Hey everyone I made a post yesterday and got a bunch of counter arguments and questions it brought in many different point of views and makes me really question which I like that’s the point of the post I want to really dive in depth
• Why is memory so expensive first of all?
Simple big memory companies are focusing on high end ai memory. they are diverting their massive chunks of their factory floors to service high end AI data center contracts they accidentally triggered a massive global shortage in everyday memory
•What about china?
We all heard of CXMT, this a huge reason why micron has fell over the past weeks. They are currently on track to produce 350,000 wafers per month due to the ipo, this matches to microns total capacity of dram. This could genuinely cause a huge flood of cheap standard pc and phone ram which is why apple have started looking into china for their phones, MacBooks etc . However micron, sk Hynix and Samsung have something they have that china doesnt HBM4
•what is HBM4?
Hbm4 is the newest generation of memory built for AI. It is faster, and more efficient than all previous models like hbm3, CXMT is currently struggling to make efficient hbm3 which is a older generation, they are structurally behind micron in terms of HBM by 3-4 years. Hyperscalers like Google, Amazon, meta urgently need hbm4 to supply their expensive chips as they fear of falling behind.
•But this creates a new problem
CXMT main goal doesn’t seem to compete with HBM4, but create a oversupply of cheap ram that will drop prices and cut off the “cash cow” that the big 3 use to fund their hbm4 production. Standard ram counts for 70 percent of the total Big 3 revenue.
•but it seems microns trying to counter this
It seems like micron is trying to structurally shift from a low margin commodity “ram” into becoming a premium ai first company. Big companies need HBM4 this is why micron has forced them to sign multi year long terms deals they cannot legally drop out of, even if memory demand drops the price is fixed. Companies are scrambling to secure these deals left and right as the supply is so scarce.
•HBM4 is highly profitable and is growing fast
HBM4 is super difficult to make it takes years of building factories and funding to maybe have a shot at creating efficient memory. It currently has a 20-40 percent defect rate meaning microns margins could realistically increase if they lower this rate down, as time goes on micron will rely less on standard ram and more into the more premium ai memory.
My Bear case
In this scenario cxmt crashes ram prices next year and causes a massive supply of cheap ram, since standard ram still produces over 70 percent of microns total revenue this leaves them with little to no cash flow, this forces them to pause or withdraw from HBM4 production and could lose to competitors like SK HYNIX. Wall Street calls this a cyclical stock and everyone was right all along
My Bull case
In this scenario microns survives the crash due to a couple reasons. They have legally binded big companies into long term deals guaranteeing them revenue of the next years regardless of where standard ram goes. They will continue to push the high end ai memory production, lower defect rates and increase margins over time and shifting from a low commodity ram company to one of the biggest Ai infrastructure in the world.
In my opinion I think they will survive the eventual crash of standard ram. I believe micron is structurally transforming into a premium ai supplier but this is my opinion I’ll like to hear your thoughts, thank you all for reading I love sharing thoughts and hearing new perspectives