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Comment by sleepyguy | Hacker News Reader

Manufacturers learned a valuable lesson a few years ago: overproduction leads to lower prices. Samsung was the first to address this issue by scaling back, and other manufacturers soon followed suit (collusion, cough cough). The past couple of years have been extremely profitable for the entire industry, and they’re not about to increase production and risk hurting their profits.

I suspect they would rather face shortages then satisfy market demand.

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lower prices are ok if they are selling more units, the question is whether the price point * units is Pareto optimal

overproduction means unsold units which is very bad, you pay a cost for every unsold unit

underproduction means internal processes are strained, customers are angry, but a higher price per a unit... can you increase the price by more than you are underproducing?

If we want to engage with game theory here, I would argue that overproduction is a much safer bet than underproduction from the perspective of Samsung, et. al. Underproduction brings additional caveats that manifest as existential risks. For example, encouraging your customers to move to entirely different technologies or paradigms that completely obviate the need for your product in the first place. If you leave a big, expensive constraint in place for long enough, people will eventually find paths around it.

I think the Nintendo ecosystem has been a pretty good example of where intentional underproduction can backfire. Another example might be that migration to SSD was likely accelerated by (forced) underproduction of spinning disks in 2011. We use SSDs for a lot of things that traditional magnetic media would be better at simply because the supply has been so overpowering for so long.

You can train your customers to stick with you by bathing them in product availability. Overproduction can be a good thing. Inventory can be a good thing. We've allowed a certain management class to terrorize us into believing this stuff is always bad.

Very good points. Though a "crisis of overproduction" can be an incipient spin into recession.

Yeah, it's easy to jump to the collusion theory, especially with this industry's, let's say, history. But honestly, I think it's less of an evil conspiracy and more just good old-fashioned fear mixed with inertia. These guys remember getting burned hard by oversupply cycles where they were left with mountains of useless chips. Nobody's gonna drop tens of billions on a new fab that could become a pumpkin in three years if the AI hype train just slows down a little

And on top of that fear, you have the pure technical reality: you can't just flip a switch and start pumping out wildly complex HBM instead of mass-market DDR5. That's like trying to retool a Toyota factory to build Bugattis overnight. So you get this perfect storm: a massive, near-vertical demand spike hits an industry that's both terrified of risk and physically incapable of moving fast. So yeah, they're absolutely milking the situation for all it's worth. But it's happening less because they're master villains and more because they're both scared and incredibly slow

> I suspect they would rather face shortages then satisfy market demand.

Doubtful. A shortage is normally a scary prospect for a vendor. It means that buyers want to pay more, but something is getting in the way of the seller accepting that higher price. Satisfying market demand is the only way to maximize profitability.

Why do you think companies would prefer to make less profit here?

> Why do you think companies would prefer to make less profit here?

Because if you make too much profit, you get regulated by government.

It's not the 1980s anymore. If you make too much profit nowadays you pull a John Deere and start crying to government that your customers aren't profitable enough (because you siphoned off all of their profit) and need a bailout so that they can pay even more for your product in the future.

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