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.
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?
Hopefully Chinese firms recognize the gap in the market and increase their capacity.
Hopefully the bubble bursts next year, and we all eat popcorn watching Micron’s revenue.
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.
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)?
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.
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.
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.
My intent was to provide an explanation for why someone might consider your reply about Chinese manufactured ram being a supply chain risk to be inaccurate.
To be 100% clear as a bell: ram is not a supply chain vector people need to be worried about.
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
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.
Well, a consumer giving you $350 for a RAM set is cash in hand. The contracts with hyperscalers are all IOUs until the contracts are actually fulfilled aren’t they? At what point does actual money, not the promise of money, transfer from buyer to seller?
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!
I never understood the scale of this bullshit until I had a user request his script packaged. Now, Intune doesn’t like executing random python scripts, so I gave him several options for 8 KB, 50-lines-of-code script.
He disregarded them and wrapped it all in Electron.
I received a 380 MB zip file.
But, well, it had an .exe inside so I could work with that.
¯\_(ツ)_/¯
“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.
gross margin for Micron
Gross indeed. Fucking greedy scumbags
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)
This is just like selling / buying options in any other industry, e.g farming to buy something at a specified price in the future.
They’ve agreed to buy XYZ product at 123 time at a price between $100 and $200.
If prices plummet, they’ve still agreed to buy it at $100 (similar to selling an options $100 Strike PUT), but if prices skyrocket, they don’t need to pay more than $200 (similar to buying an options $200 Strike CALL)
Anything in between is just the price, so if it’s $150 then its just $150
It’s not exactly the same as using options, but the rough idea.
I’ve never signed a contract to buy something 5 years from now at a certain price.
It’s a real thing.
Yes, but the fine is far lower than their profits here… so, it’s only illegal if you can’t afford it.
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
Unfortunately yes, but the current government is not going to enforce the laws
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”.
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.
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.
“strategic customer agreements”
Quick question: what consumer is agreeing to this?
I haven’t seen the customers named, but Apple finally increasing prices makes me think they’re one of them.
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.
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.
Shocker
I read this as Mormons. 😶
