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- Hacker News
- At some point would it be more cost efficient to replace DRAM by SRAM or some other technology and use standard cpu/gpu silicon wafers to build ram chips ?by Rexxar
- There is a futures market for DRAM and NAND for exactly this purpose.
Why not just sell on the open market, and let traders and financiers and all their prediction models give you the best possible price?
- what's the future market for that? won't Micron in particular have to be a counterparty to that anyway to ensure delivery - why would they want that??by itemize123
- Huh. It looks like Micron managed to lock in these contracts because companies are scared that prices will continue to rise. But in doing that, Micron has managed to lock themselves in a comfortably high floor price, potentially for longer than the boom is going to last. Big win for Micron.by LoganDark
- The article says they locked in floor prices, so they can even continue to climb is what I understood. So maybe they are buying capacity instead.
- That's ... just sad.by alentred
- Micron knows the volatility that may come and secures their own seat. Makes sense. No idea why companies said yes to this.by ramon156
- Smells like a cartel. Wonder who else is in on it?by cryo32
- Hynix and Samsung, presumablyby t0mpr1c3
- What stops Chinese from mass-producing more RAM? Or is this as hard as producing GPU?by jimmydoe
- lack of EUV machines
- US gov. bans and tariffsby mgh2
- Predatory. I hope the tech community remembers this and diversifies away from companies that behave this wayby digitaltrees
- > I hope the tech community remembers this and diversifies away
Doubt it. Has it EVER happened before?
by baal80spam - Why? Part of the problem is that chip manufacturers (from tsmc to to memory makers) are reluctant to ramp up production as the AI bubble may pop and they would find themselves with huge over capacity, a scenario they have gone through many times.
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.
by cm2187 - waiting for you[0] to lay the $10B on the table for a new DDR fab - there's only so long I can wait for a new PC for the kids
[0] can actually be anyone
by baq - https://en.wikipedia.org/wiki/DRAM_price_fixing_scandal
> 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.
by striking - How do you want them to behave? There is more demand than production. How would they choose who to sell to at lower prices? Organize a lottery?by bluecalm
- Yeah they're going to diversify... to one of the other two memory companies who will likely be raising their prices too, because why should they be suckers?
- It's funny how everyone (especially here on HN) accepted (and expected) extremely high profit margins from software businesses, but now that hardware companies are increasing their margins to match it is suddenly outrageous. The same was reflected in engineering salaries, with software engineering salaries being often a multiple of hardware engineering ones. All this despite the fact that software businesses is arguably much easier, less risky and less capital intensive.
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.
by cycomanic - Isn't this the market working as intended?
This agreement puts a floor on the price that Micron can sell their chips at, and a ceiling on the price that tech companies buy them.
Micron wants the floor, so they can invest in more fab capacity without going bankrupt if there's a memory glut.
Tech companies want a ceiling so they can keep selling their products even if there's a shortage.
If there's a glut, the tech companies will just resell these chips at a loss, or take a bath on their $22 Billion of deposits. It doesn't "lock in high prices" for consumers, just the producers.
by davidm-d - I agree. But Micron says it wants to end the boom-bust cyles in the memory chip business for good. It won't work.
A higher price floor for longer creates an incentive for competitors to bring more capacity online. The eventual supply glut will be even bigger.
The cyclicality of the semiconductor business (especially for simpler chips) is a result of the fact that inventory can build up. That hasn't changed and it never will.
- wishful thinking from MU holders. These LTAs or SCAs are just hedges on the prices going even higher. Once spot prices start dropping, all of the agreements will be broken in a millisecond. The break up fees have already been paid! There's absolutely nothing the buyer has to do, but to simply not buy at the inflated old price and instead buy from someone else at the new, lower price.
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.
by try-working - The article says a large part is paid upfront.by cm2187
- Can't the government step in and break the cartel like they did in 2010? I guess not because this was entirely driven by market demand and not manufactured supply restriction.by mgh2
- I think you are right but would like to keep in consideration that penalty clauses are real and can be enforced in court. We have no (or perhaps: have some) clue how far the bargaining power is leaning toward the suppliers. Maybe the signatories in the SCA are so cornered, they will sign anything and think ‘boom or bust’.by wjnc
- "consolidated gross margin came in at 84.9 percent"
They are in saas metrics territory in terms of margins, this is insane.
by alxfrnr - As long as I've been an adult, hardware was a commodity, and software was where the value was. Software could capture most of the value that was in the total supply chain.
Now, with AI, software becomes less able to demand the margins it once did.
Meanwhile, the history of low margins of hardware have created a situation where there are so few players able to demand now software-style high margins.
Hardware has always been valuable but was unable to capture it's value. Those days might be over.
I hope this encourages people who would build software companies to look to hardware. A lot of fun challenges there. Deeply technical, interesting ones. And now solutions will pay.
- we have a third category now - LLMs. this is where the value is captured nowby nok22kon