SK Hynix reports record profits despite DDR4 "shortages"

[Nocte]

SK Hynix reported record high profits despite the often cited RAM shortages that are thought to affect the current market prices. 

Spoiler

Buoyant sales of Dram memory chips have helped SK Hynix report record operating profit for the final quarter of 2017

There are also hints that prices are not going down any time soon as: "Demand will remain strong because the macro trends that are driving cloud demand remain strong".

 

Hynix blames Intel's chip flaws for the current high prices as "SK Hynix said it expected Dram shortages to continue this year as Intel’s chip security flaw was tipped to fuel demand for memory chips used in servers". 

 

I really hope that Hynix and Samsung manage to ramp up production for the sake of us computer builders, and that there is no collusion to keep prices high. This is especially true as memory prices affect also GPU ones. In my opinion prices are not going down anytime before 2019. 

 

Source: Financial Times, https://www.ft.com/content/6a33bcae-017f-11e8-9650-9c0ad2d7c5b5

[dizmo]

I'm not surprised they're making record profits. The shortage doesn't mean  they're unable to make huge profits, it means they can't make enough product to meet demand. 

[porina]

A general market shortage of ram should help them, as it means anything they do sell could be at better pricing than otherwise. Only if they were to suffer unexpected production loss would that be a bad thing.

 

How would the Intel flaw drive increase ram consumption... a possible mechanism is that if existing server performance is reduced, they simply need more servers, thus more ram to go in those servers. I do wonder how big an impact that. How much ram is used, in total, in servers, as opposed to end user systems.

[Guest]

2 minutes ago, porina said:

A general market shortage of ram should help them, as it means anything they do sell could be at better pricing than otherwise. Only if they were to suffer unexpected production loss would that be a bad thing.

 

How would the Intel flaw drive increase ram consumption... a possible mechanism is that if existing server performance is reduced, they simply need more servers, thus more ram to go in those servers. I do wonder how big an impact that. How much ram is used, in total, in servers, as opposed to end user systems.

Pageing performance was hit I believe. Don’t quote me on it however. So more RAM = less pageing so more performance.

[Princess Luna]

The more shortage there is, the higher the profits will be since they still spend the same to manufacture but now they can sell it at higher pricing.

[Nocte]

9 minutes ago, dizmo said:

I'm not surprised they're making record profits. The shortage doesn't mean  they're unable to make huge profits, it means they can't make enough product to meet demand. 

 

I am not surprised either as it means everything they produce it sells immediately for record prices. 

I am just saying that it is not good for us average consumers

 

If they managed to ramp up production, thus lowering prices, they would make even more profits, as long as demand does not die. But memory demand is unlikely to remain at these levels for long, so they might not have the incentives to increase their production facilities. 

 

(Obviously I am assuming elastic demand, truth is that probably firms have an inelastic demand curve at these prices in economics terms). 

 

EDIT: @Princess Cadence, tagging you as it answers also your post. 

[porina]

2 minutes ago, RorzNZ said:

Pageing performance was hit I believe. Don’t quote me on it however. So more RAM = less pageing so more performance.

IO performance was generally hit, which would include paging... but paging in itself is a performance killer so they would avoid it regardless of the bug.

[asus killer]

17 minutes ago, Eibe said:

 

 

Hynix blames Intel's chip flaws for the current high prices as "SK Hynix said it expected Dram shortages to continue this year as Intel’s chip security flaw was tipped to fuel demand for memory chips used in servers". 

 

 

what? 

[dizmo]

3 minutes ago, Eibe said:

 

I am not surprised either as it means everything they produce it sells immediately for record prices. 

I am just saying that it is not good for us average consumers

 

If they managed to ramp up production, thus lowering prices, they would make even more profits, as long as demand does not die. But memory demand is unlikely to remain at these levels for long, so they might not have the incentives to increase their production facilities. 

 

EDIT: @Princess Cadence, tagging you as it answers also your post. 

I completely disagree. Demand will remain, if not grow. More and more consumer products have memory modules built into them. 

 

I said that because your title doesn't make much sense. If there's a shortage, of course there's going to be record profits. That's how supply and demand works. 

[porina]

1 minute ago, asus killer said:

what? 

Server performance goes down due to bug fix. Need more servers to do same job as before. More servers mean more ram used.

[leadeater]

59 minutes ago, RorzNZ said:

Pageing performance was hit I believe. Don’t quote me on it however. So more RAM = less pageing so more performance.

 

56 minutes ago, porina said:

IO performance was generally hit, which would include paging... but paging in itself is a performance killer so they would avoid it regardless of the bug.

 

Servers rarely use paging in any meaningful way because if they do you haven't resourced them correctly and performance will be bad, luckily most things are VMs now days so you just give it more and the problem goes away.

 

In a large VM fleet under resourcing VMs so they page a lot is very bad for storage performance. Imagine hundreds of VMs hitting storage all at the same time with very heavy and sustained I/O loads, everything would crawl and go very slowly and getting a storage platform that could handle that would cost more than just putting more ram in each VM host.

[Princess Luna]

6 minutes ago, Eibe said:

If they managed to ramp up production, thus lowering prices, they would make even more profits, as long as demand does not die.

Nah the investments to make new facilities are on the billion margin, the investment is so high that to start profiting would take years and by then so much can happen and they could just lose all their investment and have extra production lines they don't need.

[Notional]

What do you mean "despite"? It's exactly the shortage that results in the high profit margins. Supply and demand you know.

[Nocte]

8 minutes ago, Notional said:

What do you mean "despite"? It's exactly the shortage that results in the high profit margins. Supply and demand you know.

Because supply shortage does mean higher prices, but does not necessarily mean higher profits?

 

If they could produce, say, triple amount of RAM, thus cutting the prices in half, they would make more money as they would meet all current demand. 

 

"Supply and demand, you know." But profits?

[mynameisjuan]

5 minutes ago, Eibe said:

Because supply shortage does mean higher prices, but does not necessarily mean higher profits?

 

If they could produce, say, triple amount of RAM, thus cutting the prices in half, they would make more money as they would meet all current demand. 

 

"Supply and demand, you know." But profits?

Looks at it this way. There is a shortage because they are now making DDR4 for phones. Overall they are still making the same amount, but now that other manufactures get first dibs that gives the rest of us a shortage. 

 

You are taking shortage out of context here. Its the same with GPUs. The shortage is related to the huge demand spike, not loss of production.

[Notional]

12 minutes ago, Eibe said:

Because supply shortage does mean higher prices, but does not necessarily mean higher profits?

 

If they could produce, say, triple amount of RAM, thus cutting the prices in half, they would make more money as they would meet all current demand. 

 

"Supply and demand, you know." But profits?

Yes, yes it does. At least in this case. None of the nand/ram vendors wants to start a price war; something that only ever happens when supply > demand.

 

There isn't a demand for tripple the amount of ram. If they manufacture that and the profits lowers by 66+%, then they make less. In fact they might make a lot less, as they get massive investment costs, increased fixed costs, and might even endure increased variable costs.

 

Why do you think GPU vendors don't care that GPU prices are through the roof? They sell every single card they make without risk, and don't have to lower prices as a usual product lifecycle dictates.

[Taf the Ghost]

DRAM is currently in one of those markets where they can collude to keep prices higher without actually having to collude. Everyone is investing into their other markets and their next generations, thus with Fabs at capacity already, it's not actually the best economic play to bring on more capacity.

[Spenser1337]

Just want some ddr4

[Taf the Ghost]

9 minutes ago, Notional said:

Yes, yes it does. At least in this case. None of the nand/ram vendors wants to start a price war; something that only ever happens when supply > demand.

 

There isn't a demand for tripple the amount of ram. If they manufacture that and the profits lowers by 66+%, then they make less. In fact they might make a lot less, as they get massive investment costs, increased fixed costs, and might even endure increased variable costs.

 

Why do you think GPU vendors don't care that GPU prices are through the roof? They sell every single card they make without risk, and don't have to lower prices as a usual product lifecycle dictates.

It would cost AMD & Nvidia a lot of money to bring on more capacity late in a generation, and if the mining bubble bursts, they lose new sales to cheap 2nd hand GPUs. It's better for both major players to keep their production targets the same. It's bad for the end-user, but the economics are pretty straight forward.

[Notional]

Just now, Taf the Ghost said:

It would cost AMD & Nvidia a lot of money to bring on more capacity late in a generation, and if the mining bubble bursts, they lose new sales to cheap 2nd hand GPUs. It's better for both major players to keep their production targets the same. It's bad for the end-user, but the economics are pretty straight forward.

Exactly. No reason to endure huge risks now. AMD burnt their hands severely on the 290 series, when it was hit with the mining craze back then.

[bcredeur97]

i still can't believe 4GB of RAM is $50... minimum

[Sakkura]

31 minutes ago, Taf the Ghost said:

DRAM is currently in one of those markets where they can collude to keep prices higher without actually having to collude. Everyone is investing into their other markets and their next generations, thus with Fabs at capacity already, it's not actually the best economic play to bring on more capacity.

I largely agree, but there are actually some new DRAM fabs coming online later this year (as well as possibly some facilities being converted from NAND to DRAM, but that's a mixed blessing for PC builders). It's just not the kind of aggressive expansion that would really shake up the market.

[Okjoek]

2 hours ago, dizmo said:

I'm not surprised they're making record profits. The shortage doesn't mean  they're unable to make huge profits, it means they can't make enough product to meet demand. 

Or they're artificially staging a shortage to increase demand so that they can charge more.

[mynameisjuan]

29 minutes ago, Okjoek said:

Or they're artificially staging a shortage to increase demand so that they can charge more.

Please dont bring bullshit conspiracy theories here.

[Drak3]

Oddly enough, despite working twice as many hours last month, I made the biggest paycheck yet.