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.
They’re like a movie actor who was in obscurity for decades and is suddenly popular. Is it being a traitor when everyone is offering larger and larger amounts for your time?
If you applied for two jobs, both said they wanted to hire you and started budding higher and higher so you’d work for them, are you a traitor to the customers who ultimately pay your inflated salary?
I don’t blame Micron. I blame the people who invested billions into AI which allowed this to happen.
The big 3 are known for being a price fixing cartel.
Any individual company could make more money by scaling up production. But they don’t because they already know the other 2 won’t.
So in your analogy the actors have all agreed to only work 10 hours a week and it’s nearly impossible to become an actor without having tens of billions to start
There are over 300 companies with over a $50B market cap. The money is there.
Micron doesn’t expand production not because they don’t want more money but because they think AI is a fad like everyone else.
That doesn’t mean they all have $20B in cash to spare, OR the expertise to pull it off. Even China is still playing catch-up and nobody else is even trying because to get started in 2026 would mean poaching a bunch of people with nasty non-compete clauses to even get started planning.
There are documented cases of these same 3 companies colluding to constrain supply, even openly discussing what the target price of DRAM should be. Some of the people who were found guilty got their fines or even prison time and then came back and got promoted.
Apple has $68B in cash on hand. Not stocks or other investments, cash.
Yes, but that doesn’t change that there are dozens of companies that could make ram but don’t because they pass off the price increases and blame ram manufacturers while not risking their own money.
And when they put all of that into their new RAM business, their investors are going to have a bunch of questions.
Even with tens of billions in cash it’s not that simple. Like I said, you first start off by convincing a bunch of people their non-competes and give up their massive annual bonuses, so that’s going to be an investment that the existing companies don’t have to make. Then you’ll have caught up with RAM manufacturing in about 10 years or so once you’ve ironed out all the details.
China, the biggest economic powerhouse in the world and the epicenter of modern electronics manufacturing, is still not making HBM3 or 4 or whatever nvidia uses now for Rubin at a commercially viable scale at CXMT, they’re only barely making enough DDR5 to get contracts.
That’s after starting the company in 2016 and getting DDR4 manufacturing going in 2020 and getting people from Samsung to steal trade secrets (and come work for them).
Just because you can build a fab for 20 billion doesn’t mean it’s only 20 billion to get started, or a quick 2-3 year endeavor to do so. Publicly traded companies can’t really do this because it’s a bunch of expenses over multiple years without a single cent of revenue for many years. This needs to be properly private cash or government backing.
And if one was based on seven companies selling debt to each other creating a bubble that will pop and destroy the economy?
I would take the one that paid less, but would not be an active plague on the planet and its people.