they can't really cut production. they want to talk about it, but can't really do it. losing volume means the losses will be even bigger on the remaining volume as they can't amortize R&D and risk losing market share to competitors. Also i don't believe they are losing money on 3d nand at the moment. they are making less for sure, but i dont think they are losing money.
SK Hynix goal is to maximize profit, not volume. Simple selling their product above a loss is not their goal. Also since there are relatively few mass NAND suppliers and the market segment has some of the highest barrier costs to entry in the world it is safe to say this is a solid move by the CEO.
Fixed costs in something like this are huge. Maximizing profit is roughly equivalent to maximizing revenue. Short term: most of the costs are already payed; so no point in not selling as much as possible. Medium term: reducing production means ceding ground to competitiors, which means less revenue to reinvest in future tech, and plain old buyers momentum working against you.
Maybe in the longest terms it makes sense to reduce investment in new fabs a bit, but even that's risky because of competition and because newer fabs are likely to be better in various ways.
However, in probably related news, WD/Toshiba have involuntarily reduced production, so if there's ever a time to save whatever money they can at the cost of reduced production, it's now. And as you say, they may be approaching anticompetitive size; and if they're (implicitly or explicitly) colluding with their competition it's another story.
quite agree. they simply cut prices of large capacity drives. I've seen an Intel 1tb nvme drive for $88 or other drives are less than $100. 1TB drive today is cheaper than the SATA 256GB m.2 drive I bought at the end of 2017, not even two years.
The prices will continue to go down because cost per bit is going down. What they are trying to avoid is a crash in prices from oversupply, putting them in financial distress and causing a sudden contraction in production and capital expenditures among the NAND suppliers. That would cause a ripple effect and a possible price spike later, at which time China will probably accuse the manufacturers of collusion and try to extort them. Also, NAND companies probably need to build up a solid financial base because China will probably eventually start to heavily subsidize their NAND production to force foreign competitors out of the business. They do it with various industries. They did it with solar cell production, and now that they have taken over the solar panel business they are dialing back those subsidies and can put the resources elsewhere.
Yup, they have done this to western Europe's steel & heavy manufacturing industries as well. Save for the former Eastern Block countries, which still have some.
I don't think they claimed that they were losing money on NAND, did they? But if supply continues to outstrip demand then they will lose money, even if they sell more NAND. They aren't cutting production, by the way. Production is growing. They are cutting wafer starts. By using more advanced manufacturing techniques, such as adding more layers to 3D NAND or by moving to QLC NAND, bit growth grows. So if such technology transitions result in a bit growth that exceeds demand bit growth their profits will go down. So they can and will cut wafer starts.
As long as they dont "focus" on going all 4D nand (however you want to call it) not until they have reliable performance as good or exceeding previous offerings, not a very small drop in retail price for a major drop in most everything of what makes "flash" what is was meant to be, the newer types are more like "spark" than "flash" memory
:P:
Micron (crucial) make some real good stuff (in my opinion) very rare "top end" though far as i remember, never "worst of the bunch, what were they thinking"
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azfacea - Friday, June 28, 2019 - link
they can't really cut production. they want to talk about it, but can't really do it. losing volume means the losses will be even bigger on the remaining volume as they can't amortize R&D and risk losing market share to competitors. Also i don't believe they are losing money on 3d nand at the moment. they are making less for sure, but i dont think they are losing money.Skeptical123 - Friday, June 28, 2019 - link
SK Hynix goal is to maximize profit, not volume. Simple selling their product above a loss is not their goal. Also since there are relatively few mass NAND suppliers and the market segment has some of the highest barrier costs to entry in the world it is safe to say this is a solid move by the CEO.emn13 - Saturday, June 29, 2019 - link
Fixed costs in something like this are huge. Maximizing profit is roughly equivalent to maximizing revenue. Short term: most of the costs are already payed; so no point in not selling as much as possible. Medium term: reducing production means ceding ground to competitiors, which means less revenue to reinvest in future tech, and plain old buyers momentum working against you.Maybe in the longest terms it makes sense to reduce investment in new fabs a bit, but even that's risky because of competition and because newer fabs are likely to be better in various ways.
However, in probably related news, WD/Toshiba have involuntarily reduced production, so if there's ever a time to save whatever money they can at the cost of reduced production, it's now. And as you say, they may be approaching anticompetitive size; and if they're (implicitly or explicitly) colluding with their competition it's another story.
DyneCorp - Saturday, June 29, 2019 - link
You mean paid? Not payed?zodiacfml - Saturday, June 29, 2019 - link
quite agree. they simply cut prices of large capacity drives. I've seen an Intel 1tb nvme drive for $88 or other drives are less than $100. 1TB drive today is cheaper than the SATA 256GB m.2 drive I bought at the end of 2017, not even two years.Yojimbo - Saturday, June 29, 2019 - link
The prices will continue to go down because cost per bit is going down. What they are trying to avoid is a crash in prices from oversupply, putting them in financial distress and causing a sudden contraction in production and capital expenditures among the NAND suppliers. That would cause a ripple effect and a possible price spike later, at which time China will probably accuse the manufacturers of collusion and try to extort them. Also, NAND companies probably need to build up a solid financial base because China will probably eventually start to heavily subsidize their NAND production to force foreign competitors out of the business. They do it with various industries. They did it with solar cell production, and now that they have taken over the solar panel business they are dialing back those subsidies and can put the resources elsewhere.Yojimbo - Saturday, June 29, 2019 - link
By the way, cost per bit means the cost of production, not what they sell it for.DyneCorp - Saturday, June 29, 2019 - link
Interesting; thanks for the info.Manch - Tuesday, July 2, 2019 - link
Yup, they have done this to western Europe's steel & heavy manufacturing industries as well. Save for the former Eastern Block countries, which still have some.Yojimbo - Saturday, June 29, 2019 - link
I don't think they claimed that they were losing money on NAND, did they? But if supply continues to outstrip demand then they will lose money, even if they sell more NAND. They aren't cutting production, by the way. Production is growing. They are cutting wafer starts. By using more advanced manufacturing techniques, such as adding more layers to 3D NAND or by moving to QLC NAND, bit growth grows. So if such technology transitions result in a bit growth that exceeds demand bit growth their profits will go down. So they can and will cut wafer starts.Dragonstongue - Saturday, June 29, 2019 - link
As long as they dont "focus" on going all 4D nand (however you want to call it) not until they have reliable performance as good or exceeding previous offerings, not a very small drop in retail price for a major drop in most everything of what makes "flash" what is was meant to be, the newer types are more like "spark" than "flash" memory:P:
Micron (crucial) make some real good stuff (in my opinion) very rare "top end" though far as i remember, never "worst of the bunch, what were they thinking"