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.
I wonder if anybody has told Micron about what happens when customers sign a contract but then declare bankruptcy shortly after.
Software developers: more Electron and bloated frameworks are what the people want! Running 10 independent browser instances for simple chat apps is a great idea!
Isn’t that called price fixing, and is generally illegal?
its price fixing if the agreement is among ‘competitors’ - this is price fixing for a customer(s)
Yes, but it’s AI, and Peter Thiel have bought all the politicians he could, so they will let them get away to “gain an advantage against China in AI”.
Yes, but the fine is far lower than their profits here… so, it’s only illegal if you can’t afford it.
“Cost of doing business”
If there’s some collusion, sure, but you’d have to find a government body with the will and teeth to prosecute.
Nothing really against charging whatever you feel like outside of things like certain supplies during disasters. It’s shitty
“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.
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.”
I think the logic for the customers is that either: A) It will work out exactly as predicted and we can afford whatever the hell we want, so it’s worth it to have secured supply
B) Declare bankruptcy, the purchasing obligations no longer matter.
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.
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?
Fun fact: this place lays off employees damn near yearly, in big waves lol
Padme: “…and then they’ll drop, right?”
gross margin for Micron
Gross indeed. Fucking greedy scumbags
Hopefully Chinese firms recognize the gap in the market and increase their capacity.
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.
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
Yes, I want some slave labor RAM.
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.
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.
It’s all slave labour RAM, one way or another.
They make whatever is most profitable as individual companies.
And China as a government, absolutely loves the idea of everyone’s computer usage going thru giant corporations because the Chinese government owns part of every Chinese company and doesn’t need a backdoor since they have a set of keys.
Like, why would they make something that they don’t want and would sell for less profit margin overseas?
Why build for a bunch of broke consumers when there’s a blank check for anything related to data centers right now?
That demand could disappear tomorrow. Personal computers will just get more expensive so prices will keep going up for when they have to switch back.
Why would you ever hope China would save us from this?
Edit:
It seems like people are confused here:
Reason 1 they want to make data center stuff, is just money:
They make whatever is most profitable as individual companies.
Separate reason #2 to prefer data center stuff as a product, is everything in China goes thru Chinese companies which China controls.
And China as a government, absolutely loves the idea of everyone’s computer usage going thru giant corporations because the Chinese government owns part of every Chinese company and doesn’t need a backdoor since they have a set of keys.
If Chinese consumers have to offload their data processing to large corporations, then since China owns a piece of every corporations, they now see everything people process.
Which is why the next sentence references two reason the Chinese government would want to squash home computing in favor of “cloud computing” thru data centers:
Like, why would they make something that they don’t (reason 2) want and would sell for less profit margin overseas (reason 1)?
And China as a government, absolutely loves the idea of everyone’s computer usage going thru giant corporations because the Chinese government owns part of every Chinese company and doesn’t need a backdoor since they have a set of keys.
This is your brain on American Government propaganda.
Like, why would they make something that they don’t want and would sell for less profit margin overseas?
To steal market share and relevance from Taiwan, removing the incentive for the US to continue to support its continual war against China.
Why build for a bunch of broke consumers when there’s a blank check for anything related to data centers right now?
Because data centers are temporary. Consumers will outlast AI.
Why would you ever hope China would save us from this?
Because they’re the only government attempting to do anything for the common person. Yes, they’re China first, but their official stance is to encourage global revolution.
If the Chinese government is doing this to spread hardware backdoors in all the RAM (technically quite difficult to do without detection, btw, and people will be looking) then it will be in their interests to lower the price of Chinese RAM to well below Western RAM, so the world buys as much as possible.
I think it’s more likely to be similar to their photovoltaic cell, battery, and industry policy in general: economically dominate the world’s markets and give China all the advantages that the previous industrial centres of the world had.
The ability to deprive rival nations of valuable resources, or help allied nations by guaranteeing their supply, is incredibly useful, which is why most nations do so if they are able to.
The US gets backdoors in many electronic systems by simply asking, and in some cases creating laws to do so. Why would China not do the same instead of owning shares in the companies? It’s probably more that they want the Party to financially share in the wealth created by those companies, as well as more directly control their corporate actions.
Chinese companies are very competitive, especially between each other. If there is a way to take market share, they will do it. If they make too much profit their CEO risks being disappeared by the chinese government.
Just look at the crazy low solar panel prices which mostly come from china.
Market share is meaningless when the same infrastructure can be used to crank out a slightly different product with an insane profit margin.
There is no logical reason for Chinese corporations to produce consumer RAM for less profit than what datacenters use.
If RAM prices rise to where profit margin is comparable, they’ll make consumer RAM.
Which is literally why RAM.prices are astronomical right now…
Does none of this make sense to you?
They would also sell datacenter RAM for lower prices to get market share there. Of course they would still make a good profit, but they wouldn’t be able to sell at the same prices as established manufacturers anyway since they first have to prove themselves.
Because who would buy RAM by an unknown manufacturer if you could get it at the same price from a known manufacturer?
Bur we’ll see what happens first, the AI bubble popping or chinese manufacturers producing RAM. Both will help lower the price.
And there is actually a reason to sell consumer RAM, if they establish themselves as a good brand to buy RAM from they can get some loyal customers which might buy from them again, whereas there is no real long term loyalty or reliability in datacenter RAM. If the AI bubble pops they will stop buying it.
How the hell does one hide and then use a backdoor in ram?
But did you think about China Bad™?
You add a piece of code that scans for a specific very big prime number and if it finds that, you look for any process and inject into stdlibc any backdoor of your choice
You add a piece of code (to ram, which famously does not hold information while unpowered).
Which scans for a specific very big prime number (finding large primes quickly would completely invalidate the world’s cryptography and therefore banking, that’s why people are afraid of the quantum boogeyman).
You look for any process and inject into stdlibc any backdoor of your choice (just any process, doesn’t need elevated permissions, assuming they use libc, assuming the backdoor hasn’t been patched out from the other end, defeated by any of the dozens of software integrity checks that have become standard).
deleted by creator
could have a chip that looks for a certain sequence of bytes then changes some other bytes as a result… it would probably introduce massive latency though…
Hang on, I’m gonna add a suspicious new component onto a part that is incredibly expensive and heavily scrutinized specifically for speed and latency that will bit bash the I/o.
The gap is in consumer market not enterprise. Micron even focused entirely on enterprise customers. New or small chinese companies can’t compete with that but can enter the consumer market with smaller prices, since no one seems to care for this gap because of higher revenue in enterprise market (just like you said). Why smaller prices? Otherwise why bothering with them instead of known brands.
They aren’t going to “save us” because they’re good people. It’s a company like the others but must get in the global maket in someway and this is a good way.
It’s a company like the others but must get in the global maket in someway and this is a good way.
Buddy…
If they can make 5 million selling consumer of 500 million selling to data centers…
They’re going all in on data center.
Yes but you don’t simply sell to datacenters. Who build them must buy from you. But who the hell know you? That’s the point.
Yes but you don’t simply sell to datacenters. Who build them must buy from you. But who the hell know you? That’s the point.
What?
Legitimately, what are you even trying to convey here?
Edit:
Do you mind sharing what country you’re from?
Because it seems like everyone in here saying China will but anything over profits is people either from China or an instance that constantly defends China…
Do you mind sharing what country you’re from?
I would prefer not to dox myself, but I’m from Europe.
What I’m trying to say here is that more competition in a so oligopolistic market would helps bring prices down. I’m not licking China boots here, it could have been even the brits I don’t care.
What I’m trying to say here is that more competition in a so oligopolistic market would helps bring prices down.
No one is saying that’s wrong.
I’m saying that those companies wouldn’t stop making something with a $1k profit per unit to make something with a $100 profit per unit product.
Consumers will never be willing/able to pay the prices datacenters will pay.
For companies to start switching back to consumer ram. Either the AI bubble needs to burst so demand goes away, or consumers have to be desperate enough to see our prices keep skyrocketing.
They may even know the bubble will burst, at least understand that they won’t keep being built at this rate. But it costs money to switch, there is zero reason to switch before that math changes, because it’s a relatively quick and easy switch.
Like…
What aren’t people understanding here?
absolutely loves the idea of everyone’s computer usage going thru giant corporations because the Chinese government owns part of every Chinese company and doesn’t need a backdoor since they have a set of keys.
We are still taking about NAND chips. Can you backdoor those? I would think you need to backdoor the controllers or smth at least.
Ok .ml, you all are known for your unbiased China takes after all…
Ram would be a really hard component to supply chain attack. It doesn’t store anything when powered off, so you’d need another chip on the board that can store your attack and that’d stick out like a sore thumb.
It also requires incredibly low latency, so low that trace lengths need to be optimized in order to deliver data accurately. So stream manipulation is out the window.
You’re left with searching through the contents looking for something juicy and that requires some kind of extra sore thumb chip that can’t go fast because it doesn’t have a heatsink.
Plus it’s been standard practice to harden the memory of libraries and programs and even operating systems to avoid stuff like the old Intel hyper threading attacks for at least fifteen years now, so there’s a reduced attack surface.
No one’s supply chain attacking your ram.
That doesn’t have anything to do with anything anyone was talking about, except that .ml accounts reflexively defend China…
And no one ever needs more of those examples.
Hey I recommend learning about how the different parts of a computer work what supply chain attacks are and are not realistic before potentially misinforming others. Your concerns are unfounded
Ok .ml, because surely there’s no other reason you’d disagree about China…
I’m .ml because it’s the only large instance that doesn’t require an email for sign up, and it’s primarily for tech enthusiasts and professionals.
At risk of sounding like a meme, ad hominem isn’t a great argument. I don’t want any backdoors on any of my devices and, while it’s unavoidable, it isn’t helpful to just make stuff up instead of understanding.
because other governments wont. other governments have embraced comoanies buying eachother up so there is no competition. the enemy of my enemy is my friend
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.
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.
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.
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.
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.
This is the key. The plan for a lot of these companies is that only two outcomes exist, unimaginable success where being gouged hardly matters or just utter failure and the obligations go away in bankruptcy.
Alternatively, they just break the SCA and maybe pay some penalty less than their obligation otherwise would have been. I have seen companies sign agreements knowing up front they will break the agreements, but the contract penalties still make business sense.
I’m still waiting to see what happens when OpenAI decides to back out of some of their purchasing obligations. It’s bound to happen, even if OpenAI does great. If folks think the tech sector is a bit wobbly the past few days, it pales in comparison to what such an announcement would do to the industry.
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.
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.
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.
