Samsung, Hynix & Micron facing DRAM Class Action suit

[Razor512]

A fine can work if done right, for example, a company like Samsung has enough liquid assets to handle a 10 billion dollar fine, but it would basically turn all of the work they did in 2017 for DRAM production be a complete financial loss.

 

Basically the goal should be to fine them a minimum of 100% of the net income the company made from that division that was responsible for the price fixing.

 

DRAM production is extremely profitable, but it is also an industry that is easily susceptible to over-saturation, which can easily discourage investment in a facility needed to manufacture more DRAM.

 

Furthermore if price fixing is not kept under control, then due to the unlikelihood that a flood of competing companies can come rushing in to produce RAM, if another large scale DRAM producer springs up, the current 3 major producers may just try to come to an agreement to share the turf and increase prices together, kinda like how cartels and gangs split their turf to avoid constant wars with each other.

The segments of the market where price fixing is harder to do, are areas which there is a low battier to enter, e.g., if a local store price gouges, then it is relatively accessible for someone to open a competing store, and if that can't be done due to corrupt zoning laws, then the community can take steps to counter the price gouging. For example, if you have enough people in your area willing to pitch in some money to meet the minimum order from a wholesaler, then you can register for as S-corporation in order to get the required tax ID needed by most wholesalers to place an order (they do this to keep the general public from seeing the prices that their local stores potentially pay for their inventory). If you can get enough people willing to stock their basements with food that will not spoil quickly then everyone can pool an order and stock their basements with 20-30 cent cans of sardines and other random stuff that the stores will typically charge $1.25+ for.

 

Anyway, many consumer facing localized businesses have no ability to really get away with price fixing as there are too many ways around their price fixing, but an industry with a 20+ billion dollar barrier to entry, will not have many alternatives outside of government force to stop price fixing.

[Zodiark1593]

3 minutes ago, Razor512 said:

A fine can work if done right, for example, a company like Samsung has enough liquid assets to handle a 10 billion dollar fine, but it would basically turn all of the work they did in 2017 for DRAM production be a complete financial loss.

 

Basically the goal should be to fine them a minimum of 100% of the net income the company made from that division that was responsible for the price fixing.

 

DRAM production is extremely profitable, but it is also an industry that is easily susceptible to over-saturation, which can easily discourage investment in a facility needed to manufacture more DRAM.

 

Furthermore if price fixing is not kept under control, then due to the unlikelihood that a flood of competing companies can come rushing in to produce RAM, if another large scale DRAM producer springs up, the current 3 major producers may just try to come to an agreement to share the turf and increase prices together, kinda like how cartels and gangs split their turf to avoid constant wars with each other.

The segments of the market where price fixing is harder to do, are areas which there is a low battier to enter, e.g., if a local store price gouges, then it is relatively accessible for someone to open a competing store, and if that can't be done due to corrupt zoning laws, then the community can take steps to counter the price gouging. For example, if you have enough people in your area willing to pitch in some money to meet the minimum order from a wholesaler, then you can register for as S-corporation in order to get the required tax ID needed by most wholesalers to place an order (they do this to keep the general public from seeing the prices that their local stores potentially pay for their inventory). If you can get enough people willing to stock their basements with food that will not spoil quickly then everyone can pool an order and stock their basements with 20-30 cent cans of sardines and other random stuff that the stores will typically charge $1.25+ for.

 

Anyway, many consumer facing localized businesses have no ability to really get away with price fixing as there are too many ways around their price fixing, but an industry with a 20+ billion dollar barrier to entry, will not have many alternatives outside of government force to stop price fixing.

Is there any way to force the company to pay such a large fine if they give a government the middle finger. It's not as though embargoes can be put in place without damaging lots of other industries. 

[Arika]

On 4/29/2018 at 7:41 AM, RorzNZ said:

These amateur companies like 'Samsung' 'Hynix' will never learn. Just introduce your products at vastly inflated prices in the first place. 

like apple?

JK

 

Any fine is still not even going to dent these companies. Lets say they made $5b off the DRAM price fixing (if it's found to be true) if they are finned any less than this, they still made a profit.

[Razor01]

On 4/28/2018 at 5:41 PM, RorzNZ said:

These amateur companies like 'Samsung' 'Hynix' will never learn. Just introduce your products at vastly inflated prices in the first place. 

although that was funny, can't do that, components like RAM the competition is brutal. 

[croppy]

we went through this 15 years ago, how does this shit happen again?

https://en.wikipedia.org/wiki/DRAM_price_fixing

[TOMPPIX]

18 minutes ago, croppy said:

we went through this 15 years ago, how does this shit happen again?

https://en.wikipedia.org/wiki/DRAM_price_fixing

because the punishment for doing it is not harsh enough.

 

[Razor512]

17 hours ago, Zodiark1593 said:

Is there any way to force the company to pay such a large fine if they give a government the middle finger. It's not as though embargoes can be put in place without damaging lots of other industries. 

It is possible, as a company would rather lose  the net profits of 1 year compared to being completely shut down, or barred from a market where through ethical business practices, they can reliably make billions of dollars in profit.

 

If the fines to not wipe out 100% of the profit made from the unethical behavior + additional punitive damages, then it will not discourage the behavior.

 

CVS gets fines pretty much every year for for charging higher than the listed prices at the register, but the investigations shows the company making tens of millions from it while the fines are in the hundreds of thousands - 2 million range, thus they do it every year as they still net more money with the fine than if they would give up the unethical practice.

 

To properly prevent that behavior, they need to lose at least a year's worth of net income, for example, if Samsung is found guilty, then every penny their DRAM production division made + a billion extra dollars should be find.

 

Imagine if the law treated humans the same way it treated large corporations. You would have a court case where someone robbed a bank for 10 million dollars, and when found guilty, the judge will say "Since you were found guilty for robbing this bank (stealing 10 million dollars in the process), I am going to fine you $1000, pay this fine within a year of this judgement and you will avoid any additional penalties".

 

 

[asus killer]

i was watching GN video answering viewers questions and one guy asks him the difference between gpu prices and shortage and ram prices but absolutely no shortage. Steve gave his answer but for me he did not address the question. Isn't it strange that there never was actually a ram shortage? i never seen any memory sold out at any website.

 

Steve answer was that in the gpu case the middle man got the profits and increased the prices, manufacturers keep selling gpus at MSRP or close.

But in the case of RAM the middle man just buys it at increased prices and makes little profit, the manufacturers are the one pocketing all the profits, as he said "he have more money than God, more money than we know what to do with it".

 

Isn't this difference strange?

[Razor512]

That is one of the characteristics with price fixing, standard supply and demand economics are not in play like you had with the video cards.

 

If the issue was just overwhelming demand at any aspect of the market, you would have shortages on the supply side. for example when no store could keep the videocards in stock, They were not trying to have it always sold out. I am sure a store like newegg would have loved to have placed an order for 5 million GTX 1070s, but the GPUs simply could not be produced fast enough, thus the cards spend most of their time being sold out.

 

With price fixing is not involved, you cannot simply increase the prices without losing all of your customers. The only way price hikes outside of supply and demand works, is if you have either a monopoly on the item, or if you make an agreement with your competition to increase prices at the same time thus you more or less keep your customers but extract more money out of each customer.

 

The Gamers Nexus video does not go into detail on answering why you can have ample supply but massive price increases, then it is pretty much sure to be price fixing. It doesn't matter if they are focusing on enterprise or other parts of the market.

For a shift in focus to cause a price increase, they would have to move so much production capacity to enterprise and mobile hardware that every store ends up spending much of their time with the products out of stock.

 

Even if increased demand comes from another part of the market like how some people may blame smartphones, even if production capacity shifts to focus more on LPDDR4, you would still end up with massive shortages for normal DDR4 as less of it is being produced.

 

PS, with most cases of supply and demand leaving to massive price increases, most of those increases come at the retail stage, and not as the production stage.

[Sakkura]

1 hour ago, Razor512 said:

That is one of the characteristics with price fixing, standard supply and demand economics are not in play like you had with the video cards.

No... the RAM price increase is a textbook example of supply and demand in action. Rising demand from other sectors (servers, phones, IoT etc.) meant desktop consumers had to offer higher prices for the DRAM manufacturers to still allocate supply to them. If prices had not risen on desktop memory, then you'd have seen empty store shelves as it would have been more profitable to sell memory to other markets.

[Razor512]

That is one of the final stages of supply and demand, and in pretty much all markets, that aspect gets driven at the retail side, and due to competition, increases typically when the supply starts to become unreliable which then causes price increases.

 

Supply and demand corrective actions are never done preemptively outside of price fixing, as that will cause unwanted market shifts, the only time it can be done in advanced, unless you have a total monopoly which prevents shifting.

 

In a competitive market, price increases are a reactive measure, thus they come after supply issues are experienced.

[mr moose]

5 hours ago, Sakkura said:

No... the RAM price increase is a textbook example of supply and demand in action. Rising demand from other sectors (servers, phones, IoT etc.) meant desktop consumers had to offer higher prices for the DRAM manufacturers to still allocate supply to them. If prices had not risen on desktop memory, then you'd have seen empty store shelves as it would have been more profitable to sell memory to other markets.

 

4 hours ago, Razor512 said:

That is one of the final stages of supply and demand, and in pretty much all markets, that aspect gets driven at the retail side, and due to competition, increases typically when the supply starts to become unreliable which then causes price increases.

 

Supply and demand corrective actions are never done preemptively outside of price fixing, as that will cause unwanted market shifts, the only time it can be done in advanced, unless you have a total monopoly which prevents shifting.

 

In a competitive market, price increases are a reactive measure, thus they come after supply issues are experienced.

 

This certainly isn't as simple as it seems on the surface.  For one we consumers don't see any of the hallmark supply issues that cause prices to go up while on the other side the cost of entry to the market is so big that very few business can do it. However we are still seeing Intel investing in memory production and Samsung is building a new factory.   About the only fact we have that no one can argue is the price is stupidly high for what we are buying.

[aisle9]

I haven't seen anyone else say it yet, so I will:

 

About fucking time.

 

 

On 4/28/2018 at 9:24 AM, Doobeedoo said:

Yeah um the prices need to cut in half though. While it's not as issue as graphics cards pricing it's still like twice than it used to be. 

I would argue RAM prices are a much bigger problem than GPUs. You can build a PC without a GPU. Intel and AMD both have chips for that. You can't build a PC without RAM, and all new-build systems (as far as I know) use DDR4.

 

On 4/28/2018 at 9:10 PM, valdyrgramr said:

Well, iirc, the one guy who put out that statement from massdrop said that it was Apple and Samsung buying up all the NAND and DRAM supply for their phones.

How much was Samsung paying him to say that?

 

On 4/29/2018 at 5:59 PM, JDE said:

nanya nanya nanya nanya nanya nanya

 

we still remember you

 

please start making consumer ram chips again

#neverforget

 

On 4/29/2018 at 6:26 PM, Zodiark1593 said:

Is there any way to force the company to pay such a large fine if they give a government the middle finger. It's not as though embargoes can be put in place without damaging lots of other industries. 

It's called jail time. Corporate executives hate the thought of it.

 

[Sakkura]

5 hours ago, Razor512 said:

In a competitive market, price increases are a reactive measure, thus they come after supply issues are experienced.

The supply issues are experienced on the spot market and contract orders long before it gets to the store shelves. So the consumer never sees any shortage.

 

Same way you rarely see a shortage of stuff when the price on other commodities shifts.

[Razor512]

Some are expanding production but that is only to maintain their supply ass no one benefits from a shortage. Samsung would love to be able to make just 20 DRAM chips a year and sell each for a billion dollars, but no one would buy it. The goal of price fixing is to charge the maximum the market will handle (taking competition out of the equation).

 

A shortage also means lost funds, for example, suppose you own a pizza ship and you run out of pizza, and a customer comes in to buy a pizza. When that customer walks out without one, then it means you lost a sale, a customer came in and was willing to pay you the price you are charging, but you didn't have the supply.

 

If you are trying to maintain a price at the maximum the market will handle, then you will only increase the supply to exactly meet the demand, but there will be no goal to lower prices as one is not needed if you are working with other companies to do price fixing. Simply put, if you are price fixing, you would never want for there to be a shortage, as you want everyone who is willing to pay the insane price, to give you their money.

[Sakkura]

5 minutes ago, Razor512 said:

Some are expanding production but that is only to maintain their supply ass no one benefits from a shortage. Samsung would love to be able to make just 20 DRAM chips a year and sell each for a billion dollars, but no one would buy it. The goal of price fixing is to charge the maximum the market will handle (taking competition out of the equation).

 

A shortage also means lost funds, for example, suppose you own a pizza ship and you run out of pizza, and a customer comes in to buy a pizza. When that customer walks out without one, then it means you lost a sale, a customer came in and was willing to pay you the price you are charging, but you didn't have the supply.

 

If you are trying to maintain a price at the maximum the market will handle, then you will only increase the supply to exactly meet the demand, but there will be no goal to lower prices as one is not needed if you are working with other companies to do price fixing. Simply put, if you are price fixing, you would never want for there to be a shortage, as you want everyone who is willing to pay the insane price, to give you their money.

Sure, but the point remains: The absence of a noticeable lack of supply at the retail level is not at all evidence of price fixing.

 

Doesn't mean price fixing is ruled out either.

 

Personally I still suspect it was more of a Mexican standoff between the big 3 DRAM manufacturers, none of them wanting to be the first to expand production and spark renewed competition and price drops. But I might be wrong.

[DoctorWho1975]

Item 6, page 6 is very interesting:

 

For example, on March 30, 2016, Micron was specifically asked whether it would engage in supply cuts and Micron’s CEO, Mark Durcan, responded that Micron would “be foolish to be the first ones to take capacity off.” Micron’s CFO, Ernie Maddock, further confirmed that Micron would not unilaterally cut production: “it’s a really ill-advised move to be unilaterally cutting production.” But, at the same time, Micron reassured competitors that “our focus is not on market share.” Micron told its competitors that it would cease trying to take market share from Samsung and Hynix.

 

Telling your competitors you aren't going to bother trying to grow your business certainly invited Samsung and Hynix to take action..and boy did they ever with Samsung amazingly announcing a few weeks later the product growth trend was lapsing and back in the negatives. Shockingly.. after this action a few later prices started shooting up. 

[DrMacintosh]

Install a price ceiling anyone? 

 

 

[Doobeedoo]

45 minutes ago, aisle9 said:

I would argue RAM prices are a much bigger problem than GPUs. You can build a PC without a GPU. Intel and AMD both have chips for that. You can't build a PC without RAM, and all new-build systems (as far as I know) use DDR4.

Rarely people want it without dGPU really specially nowdays where many seek to upgrade their PC primarily with good GPU too. And GPU is the most expensive part in general, specially now when it's way more. You can get 8GB lower frequency easily. But seeking 16GB higher frequency costs a ton.

[DoctorWho1975]

32 minutes ago, DrMacintosh said:

Install a price ceiling anyone? 

 

 

Then those same companies buy off who ever sets it and we are still fucked.

[PCPartListsYT]

On 4/27/2018 at 6:49 PM, Electronics Wizardy said:

Hey governments, why don't you make it easier to start up another dram company. More competition is better right?

Idea. Lets make a DRAM company called RealDRAM. This company would sell their own ram sticks and would make their own DRAM chips.

[PCPartListsYT]

On 4/27/2018 at 7:23 PM, Coaxialgamer said:

never mind that . Remember when you could get 8GB for that price ?

True.

[ravenshrike]

8 hours ago, Razor512 said:

If the issue was just overwhelming demand at any aspect of the market, you would have shortages on the supply side. for example when no store could keep the videocards in stock,

No. Graphics cards were a case of infinite demand, which is something S&D can't account for. Participation in the cryptocurrency market is strictly on a percentage basis, which means that you have to keep buying graphics cards just to run in place, and in order to increase market share you have to buy more cards than your competitors. When working properly, S&D ensures there will always be a supply by pricing things so only those who really need it or have excess funds will be willing to buy it. This is exactly what is happening in the DRAM market.

[DrMacintosh]

1 hour ago, DoctorWho1975 said:

Then those same companies buy off who ever sets it and we are still fucked.

Well they would have to buy a plurality of Senators lol

[SpaceGhostC2C]

Even at page 4, I'd like to emphasize that whether they could increase production doesn't matter. Whether the priced increased by a lot or by a little doesn't matter. Whether their profits went up doesn't matter.

The only thing that matters for a price-fixing case is whether you can prove that there was an agreement between the participants to act as a cartel and restrict supply. Companies don't have to justify why, let's say, they are at 50% capacity with skyrocketing prices and profits. It's their decision. They only have to respond for agreeing with other market participants to fix prices, which is harder to prove, but possible (especially if done publicly ). There was a famous case I think in the 80s or 90s, when they caught a phone conversation between high level executives of a couple of airlines doing exactly this.

 

15 hours ago, croppy said:

we went through this 15 years ago, how does this shit happen again?

 

Probably, if and when this becomes a criminal offense by the firms' management, instead of a purely commercial issue with fines as all punishment.

 

8 hours ago, Razor512 said:

In a competitive market, price increases are a reactive measure, thus they come after supply issues are experienced.

That's how economists would put it... in the XIX century. Modern Economics are practically founded on forward-looking agents, and expectations-based pricing by firms.

 

3 hours ago, Razor512 said:

A shortage also means lost funds, for example, suppose you own a pizza ship and you run out of pizza, and a customer comes in to buy a pizza. When that customer walks out without one, then it means you lost a sale, a customer came in and was willing to pay you the price you are charging, but you didn't have the supply.

That's what supposed to happen. You restrict supply so the customer who does find a pizza pays a higher price for it. And that's why you need to collude with your competitors. Customers have different willingness to pay for a product. You can choose to only sell to the higher-paying customers.

 

A monopolist (or a cartel) can choose the price or the quantity, but never both. You can tell people that the price is X, or you can tell them that you only have Y units available, but you can't possibly tell them that they have to buy Y units at price X.

 

Quote

If you are trying to maintain a price at the maximum the market will handle, then you will only increase the supply to exactly meet the demand,

There is no "maximum price the market will handle", other than the price the last guy who is desperate for RAM would pay for a stick after everyone else has given up do to the cost.

What you are looking for is the profit-maximizing price, or the one at which marginal revenue equals marginal cost. You could sell more units, but only at a lower price; you could set a higher price, but only at the expense of a reduction in sales. Hence, you stay at the point in which P*Q - Total Cost is highest. If there is any change in demand, you re-calculate what the optimal price/quantity is now, and adjust accordingly, if necessary. It can go in either direction, it all depends on whether the price-elasticity of the previous demand curve is different from the elasticity of the new one.

 

Quote

Simply put, if you are price fixing, you would never want for there to be a shortage, as you want everyone who is willing to pay the insane price, to give you their money.

The thing is, if many people are willing to pay what you call "the insane price", then maybe you need to re-consider is said price is your profit-maximizing price or not.

But I agree with you in one aspect: I think the word you are looking for is "rationing" - there should be no rationing. That is, price-fixing should restrict quantities by making too expensive for anyone not served to want to buy at said price. But that's what we observe with RAM: you can buy it, you may not like the price, but you can definitely buy it.

It was different with the GPUs, with people showing up at the store to pay the high price and still not finding any. But that's another topic...