1 00:00:00,000 --> 00:00:03,440 If you've ever suddenly needed to buy a computer memory or an SSD, 2 00:00:03,440 --> 00:00:06,880 there's a good chance you've experienced either sticker shock 3 00:00:06,880 --> 00:00:10,560 or a pleasant surprise when you looked up how much it cost. 4 00:00:10,560 --> 00:00:15,440 Indeed, both RAM and the NAND flash that holds the data inside SSDs 5 00:00:15,440 --> 00:00:19,440 are notorious for fluctuating in price more than other components. 6 00:00:20,240 --> 00:00:25,280 But why? To answer, we spoke with our friends at G-Skill and we'd like to thank them for 7 00:00:25,280 --> 00:00:32,800 contributing their insight. As it turns out, the main reason is that both RAM and NAND flash are commodity goods. 8 00:00:33,440 --> 00:00:39,600 And when we say commodity, we mean a good that can be used in many different types of markets. 9 00:00:39,600 --> 00:00:47,280 Think about corn, for example. You can eat it, sure, but it can also be used for everything from animal feed to biofuel, 10 00:00:47,280 --> 00:00:52,560 so large amounts of it are regularly sold to many different types of businesses. 11 00:00:53,120 --> 00:00:56,320 The DRAM and NAND markets work in much the same way. 12 00:00:56,720 --> 00:01:02,560 Nearly all modern electronic devices, everything from TVs to smartwatches to 13 00:01:02,560 --> 00:01:09,840 heck, even internet-connected microwaves, need both RAM and flash storage, not just computers. 14 00:01:09,840 --> 00:01:14,400 By comparison, something like an x86 CPU from Intel or AMD 15 00:01:14,400 --> 00:01:17,840 is really only being sold to two kinds of markets, 16 00:01:17,840 --> 00:01:23,120 system integrators like Dell or HP and retailers like New Egg and Micro Center. 17 00:01:23,120 --> 00:01:28,880 You also have the fact that DRAM and NAND can be shipped off more or less unchanged 18 00:01:28,880 --> 00:01:33,920 to these different customers. For example, the RAM that's inside your computer 19 00:01:33,920 --> 00:01:37,520 is not all that dissimilar from the RAM inside your phone. 20 00:01:37,520 --> 00:01:44,640 So if a RAM manufacturer is trying to increase supply to serve a bunch of different use cases, 21 00:01:44,640 --> 00:01:51,120 all they really have to do is shrink the process node so they can fit more RAM chips on one wafer. 22 00:01:51,120 --> 00:01:55,520 Then they cut it up like a square-cut pizza and send however many chips to buyers 23 00:01:55,520 --> 00:02:01,600 serving each of these different segments. Contrast that with something like manufacturing displays, 24 00:02:01,600 --> 00:02:07,280 where different resolutions and panel types mean that serving many different markets 25 00:02:07,280 --> 00:02:11,520 is much more challenging for any single consolidated manufacturer. 26 00:02:11,520 --> 00:02:17,920 So this ends up meaning that more external forces are exerting influence on how much DRAM 27 00:02:17,920 --> 00:02:23,280 and NAND will cost you, and it also means that manufacturers have a much harder time 28 00:02:23,280 --> 00:02:26,560 estimating how much supply they need to keep on hand. 29 00:02:26,560 --> 00:02:31,120 That means that both supply gluts and shortages are more likely. 30 00:02:31,120 --> 00:02:34,800 Shortages can and have been caused by many different things. 31 00:02:34,800 --> 00:02:40,320 For example, there can be unforeseen high demand when a hot new phone comes out that everyone wants, 32 00:02:40,320 --> 00:02:45,600 or even a service that causes a spike in demand on the server side of things. 33 00:02:45,600 --> 00:02:49,120 I mean, think how much more memory Google might suddenly require 34 00:02:49,120 --> 00:02:53,040 if their Stadia game streaming service were to take off. Good luck with that. 35 00:02:53,040 --> 00:02:58,160 Other times, supply can be strained by production problems such as power outages that disable 36 00:02:58,160 --> 00:03:02,000 the systems used to maintain their dust-free environments on the production line, 37 00:03:02,000 --> 00:03:06,960 meaning that manufacturers have to scrap whatever's on the line and start from scratch. 38 00:03:06,960 --> 00:03:12,000 Now this might only set things back a week or two and have a minimal impact on prices, 39 00:03:12,000 --> 00:03:16,720 but other times, natural disasters like earthquakes and fires have shut down 40 00:03:16,720 --> 00:03:21,120 fabs for months at a time, resulting in significant shortages in supply, 41 00:03:21,120 --> 00:03:24,880 something that notably happened to SK Hynex back in 2013. 42 00:03:24,880 --> 00:03:29,760 There's also the possibility of politics muddying things up as they so often do. 43 00:03:29,760 --> 00:03:34,000 For example, there was a trade dispute between Japan and Korea in 2019. 44 00:03:34,560 --> 00:03:39,120 Japan supplies lots of raw materials used in the manufacture of DRAM and NAND, 45 00:03:39,120 --> 00:03:44,160 meaning that the fabs in Korea couldn't get the ingredients they needed for a short while. 46 00:03:44,720 --> 00:03:52,160 Now that situation was fortunately resolved quickly, but any kind of more protracted conflict could have driven prices up in a big way. 47 00:03:52,160 --> 00:03:56,720 Of course, sometimes mishaps end up working in the consumer's favor instead. 48 00:03:56,720 --> 00:04:02,000 In the mid-2000s, there was a huge surge of people buying mobile devices like phones, 49 00:04:02,000 --> 00:04:07,360 and the RAM manufacturers assumed that this trend would just keep going the way that it was. 50 00:04:07,360 --> 00:04:12,560 So they started churning out lots more RAM, but instead, the market got saturated. 51 00:04:12,560 --> 00:04:16,720 Suddenly, everybody already had a phone. Or two. 52 00:04:16,720 --> 00:04:20,160 And sales slowed down, so suddenly there was a lot of excess supply, 53 00:04:20,160 --> 00:04:23,920 meaning that folks who bought RAM during this time ended up getting a bargain. 54 00:04:23,920 --> 00:04:28,480 There have even been times that memory prices have been pushed below the manufacturing cost 55 00:04:28,480 --> 00:04:33,760 for the DRAM chips, because it's worse for the manufacturers to shut down the fabs 56 00:04:33,760 --> 00:04:38,640 than to keep pumping out chips at a loss like during the Great Pringles Incident of 1994, 57 00:04:39,360 --> 00:04:44,560 which actually wasn't a real thing. It was never a Pringles incident that I know of.