DRAM Industry Cycles

Historical boom-bust patterns in memory manufacturing, previous oversupply collapses, why only three major manufacturers remain, and reluctance to invest in capacity that may become stranded

The DRAM market is defined by a volatile "feast or famine" cycle, where the massive capital and multi-year lead times required for new factories turn every expansion into a high-stakes gamble. Having survived decades of oversupply collapses that consolidated the industry into just three dominant players, manufacturers now show a calculated reluctance to scale up, fearing that current AI-driven demand might be a bubble that leaves them with stranded, multi-billion-dollar assets. This tension pits the risk of bankruptcy against the temptation of record profits, suggesting that while consumers face high prices now, the trauma of past busts makes producers prioritize long-term survival over immediate market saturation.

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Don’t the memory makers always get left holding the bag? I feel this has happened at least three times before.

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DRAM and to a lesser degree storage are notorious for their feast and famine cycles

(Well that and collusion)

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There are a lot of cyclical businesses that make money every year. It requires careful management. Factories can produce less than full capacity - but you better design for that. you can make money in the worst years without laying anyone off even - but it requires careful attention to details and not over hiring in good times as if they will never end.

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Factories working at (significantly) less than full capacity gets a bit harder when you've got one of the most expensive machines on earth working in them, and production lines that'll be out of date in a couple of years

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the normal way to do that is by hiring/firing to meet demand, but in the fab business, you have 10s of billions of dollars of capex with relatively little opex. if you're running at <90% capacity, you're losing money.

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That is the common way, but there are companies that manage without hiring/firing. (or they hire temp workers). There is a minimum level of capacity you need to run just to keep the lights on, and figuring out how to get that low without impacting your ability to serve the highs is hard. Memory manufactures have not gotten very low, probably for good reasons, but it is something they should work on.

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I don’t know if they realize that collusion lends itself to feast/famine.

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but if you don't collude during times of feast you will have famine, and during times of famine you will have famine, in an economy based on feast/famine you must sometimes feast or die.

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All of the capital intensive businesses face this issue. Chemicals, Shipping, Semiconductors etc.

You get market signals that the demand is there, you acquire the necessary capital, you spend 5 years to build capacity, but guess what, 5 other market players did the same thing. So now you are doomed, because the market is flooded and you have low cash flow since you need to drop prices to compete for pennies.

Now you cannot find capital, you don't invest, but guess what, neither your competitors did. So now the demand is higher than the supply. Your price per unit sold skyrocketed, but you don't have enough capacity!

Rinse and repeat.

Capitalists claim that this is optimal.

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The book Capital Returns: Investing Through the Capital Cycle details this phenomenon, including historical cases.

If anything, it shows it's possible for you to arbitrage this and in doing so help "smooth out the cycle."

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To add to that, investors who do make the bet get punished for over-building, which is better than tax payers paying for it. And before someone says it, big corps do get bailed out by gov't, but that's definitely goes against capitalist ideas.

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Sufficient diversity of response will only appear when there are enough competitors. When there are only a few, it doesn't necessarily work out.

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>Capitalists claim that this is optimal.

It's more optimal than planned economies until we have AI planned economies with realtime feedback, I guess.

Consumers get cheap goods during oversupply and most inefficient companies get elliminated during bust while consolidation leads to economies of scale.

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> Soo ... how sure are we that the memory makers themselves are not going to be the ones holding the bag?

The memory makers specifically did not scale up capacity to avoid being left holding the bag.

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I am betting the pendulum swings faster to the other side to excess capacity as all the construction lies of Altman fall through with financiers waking up the the fact they can't build the infrasctructure as fast nor make any profits on that infrastructure that will get built.

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Not a rec, but just my source: Atrioc (streamer, YouTuber) is good at gathering all the facts for the rest of us. There's many other things in play, like the Strait of Hormuz (helium, bromine). Ultimately it works out that the shortage, and shortage profits, will continue; the chip makers are probably going to continue to see record profits (as Samsung has).

The specific mix of factors could change at any time, but the supply chain is relatively inelastic, it will take some time to show up on price labels.

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I think I’m missing something. Financially, what bag would the memory makers be holding here? I don’t think I’m well informed regarding how these deals were structured.

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Exactly, that's why they are not building more capacity and that's why RAM prices will stay up for years.

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The market is already stagnated. Even if OpenAI doesn’t buy what they reserved other players will do so. SK Hynix CEO said there is a 20% gap between supply and demand per year. And that doesn’t account the shock effect that will take place the moment prices normalize and everyone and their dog will go out and start buying inventory to avoid the next crisis. I for one would certainly buy more than I currently need just in case.

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I think:
s/stagnated/saturated/

Edit: also, that demand pressure is going to be applied constantly; there isn’t going to be a shock, it’s just going to keep prices high longer.

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That wouldn’t help if another one goes bankrupt that’ll only make things worse.

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> Soo ... how sure are we that the memory makers themselves are not going to be the ones holding the bag?

We aren't. The remaining memory manufacturers fear getting caught in a "pork cycle" yet again - that is why there's only the three large ones left anyway.

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If they don't expand capacity much, the only negative consequences I foresee happening for them is that they might lose spending discipline, and that systems will be set up to make do with a little less memory. Apart from that, it's just very high profits followed by more or less regular profits.

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You think this window is short? We've been dealing with this for years and years, and to me it seems more like incumbent manufacturers are too comfortable milking cash cows.

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This window of opportunity (very high RAM prices) opened about half a year ago.

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They won't be, prices are high because they are refusing to build capacity for demand that may evaporated by the time they are done. They are holding back and building only enough so when the bubble pops they will be fine.

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I don't think its from the ML collapse FUD, its most likely from the multiple time's in the past when they overbuilt and it resulted in a memory oversupply and price collapses. The 1985–1988, 1993–1994, 1998–2002 and the post pandemic oversupply. These were all cases where shortages followed by over corrections caused oversupply, financial losses due to low prices and fewer surviving companies. I think they're taking their time and are cautiously adding more capacity in such a way that prices won't end up collapsing again. Regardless, the result is still that we the consumers have to pay more.

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At this point the remaining memory companies are… the ones that didn’t die during an over-supply collapse, right? I guess there’s been a strong evolutionary pressure against giving consumers what we want, haha.

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If they gradually increase production capacity then prices stay high for 10+ years (or for as long as it takes for demand to crash) because a gradual increase in production takes that long for them to add enough capacity for current demand.

If they add enough capacity to meet current demand quickly then if demand crashes they still have billions of dollars in loans used to build capacity for demand that no longer exists and then they go bankrupt.

The biggest problem is predicting future demand, because it often declines quickly rather than gradually.

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do we have evidence of RAM manufacturers going bankrupt? do we have evidence that the increased capacities after the mentioned past shortages went unused or were operated at a loss?

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There used to be a dozen DRAM manufacturers and now there are five. I don't know if the others went bankrupt but they got out of the market somehow.

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as a starting point, asianometry has some good videos on this

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Something I haven’t been able to reconcile: If AI makes software easier to create, that will drive the price down. How are software companies going to make enough revenue to pay for AI, when the amount of money being spent on AI is already multiples of the current total global expenditure on software? This demand for RAM is built on a foundation of sand, there will be a glut of capacity when it all shakes out.

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As the article states:

>CXMT still trails Samsung, SK Hynix, and Micron by approximately three years in advanced DRAM node development, and yield rates on new production lines remain the variable that determines whether capacity targets translate into reliable supply. Liu notes that lines launched in the second half of 2026 are unlikely to change the global supply-demand balance until 2027.

The Verge article talks about demand exceeding supply in 2028. Your article suggests it'll take until 2029 before Chinese production catches up to current technology.

It'll help drive prices down in five yearss, but the Chinese memory production won't be ready and efficient enough to prevent the shortages from continuing to grow.

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It seems that RAM manufacturers are still reluctant to increase production. They know something that investors don't about long term RAM demands?

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They've been burned before. The DRAM industry has a long history of booms and busts.

Demand increased, everyone built new fabs, then prices dropped and they couldn't pay off their investments. Many went out of business. It happened in the 80s, it happened in the 90s, it happened in the 2000s.

Now there's only three manufacturers left, and they know very well that demand for their product tends to be cyclical.

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The semiconductor industry has been a boom and bust industry for over 50 years.

https://imgur.com/a/cDLoeZm

I've been in the industry for 30 years and I've worked at companies with fabs were demand was high and customers would only get 30% of what they ordered. Then just 2 years later our fab was only running at 50% capacity and losing money. It takes about $20 billion and 3-4 years to make a modern new fab. If you think that AI is a bubble then do you want to be left with a shiny new factory and no products to sell because demand has collapsed?

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They're doing this but it takes time and if they overshoot even a little they're screwed.

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It won't. DRAM prices are cyclical. They were super high in 2020, then demand crashed in 2022 to the point that manufacturers couldn't sell all their inventory.

Now it's high again, but give it a couple years and it'll once again crash.

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Usually, right after articles like this, things come crashing down.

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The issue is supply is inelastic so even as prices soar they can only make more so fast and that won’t get fixed until 2028.

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Of course, alternatively, the AI companies could go bust before finding profitability. Then, there’d be a ton of supply, prices would crash, and one or two of the current memory suppliers would go out of business. After that, the new Chinese memory companies might be producing at volume, and Renesas could be up and running.

At the moment, nothing is certain. Could this last? Sure. Could it not last? Yup.

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Your instincts are likely right on this one OP. Memory prices surged 80–90% in Q1 2026 compared to Q4 2025, DRAM, NAND, and HBM all at record highs. 3 suppliers for the entire planet?

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The RAM market is a square wave

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This could be great.

There's a future where RAM makers tool up for this massively increased demand, then the AI companies go broke as the bubble bursts, so RAM is cheap as. So laptop manufacturers get on that and start making laptops with 1TB+ memory so we can run decent LLMs on the local machine. Everyone happy :)

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RAM makers are not increasing their capacity. If AI bubble bursts we might see a momentary drop in RAM prices but it won't be dramatic. Return to "normal" is the best scenario I can imagine but my gut tells me we're probably never going back to early 2025 memory prices.

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I fear the author and most commenters are not aware of the law of demand and supply. If there is demand for consumer RAM, there will be supply for consumer RAM. It just takes time and risk-assessment to scale up operations.

We have RAM shortage now, we will have very cheap RAM tomorrow. It’s not like production is bottlenecked by raw materials. Chip companies just need to assess if the demand by AI companies will last so it’s better to scale up, or perhaps they should wait it out instead of oversupplying and cutting into their profits.

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We're talking about advanced semiconductor manufacture. It takes years and 100s millions to billions of dollars to scale up operations. That's something you don't do unless you know there's demand to sustain it in future.

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The law of supply and demand works in a perfect competition market.

There are two RAM suppliers...

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