Micron locks in historically high memory prices for five years(theregister.com) |
Micron locks in historically high memory prices for five years(theregister.com) |
They are in saas metrics territory in terms of margins, this is insane.
Does anyone really think that there is any agreement in the world that will keep companies paying $1000 for a product priced at $20 on the market? The larger the gap the larger the incentiv to break the agreement.
Why not just sell on the open market, and let traders and financiers and all their prediction models give you the best possible price?
For decades now we have seen the expectations that software businesses (and in particular FANGs) have pushed any hardware margnins to be more and more like commodities, while they were extracting all the value.
Decades ago, when memory production still existed in many countries, no such margin increases would have been possible.
Even now, this would not have been possible without the US government actively suppressing competition in the memory market, by sabotaging the Chinese memory producers.
The so-called "sanctions" against the Chinese memory producers have started some years ago precisely in the moment when Micron was threatened to lose market share to the Chinese producers (e.g. when Apple was considering to switch to them as providers). Based on the "Cui prodest?" principle, it is extremely likely that Micron was the entity who lobbied the US government to sabotage the Chinese memory producers, creating the environment where companies like OpenAI could successfully drive the memory prices to record levels.
> To date, five manufacturers have pleaded guilty to their involvement in an international price-fixing conspiracy between July 1, 1998, and June 15, 2002, including Hynix, Infineon, Micron Technology, Samsung, and Elpida.
It is history; we have not learned; we are doomed to repeat it.
[0] can actually be anyone
By giving them stability of cash flows, the AI companies are enabling them to make those investments and to ramp up production. That's a good thing, not a bad thing. Over time it should ease the squeeze on chips.
Doubt it. Has it EVER happened before?
So clearly 16 large buyers consider it likely that prices will go even higher. How likely? >10% chance? Likely enough to sign an agreement.
Moreover, the AI companies have not bought anything with their own money, but with the money of naive investors who believe that their money will be used by the AI companies to buy things out of which they will be able to gen the most value.
So for now, this is strictly only speculation. It remains to be seen who will really get any value.
In all seriousness, the payoff of a real competitor not in the cartel entering at some time in the next five years would be huge. They would have business through the busts because people would go to them first. The challenge will be fighting corruption every step along the way. They would have to keep a sharp legal team on staff for all the litigating necessary to defend against anti-competitive practices and even then would only succeed in a legal and political environment accepting of anti-corruption enforcement.