Memory-maker Micron has found a way to keep prices for its products sky-high for another five years, by signing 16 “strategic customer agreements” (SCAs) that include a floor price the company says comes with “a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle.”
Micron CEO, president and chairman Sanjay Mehrotra explained the SCAs in prepared remarks delivered during the company’s Q3 earnings call. He explained that Micron has signed 16 SCAs, most of them covering 2026 to 2030, and that they involve a commitment to buy a certain quantity of product and pay for it in a pricing band that has a floor and a ceiling price. The floor price covers the historically high gross margins mentioned above, and the ceiling price means those who commit to an SCA are insulated if memory prices go even higher.
Hopefully Chinese firms recognize the gap in the market and increase their capacity.
They are scaling up but as with other things they will most likely scale to their inner market first, and then I doubt they’ll subsidize a price depreciation to help westerners when they can get the profits for themselves
I’m in a pretty mercenary mindset about it these days TBH. I’ve got some money on the table, whoever can provide 32gb of RAM and three HDDs for my RAID at a price that’s not ridiculous can have it.
Yes, I want some slave labor RAM.
It’s all slave labour RAM, one way or another.
The fact you think high tech silicon manufacturing, so complex to do that only few companies around the world can do it, is a high slave labor sector tell you everything you need to know about your thinking process.
It’s “peasant with a dirty pitchfork”-work, really.
Backyard chip foundries, just like Mao wanted
Maybe it’s time to open up a hipster bespoke ram shop. You may only get 1kb but it will be the most beautiful hand-woven core memory you’ve ever seen.
Artisanal cores
This is just racism btw, get help.
Your China apologists arguments are so tired, overused, and just … lazy.
What’s lazy is assuming chinese people have no ability for self determination and holding that racist belief to such an extreme level of nonsensicality that you believe literally the most high tech job in world history, one that is done 99% by machines because humans objectively cannot possibly do the work, one that is overseen by people with a minimum of one PhD, one where there is no non-degree holder in the building, is somehow done by slaves…
Because what, you saw a BBC or RFA or other NED article saying China uses prison labor as a form of rehabilitation one time so now no Chinese person can do something without slaves?
If you were to critically analyze any of your thoughts you’d be embarrassed to how ridiculous your thoughts have become. Replace Chinese for any other nationality and see if what you’re about to say makes sense.
People see your nonsense brigading and you’re just going to get .ml defederated.
You’ll have to start all over from scratch again.
So if you direct your attention to the instance name next to my username, you might see that your racist comments are just unpopular.
Your comments are impressively unpopular. It’s really rare that I see comments downvoted into double digits given Lemmy’s small size.
Have you maybe considered you’re just wrong?
Most intelligent liberal.
Hopefully the bubble bursts next year, and we all eat popcorn watching Micron’s revenue.
The same Micron that plead guilty to price fixing of memory 20 years ago.
https://www.theregister.com/off-prem/2004/02/27/memory-makers-hit-by-price-fixing-claims/1070959
not the same as price fixing if their entire output is being shoveled into long term agreed-upon contracts, is it?
gross margin for Micron
Gross indeed. Fucking greedy scumbags
Remember they are traitors to actual customers when the bubble burtsts.
They should fail, totally, and vanish from the world.
Traitors would mean they were ever on your side. Welcome to capitalism, bud. They’ve always been on the side of maximum profit, like all other corporations.
They’re like a movie actor who was in obscurity for decades and is suddenly popular. Is it being a traitor when everyone is offering larger and larger amounts for your time?
If you applied for two jobs, both said they wanted to hire you and started budding higher and higher so you’d work for them, are you a traitor to the customers who ultimately pay your inflated salary?
I don’t blame Micron. I blame the people who invested billions into AI which allowed this to happen.
The big 3 are known for being a price fixing cartel.
Any individual company could make more money by scaling up production. But they don’t because they already know the other 2 won’t.
So in your analogy the actors have all agreed to only work 10 hours a week and it’s nearly impossible to become an actor without having tens of billions to start
and it’s nearly impossible to become an actor without having tens of billions to start
There are over 300 companies with over a $50B market cap. The money is there.
Micron doesn’t expand production not because they don’t want more money but because they think AI is a fad like everyone else.
There are over 300 companies with over a $50B market cap. The money is there.
That doesn’t mean they all have $20B in cash to spare, OR the expertise to pull it off. Even China is still playing catch-up and nobody else is even trying because to get started in 2026 would mean poaching a bunch of people with nasty non-compete clauses to even get started planning.
There are documented cases of these same 3 companies colluding to constrain supply, even openly discussing what the target price of DRAM should be. Some of the people who were found guilty got their fines or even prison time and then came back and got promoted.
That doesn’t mean they all have $20B in cash
Apple has $68B in cash on hand. Not stocks or other investments, cash.
There are documented cases of these same 3 companies colluding to constrain supply,
Yes, but that doesn’t change that there are dozens of companies that could make ram but don’t because they pass off the price increases and blame ram manufacturers while not risking their own money.
Apple has $68B in cash on hand. Not stocks or other investments, cash.
And when they put all of that into their new RAM business, their investors are going to have a bunch of questions.
Yes, but that doesn’t change that there are dozens of companies that could make ram but don’t because they pass off the price increases and blame ram manufacturers while not risking their own money.
Even with tens of billions in cash it’s not that simple. Like I said, you first start off by convincing a bunch of people their non-competes and give up their massive annual bonuses, so that’s going to be an investment that the existing companies don’t have to make. Then you’ll have caught up with RAM manufacturing in about 10 years or so once you’ve ironed out all the details.
China, the biggest economic powerhouse in the world and the epicenter of modern electronics manufacturing, is still not making HBM3 or 4 or whatever nvidia uses now for Rubin at a commercially viable scale at CXMT, they’re only barely making enough DDR5 to get contracts.
That’s after starting the company in 2016 and getting DDR4 manufacturing going in 2020 and getting people from Samsung to steal trade secrets (and come work for them).
Just because you can build a fab for 20 billion doesn’t mean it’s only 20 billion to get started, or a quick 2-3 year endeavor to do so. Publicly traded companies can’t really do this because it’s a bunch of expenses over multiple years without a single cent of revenue for many years. This needs to be properly private cash or government backing.
And if one was based on seven companies selling debt to each other creating a bubble that will pop and destroy the economy?
I would take the one that paid less, but would not be an active plague on the planet and its people.
What alternatives would you suggest?
There sadly are none, now, outside of the “Big Three” who all did the same.
I’d suggest we start actively targeting smaller businesses for our suport, to prevent a monopol… Or triopoly in this case, from allowing everyone to be screwed by collusion and manipulation of markets and pricing.
Not a lot you can do with RAM, or SSDs, or GPUs now, but if we get competitors crop up we should be active in our suport of them and avoiding the ones who want to charge you $600 for an SD card now.
Plus a lot of this is part of the Bezos plan to force everyone into cloud computiong so all your data belongs to corporations and they can do whatever their constantly changing EULAs allow while overriding legal protecations like how a Health Exchange bypasses HIPPA laws and a corporate owned messenger is excluded from wiretapping laws if they sell their data to the agencies.
I wonder if anybody has told Micron about what happens when customers sign a contract but then declare bankruptcy shortly after.
“Locks in”…if all of a sudden there was no demand you can be assured they would “lock out”. Micron likes to put the boot to the throat when they have an advantage. Not someone I’d do business with.
Yeah, everyone was paying to back out of their contracts as soon as the prices went through the roof. The customers will do the same when they come back down if they are stuck in these contracts.
I believe that most of the customers signing these agreements are also the ones responsible for the memory shortage in the first place, and will go bankrupt when the AI bubble bursts, so the contracts will be voided in bankruptcy court.
Assuming these customers are the reason for the price hikes, their backing out is the demand loss needed to bring prices back down.
Five years is too long for the buyers. The AI bubble will burst before then and then the market price will drop as the inflated demand disappears, especially if this continues long enough for more production capacity to come online.
They might not have had much of a choice in making the deal, though. Micron has been extracting the absolute maximum they can out of this situation. Make a deal or get nothing. Their clients will remember, though, and flag them as an unreliable supplier. Once this ends—and these always end—they’ll likely have a lower market share and end up having to cut prices.
Micron is optimistic in saying the demand won’t start easing until 2028. A lot of the rest of the technology manufacturing industry is about to grind to a crawl if not a halt because it’s nearly impossible to get components. Some companies are already delaying product launches and I think a lot more are about to this summer as they realize what’s happening. If non-AI businesses start to slow, the whole economy starts to slow, the AI demand will falter and that’s when the bubble bursts. I’m thinking maybe by the end of this year, more likely next year.
When the bubble bursts I’m guessing at least a couple of the companies Micron signed SCAs with will fold and Micron won’t get anything.
Interesting analysis. I was thinking the same, their customers might not make it.
About this point:
They might not have had much of a choice in making the deal, though. Micron has been extracting the absolute maximum they can out of this situation. Make a deal or get nothing. Their clients will remember, though, and flag them as an unreliable supplier.
Are the other two any better? If not Micron might get away with it. It doesn’t strike me as a very competitive market.
Padme: “…and then they’ll drop, right?”
Soooo if you raise the price sooo high then it lowers the price of barriers to entry. Congrats on maybe a year of monopoly before memory becomes a commodity like corn. Or AI crashes so hard that your customers refuse to come back. I feel like the later since using Micron memory for the past 30~ years.
Thus the 5 year contract - even if someone else starts adding supply they still get today’s high prices.
Well, I know who’s gonna take a beating when the bubble pops and the market falls out from under them. What a stupid decision.
“Hey guys, this AI thing is gonna be like this forever. We’ll never lack for insane demand ever again.”
They’re all positioning for government bailouts anyway. Whether Trump or a neoliberal lickspittle, they know they’re pretty much covered. All of the important c-suite people will be perfectly fine.
I’m not buying shit unless I have to. And then I’ll likely buy used.
Does it go something like this? Those companies who buy the NAND chips to make AI accelerators, SSDs and RAM for data centers are the Microns customers, like Nvidia. Even if they are in trouble and know that the datacenters are not being built, they can’t cancel the deals because that would call the bubble into question. They will have to take any markup deal that Micron gives, them because if they don’t there will be nothing for them nor Micron anyway.
the barrier to entry for ddr can’t be so high that someone can’t buy a fab machine and undercut them can it?
China seems to be working on it.
They need to hurry up, I need some third shift Sunnlecs branded ddr6 STAT
It can.
It’s not just the price. If you get excavators to your new chip factory plot today to start building foundations it’ll take several years until you get first chips out of the line after everything is calibrated and ready to go. By then you’ve thrown few hundred millions on the building, machines and all the physical stuff. Hired and trained workers, managed supply chains and built a system which is pretty expensive to keep running.
So, you’re betting quite a lot of money and time against that the market stays like it is for the next 10 years (give or take) to just break even. If the bubble bursts in 5 years you have incomplete factory without potential market and a metric shitload of debt on your company. And that’s the same odd you’re betting against when trying to raise funding. Venture capital understands this risk too pretty well and that’s why everyone and their dogs aren’t building chip factories right now.
Saw a great documentary on the company that makes all the memory fab devices. They aren’t quite as bad a processors, There is only one company left that makes the house sized machines, but they’re largely self contained. Still need a clean room, but you probably don’t need as huge of a factory.
Shocker
There’s a lot more than just one in the stink
The Show Stopper?
Fun fact: this place lays off employees damn near yearly, in big waves lol
