Rational actors in game know that this demand spike is most likely temporary. So investing in more production only to face glut in future dropping margins to nearly nothing is not rational move.

This has been played out before so it is only natural that they are careful with increasing the supply. And while they don't response they are netting larger margins than before.

Obvious end result is that demand will drop as price goes up. The other natural part of supply-demand curve.

That's economical theory, but the real world is often non-linear.

Crucial is dead. There's a finite amount of rare earth. Wars and floods can bankrupt industries, supply chains are tight.

Those are all temporary events and circumstances.

If the market is big enough, competitors will appear. And if the margins are high enough, competitors can always price-compete down to capture market-share.

Competitors will appear? You can't build a DRAM production facility in a year. You probably even can't in two years.

Also, "price-compete down to capture market-share"? Prices are going up because all future production capacity has been sold. It makes no sense to lower prices if you don't have the capacity to full fill those orders.

> Crucial is dead.

Micron stopped selling to consumers to focus on the high margin enteprise market. Might change in the future.

The business that owns crucial is producing more chips than ever.

Rare earth metals are in the dirt around the world.

Supply and demand curves shifting, hence prices increasing (and decreasing) is an expected part of life due to the inability to see the future.

> Rare earth metals are in the dirt around the world.

They are. The problem is, the machinery to extract and refine them, and especially to make them into chips, takes years to build. We're looking at a time horizon of almost a decade if you include planning, permits and R&D.

And given that almost everyone but the AI bros expects the AI bubble to burst rather sooner than later (given that the interweb of funding and deals more resembles the Habsburg family tree than anything healthy) and the semiconductor industry is infamous for pretty toxic supply/demand boom-bust cycles, they are all preferring to err on the side of caution - particularly as we're not talking about single billion dollar amounts any more. TSMC Arizona is projected to cost 165 billion dollars [1] - other than the US government and cash-flush Apple, I don't even know anyone able, much less willing to finance such a project under the current conditions.

Apple at least can make use of TSMCs fab capacity when the AI bros go bust...

[1] https://www.tsmc.com/static/abouttsmcaz/index.htm

Aren't rare earth metals used mainly for batteries, not chips ?

I guess people might be mixing up all the headlines of all the articles they did not read by this point.

It's not even the economical theory. Supply should not increase to increased demand. They want more profit, and if less supplies is what accomplishes that, they will absolutely keep the supplies constant and manufacture a scarcity. This is the economical theory.

As far as I can tell, none of the companies producing memory chips are increasing production because they don't know if the current demand is sustainable.

Increasing memory production capacity is a multi-year project, but in a few years, the LLM companies creating the current demand might all have run out of money. If demand craters just as supply increases, prices will drastically decrease, which none of these companies want.

How does this square with some companies just stopping sales to consumers altogether?

This is exactly it: supply of high margin products is increasing at the cost of low margin products. Expect the low end margin to catch up to the high end as long as manufacturing capacity is constrained (at least 1 year).

They aren't making less though.

The blessing the plebs with eternal wisdom comment.

Take a look at GPU prices and how that "supply increased thus bringing the prices down"

As usual, the problem is: how fast does this happen?

No just stop being cynical. The reason almost every electronic item is cheaper now than 2 decades back is just becuase the demand(and thus supply) is higher.

I can't tell if this is sarcasm or not. I'd argue it's more the result of the CCP bankrolling the Chinese electronics industry to the point where roughly 70% of all electronics goods are produced in China. The concentration of expertise and supply chains is staggering, and, imo, was really born out of geopolitical strategy.

No, its not. Transistors used to cost $1. Now they cost $1/billion or something. It's all because the 10s of billions of fixed cost incurred by fab is shared among customers. If we create less chips, the fixed cost wont reduce.

> of the CCP bankrolling the Chinese electronics industry to the point where roughly 70% of all electronics goods are produced in China.

But we don't see this bankrolling in absolute values. Rather, it's due to regressive taxation, low (cheap) social security for workers, and very weak intellectual property protection.