If you've ever suddenly needed to buy a computer memory or an SSD,
there's a good chance you've experienced either sticker shock
or a pleasant surprise when you looked up how much it cost.
Indeed, both RAM and the NAND flash that holds the data inside SSDs
are notorious for fluctuating in price more than other components.
But why? To answer, we spoke with our friends at G-Skill and we'd like to thank them for
contributing their insight. As it turns out, the main reason is that both RAM and NAND flash are commodity goods.
And when we say commodity, we mean a good that can be used in many different types of markets.
Think about corn, for example. You can eat it, sure, but it can also be used for everything from animal feed to biofuel,
so large amounts of it are regularly sold to many different types of businesses.
The DRAM and NAND markets work in much the same way.
Nearly all modern electronic devices, everything from TVs to smartwatches to
heck, even internet-connected microwaves, need both RAM and flash storage, not just computers.
By comparison, something like an x86 CPU from Intel or AMD
is really only being sold to two kinds of markets,
system integrators like Dell or HP and retailers like New Egg and Micro Center.
You also have the fact that DRAM and NAND can be shipped off more or less unchanged
to these different customers. For example, the RAM that's inside your computer
is not all that dissimilar from the RAM inside your phone.
So if a RAM manufacturer is trying to increase supply to serve a bunch of different use cases,
all they really have to do is shrink the process node so they can fit more RAM chips on one wafer.
Then they cut it up like a square-cut pizza and send however many chips to buyers
serving each of these different segments. Contrast that with something like manufacturing displays,
where different resolutions and panel types mean that serving many different markets
is much more challenging for any single consolidated manufacturer.
So this ends up meaning that more external forces are exerting influence on how much DRAM
and NAND will cost you, and it also means that manufacturers have a much harder time
estimating how much supply they need to keep on hand.
That means that both supply gluts and shortages are more likely.
Shortages can and have been caused by many different things.
For example, there can be unforeseen high demand when a hot new phone comes out that everyone wants,
or even a service that causes a spike in demand on the server side of things.
I mean, think how much more memory Google might suddenly require
if their Stadia game streaming service were to take off. Good luck with that.
Other times, supply can be strained by production problems such as power outages that disable
the systems used to maintain their dust-free environments on the production line,
meaning that manufacturers have to scrap whatever's on the line and start from scratch.
Now this might only set things back a week or two and have a minimal impact on prices,
but other times, natural disasters like earthquakes and fires have shut down
fabs for months at a time, resulting in significant shortages in supply,
something that notably happened to SK Hynex back in 2013.
There's also the possibility of politics muddying things up as they so often do.
For example, there was a trade dispute between Japan and Korea in 2019.
Japan supplies lots of raw materials used in the manufacture of DRAM and NAND,
meaning that the fabs in Korea couldn't get the ingredients they needed for a short while.
Now that situation was fortunately resolved quickly, but any kind of more protracted conflict could have driven prices up in a big way.
Of course, sometimes mishaps end up working in the consumer's favor instead.
In the mid-2000s, there was a huge surge of people buying mobile devices like phones,
and the RAM manufacturers assumed that this trend would just keep going the way that it was.
So they started churning out lots more RAM, but instead, the market got saturated.
Suddenly, everybody already had a phone. Or two.
And sales slowed down, so suddenly there was a lot of excess supply,
meaning that folks who bought RAM during this time ended up getting a bargain.
There have even been times that memory prices have been pushed below the manufacturing cost
for the DRAM chips, because it's worse for the manufacturers to shut down the fabs
than to keep pumping out chips at a loss like during the Great Pringles Incident of 1994,
which actually wasn't a real thing. It was never a Pringles incident that I know of.