If you have recently gone to the market to buy a new smartphone or laptop, you must have realized that the prices of gadgets are continuously increasing. Companies like Apple, OnePlus and Nothing have recently increased the prices of many of their models. Often the excuse behind this is given to be supply chain or inflation, but a case filed on June 25 in a federal court in California has revealed the real reason behind this inflation to the world.
This lawsuit has been filed against the world’s top three memory (RAM) supplier companies Samsung, SK Hynix and Micron. It is alleged that these three companies, working like a syndicate, deliberately stopped the supply of RAM in the global market, due to which the prices of memory chips have increased by a huge 700% in the last four years (from 2022 till now). Let us know why RAM has become so expensive, what is the role of AI in it and how is it affecting the tech industry and common Indian customers…
Is this a syndicate game?
When the demand for something increases in the market or the prices skyrocket, some company tries to attract more and more customers by increasing its production. But according to the lawsuit, exactly the opposite happened here. These three companies have 90% control over the global DRAM (Dynamic RAM) market. When prices started rising rapidly, no one increased production. Instead, all three reduced their production together. This collusion had a direct impact on common customers, who were forced to buy expensive gadgets.
Turning away from common customers and leaning towards AI
These companies have made a major change in their strategy. By reducing production of traditional RAM (DDR3 and DDR4), their focus is now on high-bandwidth memory (HBM). HBM is mainly used in AI data centers. AI companies are ready to pay exorbitant prices to fulfill their needs. AI companies like Google, OpenAI and Anthropic are purchasing large quantities of High Bandwidth Memory (HBM) for their data centers.
The biggest example of this change is the American company Micron. Micron has completely discontinued its famous RAM brand Crucial, popular among common customers. The company has signed 16 new agreements with AI clients and will now deliver only AI orders scheduled till 2030.
Which company’s RAM does Apple use in India?
If you are thinking that Apple is dependent on any one company for iPhones or MacBooks made in India, then it is not so. Apple uses RAM from these three companies (Samsung, SK Hynix and Micron) in India and globally.
- Multi-Sourcing Strategy: Apple never leaves its entire supply chain at the mercy of any one supplier. The Indian-made iPhone 15 or iPhone 16 you have may have Samsung RAM, while your friend’s phone of the same model may have SK Hynix or Micron RAM.
- Unified Memory Architecture (UMA): The RAM that’s packed right next to Apple’s M and A series silicon chips is primarily customized LPDDR5X RAM from SK Hynix and Samsung.
Apple can now look towards Chinese chip companies to reduce dependence on Samsung and Micron, but due to the US-China trade war, it will require US government approval.
Chip companies’ argument
Chip making companies say that the reason for increasing prices is not just their strategy. Micron Chief Business Officer Sumit Sadana told the Wall Street Journal that when memory chips were cheap in 2023, many big customers wanted to buy chips at very low prices. Due to this, companies earned very little profit and many investments had to be stopped. Earlier, big customers like Apple used to buy chips at cheaper prices by placing more orders. But now the situation has changed. AI companies are buying memory chips in large quantities by paying higher prices. That’s why chip companies are now giving more importance to AI companies. This is also affecting big customers like Apple.
No-entry of new companies in the market
If these three companies are acting arbitrarily, then why doesn’t any new company come into the market? Understand it like this…
- Huge Cost: The cost of setting up a single DRAM fabrication plant (Fab) comes between 15 to 20 billion dollars (approximately Rs 1.25 lakh crore to Rs 1.65 lakh crore).
- Long Process: Plants take years to build and acquiring new technology is almost impossible due to decades-old trade secrets.
- Strict Testing: Even if a company makes a chip, it takes 12 to 18 months to get approval from big buyers (like Apple or Dell). American export controls also prevent new players from acquiring modern equipment.
Allegations of price fixing have been made before also.
This is not the first time that these companies have done this. Their history is full of such cases.
- 1998 to 2022: In a long investigation by the US Department of Justice (DOJ), it was proved that these companies had fixed the prices. Then Samsung paid a fine of $300 million and SK Hynix paid a fine of $185 million. Micron had turned informant with investigators in this case and escaped fines.
- 2016 to 2018: During this time too, a similar cycle of price increase was seen, on which the Chinese government had also instituted an investigation.
Its direct impact on India
Even though this case is going on in America, its impact is clearly being felt in India.
- The effect will be visible during the festive season: India is one of the largest smartphone and PC markets in the world. Due to expensive RAM, customers may have to pay more for budget smartphones and laptops during the festive season of Diwali and Dussehra.
- Digital India and cost of data centres: Companies like Reliance, Adani and Yota are rapidly setting up AI data centers in India. The skyrocketing prices of memory chips will also increase the cost of these infrastructure projects.
So far, Samsung, SK Hynix and Micron have not made any public comment on this lawsuit. But whatever the decision of this legal battle will be, it will decide what price you and I will pay for our electronics in the future.
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