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Microsoft doesn't know what to do about the memory pricing crisis Microsoft is causing (www.pcgamer.com)
submitted 5 months ago by to c/technology@lemmy.world
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[–] 101 points 5 months ago (29 children)

They could start manufacturing ram? Or fund startups trying to make ram?

Seriously is there no way to get out of having only 2-3 chip and memory makers?

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  • [–] 129 points 5 months ago (4 children)

    You cant just "fund a startup trying to make ram". Chip fabrication is probably the most difficult and capital intensive production process there is. What manufacturing more ram looks like is investing tens of billions of real money (not the you give us stock we let you use our GPU deals the AI companies have been doing) and then waiting 5-10 years before the fab you funded starts to make chips, and hope prices are still high by then.

    That's why the existing manufactures are slow to scale up, they arent sure that the current spike in demand will still be there by the time their scaling up increases production.

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  • [–] 1 point 5 months ago

    It's actually worse than that, the whole ecosystem needs to be set in place, it's not just one company, it's the raw materials it's the logistics, the experienced people living in the area etc.

    It's more like creating a city from the ground up than create a company.

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  • [–] 33 points 5 months ago

    Honestly, no. There is no fast way to spin up fabs for this stuff. A lot of lithography equipment for the top tier stuff is made by 1 supplier, stocking a shitload of fabs with the right gear just isn’t something they can do.

    IMHO, the fastest way out of this mess would be for governments to regulate how supply is spilt between consumer and enterprise products.

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  • [–] 22 points 5 months ago (2 children)

    That still might take 10y because lithography printers aren’t cheap, their location isn’t cheap, and so much more. Once you watch an Intel, TSMC, or Texas Instru… chip factory tour.

    Wait, why doesn’t Texas Instrument cash in or did they offshore their production too?

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  • [–] 14 points 5 months ago (5 children)

    They're going to start up an entire RAM company to fill a temporary shortage?

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  • [–] 10 points 5 months ago (4 children)

    Yes, then they'll be shortage resistant

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  • [–] 15 points 5 months ago (1 child)

    It can't really work the way to want it to.

    You have let's say Samsung who can make money selling a chip as long as the price > $50. And historically the price of the chip has averaged $100.

    But the demand is crazy and they can't keep up and the price of the chip is $500. They are making money hand over fist but let's say they feel a moral obligation (hahahahaha) to lower the price by increasing capacity.

    So they invest a billion dollars to increase capacity. Now that's a huge cost that reduces their margin on all chips. Between loans and maintenance, now they have to sell a chip for $90 to break even. But that's fine because they are making $410 per chip instead of $50!

    Except now you fix the supply issue and demand falls to normal. You've just cut your profit from $50 to $10. You have to sell 5x the volume to make the money you were making!

    Except it's even worse, because now you have all these extra chips you're building and nowhere to put them. Supply exceeds demand, pushing prices lower so instead of $100, they are selling for $80. Now Samsung loses $10 on every chip and they go bankrupt trying to pay back a billion in loans.

    So it's not really in their interest to build capacity to meet a temporary demand. Unfortunately.

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  • [–] 3 points 5 months ago

    That is not how it works at all. RAM is a necessary part for every compute device, and there is no way to recover any part of selling at a loss once it's acquired by the final owner. Thus, they will never be sold without a profit margin. This is very different from, for example, the video game consoles market. Once you have the console, you still need games, so, whatever loss the manufacturer is assuming has a chance of being filled by the customer "buying" (renting) games.

    Having said that, the rest of your logic is sound. However, I don't see prices dropping back to what they were before this AI bullshit even if the market is suddenly flooded by triple the offer vs demand. These corporations would certainly manufacture a fictional shortage somehow, makeing people rush-purchase ram for fear of the prices going too high again, and release all the production into the market to maintain the illusion of low offer.

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  • [–] 5 points 5 months ago

    There were loads of ram companies in the eighties, so many that when meager times came, half went bankrupt.

    RAM making is a brutal market. It's very different to chip making, it's "just" billions of capacitors.

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  • [–] 9 points 5 months ago (1 child)

    Honestly, we should probably just have a state owned and ran chip fab company. If the US is serious about security and/or innovation, that's what needs to happen. There's no way it's going to happen though sadly, but that's what should be done. >

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  • [–] 5 points 5 months ago (6 children)

    The problem is it doesn't solve the core issue. What's to stop an AI data center buying up all the startup's stock and future stock also.

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  • [–] 2 points 5 months ago (5 children)

    If you're the one funding the startup you can just reject that

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  • [–] 1 point 5 months ago (4 children)

    Doesn't that go against Microsoft's fiduciary responsibilities to shareholders to maximize profits? At the very least, it would be contentious among the shareholders. Leaving money on the table? This is the kind of thing would need a very brave (or cavalier) CEO to risk a personal lawsuit.

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  • [–] 1 point 5 months ago (3 children)

    You don't have shareholders until you ipo. Startups have not ipoed.

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  • [–] 1 point 5 months ago (2 children)

    But Microsoft does. And those shareholders would want to know why money that could be going to them is frittered away on a startup that is constitutionally set up to leave money on the table.

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  • [–] 1 point 5 months ago (1 child)

    I mean Microsoft invested in OpenAI back when they were still claiming to stay non-profit. There are ways such as just treating them as an exclusive subcontractor in order to keep your main business. Microsoft is not a chip company afterall but needs them to have product at prices people will pay.

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  • [–] 1 point 5 months ago

    In that case they would be locking down their subsidiary even further to just one client. I guess it all comes down to the plausibility of their argument for making this investment, rather than, say increasing dividends or ploughing that money back into other investments for the business. I guess they were able to justify the OpenAI investment along these lines. If I could hazard a guess, it would be something along the lines of:

    This is a new market. We need to get in at the ground floor.

    I suspect, OpenAI presented itself as a turn key solution to get a foothold in this brave new world and maybe steal a march on Google.

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  • [–] 3 points 5 months ago

    It is an extremely long and complicated process to do so. China has been trying to enter chips manufacturing for decades and are now almost there (they don't have the capacity to produce the most advanced chips yet, but are still working on it).

    However the moment they got a decent DDR4 production going they announced they are going to "phase them out" in favour of DDR5 chips (of which they have not really perfected the process yet) so they can be used for Chinese AI-datacenters.

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  • [+] 2 points 5 months ago (2 children)
    [deleted]
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