@jukan05: Why the Memory Big 3 Cannot Exercise Implicit Supply Discipline Like HDD Players...
Why the Memory Big 3 Cannot Exercise Implicit Supply Discipline Like HDD Players Someone raised an excellent question: "There are only three DRAM suppliers—why can't they implicitly coordinate supply, like HDD makers do, to avoid over-investment?" Intuitively, it makes sense. In an oligopoly, players should be able to read each other's signals and moderate accordingly. And indeed, after the HDD market consolidated into a three-player structure—Seagate, WD, and Toshiba—the industry maintained relatively stable supply discipline for a considerable period. So why doesn't this work in memory? The core issue is that memory is an industry where those who wait are punished. HDD is a mature industry. The pace of generational technology transitions is slow, and being late to adopt a new generation doesn't get you expelled from the market. This creates room for a tacit agreement along the lines of "let's all take it slow together." Memory is the exact opposite. From DDR4 to DDR5, HBM2e to HBM3, 1-alpha to 1-beta—technology node transitions happen relentlessly, and the first mover to reach a new node captures a 6–12 month premium pricing window. "Exercising discipline" effectively means "falling behind," and falling behind in this industry is fatal. Consider a concrete example. Suppose Samsung decides to conserve CAPEX and delays its transition to the next-generation DRAM specification. But SK Hynix proceeds on schedule. What happens? Samsung gets shut out of socket qualifications on new Intel and AMD server platforms. Socket qualification, once lost, takes months to quarters to reclaim. In other words, the cost savings on CAPEX translate into months of forfeited revenue opportunities. This is the textbook prisoner's dilemma. If all three players collectively restrain capacity additions, everyone benefits. But if even one defects, the other two suffer massive losses. So inevitably, every player arrives at the same conclusion: "I have to move first." On top of this, the cost structure of fabs pours fuel on the fire. A state-of-the-art memory fab generates billions of dollars in annual fixed depreciation. Once a fab is built, it must be run. The marginal cost of producing one additional wafer is extremely low, which means that running at 100% utilization is the only way to minimize average cost per bit—regardless of whether the market is oversupplied or not. HDD factories have relatively modest capital investment requirements and offer flexible production scalability. When orders decline, you simply scale back the line. Semiconductor fabs are a different beast entirely. Shutting one down and restarting it involves enormous costs and lead times, and depreciation charges keep accumulating whether the fab is running or not. While the strategy of "cut production to defend pricing" can work, it comes at the cost of enormous losses. To summarize: the HDD industry features slow technology transitions, high manufacturing flexibility, and a forgiving environment where waiting carries little penalty. The memory industry features rapid technology transitions, enormous fixed-cost burdens, and an unforgiving environment where waiting is existential. Even under the same oligopolistic structure, the fundamental competitive dynamics of each industry are so different that the implicit supply discipline that worked in HDD is structurally impossible in memory.