DRAM Shortage as Price Fixing?

[Squilliam]

Good morning everyone,

 

Tin foil hat time (with historical evidence)!

 

Given the sustained more than doubling of DRAM prices, it's sounding more and more like collusion.

I've been wondering this more and more as of late, especially since this has happened before with the SAME manufacturers.

It's a problem that would make sense for 4-6 months, but it appears there is no end in sight.

 

Links for sauce: 

https://www.techpowerup.com/234565/no-relief-for-dram-and-nand-shortages-in-sight-considerable-supply-only-in-2018 (this article is from June!)

https://web.archive.org/web/20051112051337/http://www.justice.gov/atr/public/press_releases/2005/212002.htm (2002 price fixing)

https://www.computerworld.com/article/2502392/technology-law-regulation/micron--oracle-settle-memory-price-fixing-lawsuit.html (2012 price fixing)

 

I'd love some input on the topic.

[cj09beira]

you are kind of right, they are doing this on purpose, at least part of it, part of the problem is things like ssds becoming more mainstream and in general more silicon demand

[Sakkura]

It's not outright price fixing, but the three major manufacturers are benefitting from the shortage and weak competition and have not been rushing to increase production capacity.

 

Samsung is about to bring a small number of DRAM fabs online though, after conversion from producing NAND flash. But major production expansion won't come until late next year.

[GDRRiley]

it takes time to add more production and fabs are not cheap to make. as @Sakkura said samsung is adding some production next year  

[thorhammerz]

The new production Samsung is bringing online next year (~100,000 units) will add about 6-10% more DRAM supply.

 

If the market demand for DRAM grows by more than that 6-10%, expect prices to continue rising (supply < demand).

[aisle9]

It's straight up price fixing. 

[Ertman]

Well I don't know if any collusion is going on, but setting higher prices doesn't necessarily mean it's price fixing. Companies can sell their product for whatever they like, and if they price to high it creates an opening in the market for competitors take sales away. The issue comes from whether there is any collusion from the suppliers that stops market forces from affecting pricing. Does anyone have any information on whether demand or supply has been affected to cause an increase in prices?

[Squilliam]

34 minutes ago, Ertman said:

Well I don't know if any collusion is going on, but setting higher prices doesn't necessarily mean it's price fixing. Companies can sell their product for whatever they like, and if they price to high it creates an opening in the market for competitors take sales away. The issue comes from whether there is any collusion from the suppliers that stops market forces from affecting pricing. Does anyone have any information on whether demand or supply has been affected to cause an increase in prices?

I'm sure it's a bunch of traditional market variables (supply + demand, fewer competitors, natural business inclination to increase profits, etc), however it's both fun to speculate and try to investigate why it keeps getting worse and worse as time goes on. It's problem that has been happening for over a year, and seems to only get worse. Feels fishy, even if it isn't.

[SteveGrabowski0]

10 hours ago, aisle9 said:

It's straight up price fixing. 

They have done it before. I remember getting a payout from a class action lawsuit for RAM I bought back in 2002.

[Squilliam]

1 minute ago, SteveGrabowski0 said:

They have done it before. I remember getting a payout from a class action lawsuit for RAM I bought back in 2002.

That's one of the examples I showed in OP.

There was ANOTHER case of it in 2012, which is what has led me to think it's not such a far-fetched idea.

[spat55]

I remember getting my LPX DDR3 back in 2012 for £35 now if I got the same in DDR4 it'd be at least £80 and they complain about people not buying new hardware, why bother when a 3770k can still play all the games anyone could dream of at 60 fps minimum.

[johnukguy]

On 12/21/2017 at 9:27 AM, Sakkura said:

It's not outright price fixing, but the three major manufacturers are benefitting from the shortage and weak competition and have not been rushing to increase production capacity.

 

Samsung is about to bring a small number of DRAM fabs online though, after conversion from producing NAND flash. But major production expansion won't come until late next year.

Except that it is. DramXchange did an investigation and the three major manufacturers admitted that they'd agreed not to compete, and that there is no real 'shortage.'

[Sakkura]

15 minutes ago, johnukguy said:

Except that it is. DramXchange did an investigation and the three major manufacturers admitted that they'd agreed not to compete, and that there is no real 'shortage.'

That is not correct.

 

https://www.businesswire.com/news/home/20171030005517/en/TrendForce-Samsung-Increase-Competition-DRAM-Market-Year

 

Quote

During the recent two years, limited increase in production capacity and challenges related to technology migration have slowed down the growth of DRAM supply, according to DRAMeXchange, a division of TrendForce. Contract prices of DRAM products began to climb in the second half of 2016, particularly driven by the strong demand in the year-end busy season. The DRAM market since then has continued to see surging prices. However, there are reports that Samsung is considering expanding its production capacity to increase competition and raise the barrier for market entry. Thus, there is a possibility that the tight supply for DRAM may end sooner than originally anticipated.

Quote

With the DRAM market being an oligopoly, the three dominant suppliers theoretically would want to maintain the status quo as to maximize their profits. Nonetheless, SK Hynix and Micron are now flushed with cash after benefiting from several quarters of rising prices, and they are also in a great position to improve their competitiveness. SK Hynix is now transitioning to the 18nm node and will be building its second fab in the Chinese city of Wuxi next year. Meanwhile, with the cash and resources at hand, SK Hynix will be able to proceed with its plans smoothly and on schedule. As for Micron, its rising stock price has given the company an opportunity to pursue capital increase by cash. This signals that Micron is preparing to build new fabs, expand production capacity or upgrade its manufacturing technology. The gains made by SK Hynix and Micron as well as their recent activities are unlikely to have escape Samsung’s notice. Therefore, Samsung may in response expand its DRAM production capacity to main its lead in the market.

Capacity building on the surface is about alleviating the current tight supply situation but the underlying motive behind such a move is to keep prices from going up further. If Samsung chooses this strategy, the short-term effect will be an increase in depreciation cost that will also erode the profitability of its DRAM business. However, Samsung’s ultimate goal to ensure its long-term dominance in the market in terms of having an enormous production capacity and being ahead of its competitors’ technologies by one to two years.

Additionally, China’s memory industry continues to take shape and is expected to enter its formative stage of development in 2018. To forestall Chinese DRAM and NAND Flash makers from catching up significantly, Samsung could raise its production capacities for these products and engage in aggressive pricing. Potential market entrants will not be able to expand their production capacities and improve their technologies on schedule if they are under heavy financial pressure.

That's called competition.

 

They were being "lazy" about competing for a couple years, as the DRAM prices had previously gone very low and hurt their profit margin, and they were now in a market with only 3 real suppliers. But that situation was not coordinated directly, and it wasn't going to last.

[johnukguy]

Bullshit. Look up the DramXchange article that they wrote and see for yourself. As for Samsung, saying that they will compete in the future means nothing right now and may make absolutely no difference to RAM prices in a year's time. Do you not realize that you quoted a press release, not an actual article? For example, you didn't bother to find out what's actually going on behind the scenes at all:

“At the same time, changes have occurred in the relationship among the top three suppliers – Micron, SK Hynix and Samsung,” Wu added. “Based on the oligopolistic market situation, the trio have opted for co-existence as the best way to maximize their own profitability. They therefore are turning away from aggressively competing for market share through price reduction and capacity expansion.”

http://press.trendforce.com/press/20161102-2677.html#EFRZdPoLvKZaUOO6.99

That by the way is classic price fixing - agreeing not to compete and to under produce in order to artificially drive up prices. You also seem to be completely unaware that price fixing is standard practice for all of the major DRAM manufacturers:

https://www.geek.com/chips/eu-fines-nine-chip-makers-for-dram-price-fixing-1252231/

[Sakkura]

On 24/12/2017 at 7:17 AM, johnukguy said:

Bullshit. Look up the DramXchange article that they wrote and see for yourself. As for Samsung, saying that they will compete in the future means nothing right now and may make absolutely no difference to RAM prices in a year's time. Do you not realize that you quoted a press release, not an actual article? For example, you didn't bother to find out what's actually going on behind the scenes at all:

“At the same time, changes have occurred in the relationship among the top three suppliers – Micron, SK Hynix and Samsung,” Wu added. “Based on the oligopolistic market situation, the trio have opted for co-existence as the best way to maximize their own profitability. They therefore are turning away from aggressively competing for market share through price reduction and capacity expansion.”

http://press.trendforce.com/press/20161102-2677.html#EFRZdPoLvKZaUOO6.99

That by the way is classic price fixing - agreeing not to compete and to under produce in order to artificially drive up prices. You also seem to be completely unaware that price fixing is standard practice for all of the major DRAM manufacturers:

https://www.geek.com/chips/eu-fines-nine-chip-makers-for-dram-price-fixing-1252231/

It's a press release from Trendforce, AKA DramXchange.

 

You quoted another press release from the exact same source...

 

As for the reduced competition, that was not coordinated. They didn't sit down together and agree to raise prices. That's what is actual price fixing. They did not do that, and DramXchange never claimed they did that. They just decided - individually - not to compete aggressively.

 

The price fixing around 2000 was actual price fixing. It is clearly not standard practice as it obviously stopped and was punished.

[johnukguy]

"As for the reduced competition, that was not coordinated. They didn't sit down together and agree to raise prices."

 

Except, again, that they did exactly that. They sat down together and agreed to not compete and to under produce. That is classic price fixing. Look up the investigation done by Trendforce, which you seem to repeatedly ignore. Also, China has just opened up a formal investigation and legal action, starting with Samsung, for doing exactly this - blatant price fixing. Sorry but you've just flat out lost this one:

http://darrellx.com/buildapc/price-fixing-collusion/

http://www.china.org.cn/business/2017-12/23/content_50157479.htm

[JoostinOnline]

I've been wondering this same thing.  With the increased price of SSD's, DRAM, and VRAM, it seems very suspicious.

[WkdPaul]

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[Sakkura]

On 27/12/2017 at 11:59 AM, johnukguy said:

Except, again, that they did exactly that. They sat down together and agreed to not compete and to under produce. That is classic price fixing. Look up the investigation done by Trendforce, which you seem to repeatedly ignore. Also, China has just opened up a formal investigation and legal action, starting with Samsung, for doing exactly this - blatant price fixing. Sorry but you've just flat out lost this one:

That happened almost 2 decades ago.

 

And DramXchange/Trendforce does not say the same thing is happening now.

[johnukguy]

This happened last year and DramXchange are saying exactly that. Are you not able to read the links given or are you just ignoring them because they disprove what your'e claiming?

2017 – Changes have occurred in the relationship among the top three suppliers – Micron, SK Hynix and Samsung. Based on the oligopolistic market situation, the trio have opted for co-existence as the best way to maximize profitability. They are turning away from aggressive competition…”

[Sakkura]

3 hours ago, johnukguy said:

This happened last year and DramXchange are saying exactly that. Are you not able to read the links given or are you just ignoring them because they disprove what your'e claiming?

2017 – Changes have occurred in the relationship among the top three suppliers – Micron, SK Hynix and Samsung. Based on the oligopolistic market situation, the trio have opted for co-existence as the best way to maximize profitability. They are turning away from aggressive competition…”

They literally do not say exactly that. Nowhere in your quote does it say they sat down together and fixed the prices.

[johnukguy]

I get that English likely isn't your first language, but that's exactly what it says. You're now actually denying what's in front of your own eyes. The major RAM manufacturers sat down and agreed not to compete and to under produce in order to keep prices high. That's why they are now under investigation for price fixing and that is exactly what price fixing is.

[Sakkura]

2 hours ago, johnukguy said:

I get that English likely isn't your first language, but that's exactly what it says. You're now actually denying what's in front of your own eyes. The major RAM manufacturers sat down and agreed not to compete and to under produce in order to keep prices high. That's why they are now under investigation for price fixing and that is exactly what price fixing is.

Stop lying. It says they "have opted" not eg. they "have agreed."

 

The Chinese investigation concerns NAND flash, not DRAM. Also it's China, let me know when a country with proper rule of law opens an investigation.

[johnukguy]

You either have no idea what you're talking about, no understanding of why NAND flash effects RAM and RAM pricing, or you're trolling. You are flat out saying that black is white and up is down here. You cannot be serious.

[Sakkura]

Just now, johnukguy said:

You either have no idea what you're talking about, no understanding of why NAND flash effects RAM and RAM pricing, or you're trolling. You are flat out saying that black is white and up is down here. You cannot be serious.

So you ran out of arguments?

 

There are 3 major DRAM suppliers.

 

There are 4 major NAND flash suppliers.

 

Fabs can't be quickly switched between making DRAM and NAND flash.

 

Price fixing in one area does not necessitate price fixing in the other.

 

Price fixing in either area has not been alleged by any reliable authorities, let alone proved.