The PC hardware market right now is not a pretty sight, so it’s nice to hear one of the companies arguably at least in part responsible acknowledging how bad things are from a customer’s perspective. Even if that is taken with the giant pinch of salt considering it’s being approached from a business perspective, and discussing the ability for other companies to absorb costs.
As The Chosun Daily reports, SK hynix group chairman (ie, head of the board) Chey Tae-won recently admitted to the the press that memory prices are “abnormally high” and said “there are limits to how much prices can be raised”. Apparently the company is considering building a factory in the US to help with supply and trade pressures.
“Supply must be increased to lower prices, even for the sake of semiconductor companies… Memory prices are currently at an abnormally high level. While AI companies can absorb increased costs through investments, PC and smartphone manufacturers have no choice but to pass semiconductor price hikes onto product prices.”
“Since most customers for these products are individuals, there are limits to how much prices can be raised. To prevent ‘chipflation’—where rising chip prices drive up finished product costs—supply must be increased.”
In other words, while rising memory costs might be no problemo as far as AI companies and concerned, it’s a different story for PC and smartphone manufacturers. That’s because their customers are individuals like us who cannot afford to just take the hikes on the chin. We don’t get to take out multi-million loans for our hardware.
But why should the actual semiconductor manufacturers care? If the big AI customers are happy, surely that’s enough, right?
Not quite, says Tae-won:
“Even if profit margins are reduced, increasing supply, protecting the market, and growing together is essential for the sustainability and development of South Korea’s semiconductor industry. If factories are not built and prices keep rising, the market will shrink, and new entrants will inevitably flood in.”
New entrants, ie, competition the company would rather not deal with. So more supply and lower prices are in everyone’s interest, according to Tae-won.
I’m not going to pretend to be enough of an economic boffin to know how likely it is that we would see such competitive “entrants”, but any notes of concern over prices from memory companies is a good thing in my books. Especially given SK hynix’s CEO is forecasting next year to be “the worst year in the industry’s history from the supply perspective.”
The CEO also predicted that demand will remain higher than supply beyond 2030, which was recently echoed by independent analysis. More supply would certainly be welcome, although I should mention that the aforementioned analysis does predict the “2030 DRAM squeeze” will hit regardless of predicted supply expansion from all the big memory makers, including China.
I suppose, therefore, the worry is that even if these memory makers do start taking customer price increases very seriously, it might make no difference unless and until AI demand goes down. Perhaps with an audible ‘pop’.
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