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Memory-maker Micron has found a way to keep prices for its products sky-high for another five years, by signing 16 “strategic customer agreements” (SCAs) that include a floor price the company says comes with “a very robust gross margin for Micron, well above our peak quarterly margins in any past cycle.”
Micron CEO, president and chairman Sanjay Mehrotra explained the SCAs in prepared remarks delivered during the company’s Q3 earnings call. He explained that Micron has signed 16 SCAs, most of them covering 2026 to 2030, and that they involve a commitment to buy a certain quantity of product and pay for it in a pricing band that has a floor and a ceiling price. The floor price covers the historically high gross margins mentioned above, and the ceiling price means those who commit to an SCA are insulated if memory prices go even higher.
Isn’t that called price fixing, and is generally illegal?
no?
Only if regulatory bodies do something about it.
its price fixing if the agreement is among ‘competitors’ - this is price fixing for a customer(s)
Wouldn’t this just be selling security?
You would enter the SCA if you want to secure your supply chain against the risk of inflated pricing. The risk would now be overspending if the market drops. Comparing the two risk profiles, an organization might decide that they have more stomach for overpaying a set amount over 5 years. As opposed, of course, to the risk of paying an arbitrarily expensive amount indefinitely as the market remains volatile.
So now, while planning out the next 5 years of business objectives, you can plan against a much more solid best/worst case scenario. That minimized uncertainty, which lets the business keep moving even if at a more expense pace.
Yes, but the fine is far lower than their profits here… so, it’s only illegal if you can’t afford it.
“Cost of doing business”
If there’s some collusion, sure, but you’d have to find a government body with the will and teeth to prosecute.
Nothing really against charging whatever you feel like outside of things like certain supplies during disasters. It’s shitty
Yes, but it’s AI, and Peter Thiel have bought all the politicians he could, so they will let them get away to “gain an advantage against China in AI”.