Manufacturers have a certain amount of chips they can manufacture, let’s say they can manufacture 10 million chips per year. Normally they adjust for demand, like manufacture 7 million chips for consumers and 3 million for enterprise customers. Company A contacts them and says “We need 6 million chips for this year, here’s the money”, But the factories still can manufacture only 10 million chips in total, so they adjust their factories to manufacture more enterprise focused chips, decreasing the amount of chips manufactured used by consumers.
That’s more what I was wondering. I’m sure most big customers can get a contract that lets them pay over time, but this particular bubble feels significantly out of the ordinary.
If I’m a RAM manufacturer, there’s got to be some kind of guarantee that makes me me confident enough that I’ll see that money in the end if I’m putting that many eggs in one basket.
Manufacturers have a certain amount of chips they can manufacture, let’s say they can manufacture 10 million chips per year. Normally they adjust for demand, like manufacture 7 million chips for consumers and 3 million for enterprise customers. Company A contacts them and says “We need 6 million chips for this year, here’s the money”, But the factories still can manufacture only 10 million chips in total, so they adjust their factories to manufacture more enterprise focused chips, decreasing the amount of chips manufactured used by consumers.
I think it’s more like “we need 6 million chips for this year, and we’ll pay you eventually, maybe”.
But yeah the outcome is the same.
How does that work? Are they taking out a loan?
Last time I went round with someone on this, they insisted that this is just normal business procedure to order product on credit.
To me, while trade credit is definitely a thing, for orders this large I expect there’s some more substantial backing for it.
Ultimately it probably fits in somewhere on a chart of financial shenanigans like this one:
That’s more what I was wondering. I’m sure most big customers can get a contract that lets them pay over time, but this particular bubble feels significantly out of the ordinary.
If I’m a RAM manufacturer, there’s got to be some kind of guarantee that makes me me confident enough that I’ll see that money in the end if I’m putting that many eggs in one basket.
I mean, contracts are how you get that guarantee.
But what is motivating RAM manufacturers to sign that contract? Why can the commenter above figure it out, but they can’t?
Because the contract would be an agreement for the purchasing company to pay for the products they ordered to be manufactured.
Are you being deliberately obtuse?