Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
Increasing the availability doesn't mean decreasing the price ... people think those are intrinsically related - not so much.
You can get a prada shirt for $2,000 ... as many as you'd like, for $2,000 a piece. No problem. They'll make the factories go burr all night long. Still $2,000.sweeping
There's a bunch of things like this. $100 bills for instance ...
a new entrant might yield a price drop, or, it might not.
> why not? i'm sure they can jump into the hustle.
Not so quick. Critical difference is the relationship between enterprises and the state. In China, the state owns the enterprise, in one way or another. High costs of memory is a threat to the established Chinese electronics manufacturers. The Chinese state can optimize returns at a higher level than the one some petty chip manufacturer operates at, especially if doing so means it could gain coercive geopolitical strength, aka blackmailing.
I mean kind of? Industry and politics are always cohorts. China has structural differences but new entrance to commodities and defensives are almost exclusively price sensitive offers. If say, Singapore or even a firm in Ohio tried to enter the market for global play, they'd undercut as a strategy
Except... Maybe they don't need to. Demand is outstripping supply right now. Competing on availability may be sufficient
You can easily see this on a mini-macro scale with popular restaurants. Often a restaurant with an equivalent menu and prices will open nearly adjacent to a very popular place and can sustain itself simply because you don't have to wait an unacceptable length of time to be seated
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
There really aren't though. The reason there's only three is because memory is a commodity and margins are historically very low. It's not a very good business to be in, generally.
In the past when memory supply was short and then rebounded, many companies went out of business because making memory was no longer profitable.
And margins will continue to be low, otherwise they'll discover they don't have a moat. Commodity markets being competitive is a self fulfilling prophecy.
The companies have two choices. They either produce RAM cheaply and in large quantities, or they get replaced by someone who will produce RAM cheaply and in large quantities. Current incumbents are free to pick which of those two scenarios they prefer.
There used to be over 50 memory manufactures in the US alone. Everytime there was a bust (following a boom) there'd be bankruptcies. The lucky ones got bought out and consolidated. Empirically, attempting to capitalize on memory booms is a losing strategy.
If it costs you $1B and five years to build out new supply and you think demand will not sustain for more than three years, it does not make sense to expand supply.
Instead you will maintain your margins currently and await demand to decrease back to your current supply.
This is pretty common and as others have pointed out is even more common in markets where competition is slow and lead times are long.
Ammunition is a great example over the last decade or so as political turnover caused relatively short lived demand spikes and manufacturers didn't expand supply because they knew once political winds shift, demand would decrease.
