This feels like a classic business blunder. Focus hard on a single business segment, leaving an opening in the market for your competitors. Not because it wasn't profitable, but because it wasn't profitable enough for you, right now. Only downside is that now you've created an opening for a new player in the market.
This feels like a short coming of western business/stock market thinking. Focusing on profit within the next few quarters, and not caring about the longer term consequences. For all it's flaws and shady business practises at least China can think beyond a single fiscal year.
Ok but this is how the market is supposed to work. If the incumbents aren't doing what their customers want, then competitors can rise and fill the gap and compete.
This isn't a shortcoming, it's a competitive market working as intended.
CXMT sells the vast majority of their bits at the prevailing market rate, just like everyone else. They are adding capacity as quickly as they can, with a 5-10 year planning horizon, just like everyone else. It’s really not that deep!
Yes of course their messaging to customers and the investment community is that they will be rational and measured in their investments. In reality, they are adding capacity as quickly as possible as margins are too high. However, capacity addition leading edge semiconductor manufacturing has a multi-year lead time.
As a outside observer, NAND and DRAM prices have skyrocket ed with the AI infrastructure boom just as the China-based fabs are coming online.
It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
But right now it seems they can max out their supply capacity without selling below cost.
Appears to me like China's endless state led (often unproductive) investment in semiconductor manufacturing subsidies (for decades) is about to pay off with some industry dominance soon.
The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced.
Also they gradually lose the ability to meaningfully innovate in those sectors because there's no grounding against production reality anymore.
This has geopolitical consequences further down the line.
> steel, heavy industry, semiconductors, machine tools
the question is if single country can carry all these industries at loss for prolonged period of time.
Another approach is to rely on international supply chain and speed of innovation, we can't produce steel domestically profitably today, fine, we may buy it from diversified international supplier network, and rebuild it fast tomorrow if needed using new tech, and focus on many other high margin verticals, instead of putting many billions of resources into infra which could be obsolete tomorrow.
Agree, worth analysing what is genuinely commodity.
There are more elements to it though which can be sort of hard to explain.
There are whole cultures and ways of thinking built around production. The children of engineers who worked on xyz v1.0 have a genuine advantage when its time to work on xyz v2.0. There is a lot of tacit knowledge in these engineering fields and you have a huge advantage in knowledge retention if you can maintain unbroken chains of succession.
You can't achieve the top levels of ability (decades of experience, generational knowledge) if you are whip-sawing production to and fro across the globe every 10 years.
There are also cross pollination effects. Being in the same community with as many related fields as possible (co-located) is what drives cross-pollination and mobility of ideas and people between industries.
Think how many countries have tried to copy "silicon valley" and failed, and _why_ they failed.
What I'm saying is that technology is built by _people_ and there are human reasons why having local capacity is beneficial for all the related industries in the area.
> The children of engineers who worked on xyz v1.0 have a genuine advantage when its time to work on xyz v2.0.
my point is that other children with no extremely heavy investments into perl v1.0, will have some skills in c++ v1.0 and python v1.0, and will have advantage in adapting Tensorflow v1.0, which is more valuable than skills in perl v2.0. Heavily investing in one industry you sacrifice some flexibility.
So, this is multifactor analysis, lets say wise American people will elect me as next president, I would create list of industries, assign metrics (national security importance, potential revenue in 5y from now, impact on other industries, potential margin, risks of failure, etc), then build some formula which aggregate those metrics into single, and base on final metric allocate weighted funds to support N top industries.
I don't know if it's still a thing, but China was getting a lot of heat about a decade ago for purposefully devaluing their currency to make their exports more attractive.
They kind of had to do this, because their large amount of exports were pushing the value of it up compared to others.
It's funny that you call this an "very aggressive dumping strategy" while AI vendors are doing the same but with even greater losses and on a much larger scale.
It's all simply a fight for market share.
The original sin is the existing DRAM vendors selling their entire (spare) capacity to the likes of OpenAI.
Has DDR5 caught up to DDR4 latency yet? I remember it was worse at least in the beginning. There's more bandwidth per channel but a hw design can always add more channels for the desired BW. Not so for latency.
DDR4 going from $1.35 to $11.50 in a year shows this market was already distorted before CXMT showed up.
Legacy DRAM is still over half of Samsung and SK hynix's production capacity. That's where the volume pain actually lands while they're betting everything on HBM4.
It might be very effective marketing. The big non-Chinese OEMs trust and use Korean and Japanese DRAM, and they might have been unwilling to put DRAM from CXMT into their products. (CXMT is newish, does not have access to ASML gear, which ASML would like you to believe makes it harder to make high-quality DRAM, DRAM is historically not a very large fraction of the cost of most non-huge-memory machines, and a bad DIMM is an expensive mistake for a company like Dell or HPE that is on the hook for repairs.)
But now CXMT seems to have gotten at least Dell, HP (I wonder if there’s article meant HPE), Acer and Asus to buy and attempt to qualify samples. If CXMT lands some serious purchasing agreements while still selling well above cost, that’s a win for them.
This feels like a short coming of western business/stock market thinking. Focusing on profit within the next few quarters, and not caring about the longer term consequences. For all it's flaws and shady business practises at least China can think beyond a single fiscal year.
This isn't a shortcoming, it's a competitive market working as intended.
https://www.tomshardware.com/pc-components/dram/memory-maker...
It is wise for these Chinese fabs to eventually use a very aggressive dumping strategy to price well below cost push out other players forever, especially in DRAM.
But right now it seems they can max out their supply capacity without selling below cost.
Appears to me like China's endless state led (often unproductive) investment in semiconductor manufacturing subsidies (for decades) is about to pay off with some industry dominance soon.
Like the electric vehicle sector.
The downside in general is that other countries lose production capacity in steel, heavy industry, semiconductors, machine tools etc - industries that took decades to build and can't be easily replaced.
Also they gradually lose the ability to meaningfully innovate in those sectors because there's no grounding against production reality anymore.
This has geopolitical consequences further down the line.
the question is if single country can carry all these industries at loss for prolonged period of time.
Another approach is to rely on international supply chain and speed of innovation, we can't produce steel domestically profitably today, fine, we may buy it from diversified international supplier network, and rebuild it fast tomorrow if needed using new tech, and focus on many other high margin verticals, instead of putting many billions of resources into infra which could be obsolete tomorrow.
There are more elements to it though which can be sort of hard to explain.
There are whole cultures and ways of thinking built around production. The children of engineers who worked on xyz v1.0 have a genuine advantage when its time to work on xyz v2.0. There is a lot of tacit knowledge in these engineering fields and you have a huge advantage in knowledge retention if you can maintain unbroken chains of succession.
You can't achieve the top levels of ability (decades of experience, generational knowledge) if you are whip-sawing production to and fro across the globe every 10 years.
There are also cross pollination effects. Being in the same community with as many related fields as possible (co-located) is what drives cross-pollination and mobility of ideas and people between industries.
Think how many countries have tried to copy "silicon valley" and failed, and _why_ they failed.
What I'm saying is that technology is built by _people_ and there are human reasons why having local capacity is beneficial for all the related industries in the area.
my point is that other children with no extremely heavy investments into perl v1.0, will have some skills in c++ v1.0 and python v1.0, and will have advantage in adapting Tensorflow v1.0, which is more valuable than skills in perl v2.0. Heavily investing in one industry you sacrifice some flexibility.
So, this is multifactor analysis, lets say wise American people will elect me as next president, I would create list of industries, assign metrics (national security importance, potential revenue in 5y from now, impact on other industries, potential margin, risks of failure, etc), then build some formula which aggregate those metrics into single, and base on final metric allocate weighted funds to support N top industries.
They kind of had to do this, because their large amount of exports were pushing the value of it up compared to others.
It's all simply a fight for market share.
The original sin is the existing DRAM vendors selling their entire (spare) capacity to the likes of OpenAI.
https://globalcio.com/news/16062/
You're maybe talking about the spot market, but companies are free to make any sort of supply contract.
Legacy DRAM is still over half of Samsung and SK hynix's production capacity. That's where the volume pain actually lands while they're betting everything on HBM4.
But now CXMT seems to have gotten at least Dell, HP (I wonder if there’s article meant HPE), Acer and Asus to buy and attempt to qualify samples. If CXMT lands some serious purchasing agreements while still selling well above cost, that’s a win for them.
Once established, the Chinese vendors will retain most the market share if the quality is ok. The SK/JP vendors are making a big mistake.
And if so, how?