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Micron locks in historically high memory prices for five years (www.theregister.com)

submitted 2 months ago by ryper@lemmy.ca to c/technology@lemmy.world

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Memory-maker Micron has found a way to keep prices for its products sky-high for another five years, by signing 16 “strategic customer agreements” (SCAs) that include a floor price the company says comes with “a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle.”

Micron CEO, president and chairman Sanjay Mehrotra explained the SCAs in prepared remarks delivered during the company’s Q3 earnings call. He explained that Micron has signed 16 SCAs, most of them covering 2026 to 2030, and that they involve a commitment to buy a certain quantity of product and pay for it in a pricing band that has a floor and a ceiling price. The floor price covers the historically high gross margins mentioned above, and the ceiling price means those who commit to an SCA are insulated if memory prices go even higher.

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[–] jqubed@lemmy.world 46 points 2 months ago (2 children)

Five years is too long for the buyers. The AI bubble will burst before then and then the market price will drop as the inflated demand disappears, especially if this continues long enough for more production capacity to come online.

They might not have had much of a choice in making the deal, though. Micron has been extracting the absolute maximum they can out of this situation. Make a deal or get nothing. Their clients will remember, though, and flag them as an unreliable supplier. Once this ends—and these always end—they’ll likely have a lower market share and end up having to cut prices.

Micron is optimistic in saying the demand won’t start easing until 2028. A lot of the rest of the technology manufacturing industry is about to grind to a crawl if not a halt because it’s nearly impossible to get components. Some companies are already delaying product launches and I think a lot more are about to this summer as they realize what’s happening. If non-AI businesses start to slow, the whole economy starts to slow, the AI demand will falter and that’s when the bubble bursts. I’m thinking maybe by the end of this year, more likely next year.

When the bubble bursts I’m guessing at least a couple of the companies Micron signed SCAs with will fold and Micron won’t get anything.

[–] Kazumara@discuss.tchncs.de 7 points 2 months ago

Interesting analysis. I was thinking the same, their customers might not make it.

About this point:

They might not have had much of a choice in making the deal, though. Micron has been extracting the absolute maximum they can out of this situation. Make a deal or get nothing. Their clients will remember, though, and flag them as an unreliable supplier.

Are the other two any better? If not Micron might get away with it. It doesn't strike me as a very competitive market.

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