back to article Micron dangles predictable memory price agreements in front of vendors

Memory and storage maker Micron Technology has revealed a new business model intended to address the volatility in the memory market that has resulted in sharp swings in pricing over the past several years. Revealed at Micron's Investor Day 2022 event, the new forward pricing agreements enable a Micron customer to sign a multi …

  1. Mishak Silver badge

    I wonder

    Does this mean that there is going to be over capacity in the near term that means prices are about to fall?

    1. Snowy Silver badge
      Trollface

      Re: I wonder

      Or the supply will remain tight and prices will remain high and predicable get higher?

  2. Bitsminer Bronze badge

    details....

    On the one hand, Micron is now arbitraging between the market and the vendor, as their stated "costs" will have some variable components that help them maintain their margin. It's also defensible to the vendor who reduces their own margin risk and capital expense in an age of rapidly rising interest rates.

    On the other hand, details of the contact will matter. "Pay or play" might be part of the game: vendor commits to $500M and has to pay even if they don't or can't accept shipments in a collapsing market. Caveat vendor.

  3. Justthefacts Silver badge

    They’ve learnt from the banking sector

    This is very, very naughty.

    In the first few years of the coming DRAM business cycle, DRAM prices will fall as they always do, and Micron shareholders will make out like bandits.But in 5-8 years time…..they will have signed the next cycle of lower fixed-price contracts, and there will be a “totally unpredictable shock” (like there was for the banks in 2008) as DRAM supply struggles to keep up with demand. Possibly related to Taiwan/China geopolitical, but there’s always something. And Micron will be unable to supply at the price contracted, that’s how contracts work, you can’t just raise prices to avoid delivering demand. Then Micron lose money hand over fist, stare bankruptcy in the face. And out will come those leeetle begging hands and pleading eyes “please US government, you must save US industry, imagine how bad it would be for economy if we failed and US industry had no access to US memory chips”. And then the cheque book will come out, and hundreds of billions will be siphoned from US taxpayer to shareholders, over the full DRAM business cycle.

    This is how the game works now. Let that be a lesson to those in the EU, who want to “invest” tens of billions into subsidies for the capital-intensive semi industry. You’re writing a blank cheque medium-term for at least hundreds of billions transfer of taxpayer money to semiconductor firm shareholders. It just becomes impossible to say No.

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