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Governments Preparing To Bail Out DRAM Makers 494

Posted by timothy
from the bailing-buckets-the-new-best-conference-swag dept.
An anonymous reader writes "DRAM makers are facing one of the worst downturns in their history and governments around the world are lining up to help companies through the mess. Taiwan, Germany and South Korea all appear poised to offer some assistance to their DRAM chip makers. The chip makers' problems are indicative of global woes. Easy lending terms and a bright view of the future prompted them to build too many new DRAM factories. Much of the new output was aimed at Microsoft's Windows Vista, which has higher memory requirements than XP."
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Governments Preparing To Bail Out DRAM Makers

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  • by totally bogus dude (1040246) on Monday December 15, 2008 @05:42AM (#26117875)

    If RAM is so crucially important, why are all the RAM makers having such a hard time? I can't see there'd be no demand for RAM for any significant (or even insignificant) period of time, since as you say it's an integral component of crucial infrastructure all over the world.

    Perhaps there actually is too much competition (i.e. more suppliers than the market can really sustain) and they're having to sell their product at prices which are unrealistic in the long term? One of the necessary side-effects of a highly competitive market is that there's lots of failures, after all. Especially if you consider the high price of setting up a factory, having a business plan that requires you to sell loads of RAM with tiny profit margins for the next few decades in order to break even is probably not a sound strategy.

  • by HateBreeder (656491) on Monday December 15, 2008 @05:42AM (#26117877)

    It's not like there is no demand for RAM at all.
    The DRAM companies would not cease to exist, as people will still want to buy RAM.

    If a company fails, they usually sell their facilities to try and recover some of their debt..
    Someone would buy some of the fabs since there's still a lot of money to be made... hence, you get a smaller company doing the same thing.
    not a chain reaction that destroys all markets.

  • by thetoadwarrior (1268702) on Monday December 15, 2008 @06:24AM (#26118087) Homepage
    We tell children they're all special and can't fail these day so is it no wonder we treat businesses the same way?

    Everyone is special and deserves a gold star.
  • Re:Blowing my mind (Score:3, Interesting)

    by kazade84 (1078337) on Monday December 15, 2008 @06:40AM (#26118183)

    Hasn't every Windows release been (at least partially) responsible for the upgrade treadmill which in turn gives hardware manufacturers plenty of business?

  • Re:Bailout Bandwagon (Score:3, Interesting)

    by aliquis (678370) <dospam@gmail.com> on Monday December 15, 2008 @06:52AM (#26118253) Homepage

    Could you explain why the dollar gain strength when the american economy fails? Is it just because it's so big people trust it more?

    A smaller one would just crash wouldn't it?

  • Re:Bailout Bandwagon (Score:5, Interesting)

    by AlecC (512609) <aleccawley@gmail.com> on Monday December 15, 2008 @07:36AM (#26118485)

    The problem comes with the concept of "too big to fail" due to concentration. In the general case, you are quite right, If you have a hundred bakers, and there is not enough demand for bread to keep them all in business, the least efficient ones go bankrupt and the more efficient ones thrive, thus increasing the general efficiency of the baking business.

    The problem is when you have monolithic industries, or quasi monolithic industries, where the whole industry for one region sinks together. If you have one mega-bakery and that is badly run, you cannot let it go bust because there will be no bread and people will starve.

    The DRAM industry has become increasingly capital intensive: a new Fab costs billions, but produces vast numbers of chips. This means that there are very few fabs in one country, probably only one. Healthy shrinkage, by a few percent, is not possible: you lose 50% of your industry or none. And, politically, that is unacceptable for any single country. Worldwide, it would be correct to close down one or two DRAM fabs at the moment. A World Government, with perhaps 12 fabs, could look at the big picture. But Taiwan, Germany, and South Korea, with two or three each, cannot accept losing such a large slice of their industry.

    The same was true in the finance industry: because of their size, AIG, Fanny Mae and Freddy Mac were "too big to fail". Lehmann was adjudge not to be too big - but the repercussions of its failure are turning out much larger than expected.

    The same is true in cars. "Detroit", the Big Three American car manufacturers, is collectively "too big to fail". And they are so interlocked in the public mind that they would appear to sink or swim together. Mind you, their problems are basically the result of baling out Chrysler twice instead of letting it fail at a time when it could have failed on its own and brought the appropriate slimming down to Detroit.

  • by jambox (1015589) on Monday December 15, 2008 @08:16AM (#26118707)
    I agree that businesses that make bad decisions should be allowed to fail. So did the UK government, until they saw what happened after Northern Rock (a bank) failed and caused a run.

    I'm no expert on this but my understanding is that they then realised it was just the first of many. It then looked like if there was no intervention, most of the banking industry would fall apart. Sure, Lloyds TSB might have been ok plus a few smaller ones but it would've taken out the savings and current accounts of millions of people, plus destroyed a lot of infrastructure, making it difficult for the survivors to take up the slack as would be ideal.

    In the meantime, very many cashpoints would stop working and therefore many people would be unable to get cash or use their cards in order to buy food. BANG! Society falls apart.

    If this is anything like the UK banking sector, you may be greatly underestimating the danger that the memory chip business is in!
  • Re:Bailout Bandwagon (Score:5, Interesting)

    by apoc.famine (621563) <apoc.famine@g[ ]l.com ['mai' in gap]> on Monday December 15, 2008 @08:30AM (#26118781) Homepage Journal
    I do wonder how a modified capitalist system would work, where there was a "written in stone" law that as soon as you owned more than 25% of a market, you were automatically required to split your company in half. It seems like this would promote all sorts of competition, and prevent "too big to fail" from ever happening.
  • Re:Bailout Bandwagon (Score:4, Interesting)

    by Dr. Hellno (1159307) on Monday December 15, 2008 @08:50AM (#26118863)
    The way I see it, citing the 1979 Chrysler "tide-me-over" (can we PLEASE start using that instead of bailout because it is awesome) as a successful example of government intervention is shallow analysis because that was a fairly specific type of government intervention, much more supervised than anything proposed in the current situation. I'm not against government intervention at all, so long as we have reason to believe that it will be used well. That is to say, I also don't believe that all government intervention is good. It depends on the situation. In the specific situation of the current discussions about an auto-industry "tide-me-over",
    - The jackholes we might give money to have NO plan this time and they make no guarantees.
    - There will be very little oversight
    - We'll have to bail 'em out again in another 30 years, and we KNOW this, because they were in the exact same situation 30 years ago (or at least Chrysler was).
  • by ursuspacificus (769889) on Monday December 15, 2008 @09:14AM (#26118999) Homepage
    There's a giant elephant in the room that no one wants to mention.

    As companies increase their market share, they reduce competition, and increase the damage to the economy if they fail. The nation-wide, interstate banks in the US are a creature of deregulation unleashing unmitigated greed on the banking sector. If one of these banks fails, we're in deep excrement. A handful of companies control effectively ALL the DRAM manufacturing in the world. further it seems that this handful of companies behaves as a monolithic block. They collectively banked on Vista being a huge driver for more memory. Too bad, so sad.

    If these outfits want government help, here's how I propose we give it to them [ursuspacificus.net] (It's actually about the US auto industry, but can be applied to just about any heavily consolidated industry with a few tweaks).
  • Re:Bailout Bandwagon (Score:5, Interesting)

    by FishWithAHammer (957772) on Monday December 15, 2008 @09:30AM (#26119107)

    Russia doesn't have the economic infrastructure or, these days, the world standing to be a real economic superpower. (They weren't much of an economic superpower during the Cold War, either, when compared to the United States.) And frankly, I don't think Europe has the steel in the spine to stand up to their threats (Russia, China-to-a-lesser-extent, Muslim immigration and the recent problems therewith, and even the United States) in any significant capacity.

    China--there, you have something. But it's not going to be "divided across China, Europe, and Russia." If anyone "fights," it's going to be a fight between the United States and China, and the rest of the world, like it or not, are the chess pieces. But even then it's not going to be the drag-out fight, because it is mutually beneficial for China and the United States to stay very close trading partners. (For more on this, I suggest Tom Friedman's The World Is Flat--I don't agree with all his conclusions, but it's worthwhile for sure.)

    Everybody owes the United States money and the United States owes everybody money. That means a U.S. recession will be a global problem for a very, very long time. Do you realize that China had something like 10% of GDP [npr.org] in Freddie Mac and Frannie Mae? Everybody's money is here.

    I think you need to learn more about modern politics and economics before you make sweeping statements.

  • Re:Bailout Bandwagon (Score:4, Interesting)

    by jcr (53032) <jcr@NoSPaM.mac.com> on Monday December 15, 2008 @09:32AM (#26119117) Journal

    No, the shallowness I refer to is looking only at the effect on chrysler, while ignoring the effects of the misdirection of capital to Chrysler instead of to other people and businesses.

    A better example of shallow analysis comes from people who simply jump to the conclusion that government intervention always turns out badly.

    Show me an example of a government intervention in the economy which turned out well. You might want to read up on the Broken Window Fallacy first.

    -jcr

  • Re:Bailout Bandwagon (Score:3, Interesting)

    by babblefrog (1013127) on Monday December 15, 2008 @09:49AM (#26119231)
    Things change. I'm guessing in another few years, the US won't be able to afford anything like the military it has now.
  • by Anonymous Coward on Monday December 15, 2008 @11:39AM (#26120253)

    It ain't the gold star I have an issue with... it's the billions of dollars we give them along with the gold star that kinda pisses me off.

    Honestly, the other industries being hit with the fallout of the financial industries might need a bit of help; might even deserve it. I just wonder why the biggest (and easiest to get) loan went to the crooked bastards that caused this whole mess. Why are they not in jail getting gang raped? Why are they not accountable for the money? Why is everybody ELSE suffering, at the personal and corporate budgeting level, while the assholes that started all this run a fucking victory lap as they keep their bonuses and have massive parties on taxpayer dollars?

    Maybe you're right, maybe it's the psychology of entitlement we've instilled these days. I've got a different theory on the financials though; these guys have us by the balls. They control the money supply and therefore control the government. They made it clear that they will make an effort to bring EVERYTHING down with them if they're allowed to fail, and our politicians caved in.

    Outlaw usury, get rid of the banks' ability to create money, have the government stop borrowing money from private institutions at interest, and do everything you can to eliminate inflation. Suddenly with the money supply back under control of the government (and ultimately the people), you might find that the culprits in this whole thing won't get a bailout. They'll get jail time like they should.

  • Re:Bailout Bandwagon (Score:5, Interesting)

    by j79zlr (930600) on Monday December 15, 2008 @11:51AM (#26120391) Homepage
    Actually the parent is wrong. The USD is gaining strength because the rest of the world is also in a recession. US Treasuries are the current preferred safe haven, its bad here but worse every where else. When other currencies are sold and US treasuries bought, the yield dives and the relative value increases. We are in rapid deflation, look at the prices of everything, they are down down down. The Fed printing money will have an inflationary affect but it ain't happening yet, the key is that they raise the interest rates and fast once this economic cycle is over to help curb inflation.
  • Re:Bailout Bandwagon (Score:5, Interesting)

    by lysergic.acid (845423) on Monday December 15, 2008 @02:12PM (#26122037) Homepage

    it's funny how Americans get all up in arms about true socialism that actually serves public interest, like socialized medicine/higher-education/sciences/internet access/etc., but you never hear a peep out of them about tax dollars being funneled into companies like Halliburton/KBR, GE, Carlyle Group, Northrop Grumman, Boeing, Lockheed Martin, etc. that serves only the MIC. likewise, no one made a fuss about Harley Davidson receiving, essentially, a government bailout from the Reagan Administration in the form of overt protectionism during the 1980's while Reagan was simultaneously espousing the virtues of free market capitalism. and now we're outright giving government subsidies to the Big Three automakers to bail them out, and again there is practically no opposition to this either.

    frankly, the recent corporate bailouts are more akin to Reaganomics than socialism. after all, nothing is being socialized. the Big Three automakers aren't being nationalized. American citizens aren't getting free cars or anything else out of this. it's just taking from the poor to give to the rich. that's been going on ever since monetary economies were created. today we're just corporate sharecroppers rather than feudal serfs.

  • Re:Bailout Bandwagon (Score:1, Interesting)

    by Anonymous Coward on Monday December 15, 2008 @02:18PM (#26122141)

    The mechanism is the interplay of supply (for a specific commodity product), demand, and price, if the market for that product is sufficiently open to competition. But that's within "a" market, not so much "the" market (the sum of all markets - a nation, or the world). In practice, the stability of free markets is only relative - it's more stable than pre-industrial systems, or than central control, or than a total lack of organized system, but that doesn't mean it's as stable as we'd like it to be. Our "boom and bust" is followed by a brief period of hardship and recovery, rather than "civil war, total collapse, and dark age"; not great, but a relative improvement. It's also more equitable (not perfectly so, but more so than other systems); it's much better for everyone to grumble (but no famine happens), as opposed to the King (or the Party) still living large while the peasants starve.

  • Re:Bailout Bandwagon (Score:3, Interesting)

    by FishWithAHammer (957772) on Monday December 15, 2008 @09:46PM (#26127765)

    I knew somebody would question that. Keep in mind that this is not a condemnation of the Muslim religion or the majority of its adherents.

    That said, a) riots among Muslim youths in Western Europe, b) the rise of madrasa-type schools across Europe, c) the outright refusal to assimilate into the general culture into which they're moving, and d) the viciously forceful insistence on bending the general culture to do what they as a small minority want--I consider those all pretty gnarly problems with Muslim immigration as a whole right now, and it looks very much like Europe would rather capitulate and hand everything to these groups on a silver platter than assert their own status as sovereign nations.

    As such, I question whether they have the strength of will, as an organization, to assert the power that they have as a large, affluent, influential group of nations.

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