Chapter 230: Law of the Downswing
Translator: Nyoi-Bo Studio Editor: Nyoi-Bo Studio
The Moore’s Law was very famous in the CPU production sector. It went like this: under fixed-price conditions, the number of components that could be accommodated in an integrated circuit would be doubled every 18 to 24 months, leading to a doubling in the rate of performance. In other words, the performance of a computer that can be bought for the same price would double every 18 to 24 months. This law was also called the “Law of The Boom Phase.”
However, this law was useless in the memory storage production sector. In addition, with human interference and control in the market, a different observation could be seen. It was called “Law of The Downswing.” Samsin Corporation was the best at using this law. They were even regarded as the forefather of the “Law of The Downswing.” Samsin took full advantage of the unique strengths found in the boom phase of the memory storage industry. By relying on the inflow of capital from the government, they would expand their production as much as possible, causing prices to drop. Factories would be left with production surplus and other companies would also cut their investment spending. However, during this period of time, Samsin would continue to ma.s.s produce. This eventually forced the prices of the products even further down. In the end, compet.i.tors would be pushed out of the market or even go bankrupt. This became known as the “Law of The Downswing.”
In the history of the memory storage production sector, Samsin had employed this law a total of three times. The first two times occurred in the mid-80s and the early 90s. This had enabled Samsin to claw its way from the bottom to the top of the sector. However, Samsin was not satisfied with the extent of its games. Hence, it employed the law a third time before and after the ’08 economic crisis.
In early ’07, Microsoft launched its Vista operating system, which required a huge amount of memory. The DRAM manufacturers predicted that the demand for memory storage devices would increase dramatically, hence many of them expanded their production capacities. However, the sales of the Vista was much lower than expected and prices of DRAM plunged due to the oversupply. With the ’08 economic crisis exacerbating the situation, prices of DRAM chips dropped from $2.25 per unit to $0.31 per unit. At this point, Samsin did something truly shocking. They invested 118% of the total profit for ’07 into DRAM production to expand their business. They deliberately worsened the industry’s losses. This was the final blow to many compet.i.tors who had been experiencing a difficult time.
The effects were obvious. Prices of DRAM plunged even further. In mid ’08, DRAM prices were so low they could not break even with manufacturing costs; by the end of the year, prices could not even cover the costs of raw materials. At the start of ’09, the third biggest manufacturer, Qimeng from Germany, was the first to fall as they announced their bankruptcy. With this, the European players in this sector had disappeared. By early ’12, the fifth largest memory manufacturer, Elpida, announced bankruptcy. The j.a.panese, who used to dominate 50% of the DRAM market, lost their last trump card with the fall of Elpida.
On the evening of the very same day when Elpida announced their bankruptcy, the lights in Samsin’s headquarters in Gyeonggi Province were turned on throughout the night. Samsin’s share prices increased dramatically the next day. The whole world knew that the Goreans had won again. Up to now, there were only three players left in the DRAM sector: Samsin, Hynix and Micron.
But since the beginning of 20X8, a new player had entered the market; Purple Ray from Z country. When Purple Ray had successfully manufactured the DDR memory chips, Samsin did not take any rash actions. Instead, they had adjusted their production numbers according to the needs of the market. They merely protected their own profits by stabilizing the prices within a certain range. However, when Da Jiang started to ma.s.s produce the NAND memory storages on a shockingly ma.s.sive scale in 20X9, this severely threatened the market share of Samsin. Even so, Samsin only continued to adjust their production numbers and reduced prices within a reasonable range. They did not take any drastic action. In 20X0, Purple Ray had started ma.s.s production of the DDR3 and successfully developed the DDR4. Still, Samsin remained quiet.
The “Law of The Downswing” had not been deployed a fourth time. It was long in coming. It was because the price-cutting game did not face many restrictions in other countries. But, Z country could play the game even more skillfully. For example, Samsin and LG successfully destroyed the electronics panel industry in j.a.pan by ramping up their production during a downward market phase. Z country’s government had learned similar tricks by observing these examples. After several years of government investment and subsidies, Oriental Crystal was finally created with a large amount of money. The company was even able to seize a large share of the display screen market which had once been dominated by Samsin. Faced with the ma.s.sive Z country as their opponent, the Goreans had a deep-seated fear in their hearts.
But, it was 20X1. They were witnessing the unstoppable rise of Purple Ray’s memory storages. If they did not take action now, there might be no chance to do so in the future. The relevant industry professionals in Z country knew very well that Samsin Corporation had not been taking any action these few years because they were preparing their “ammo.” Enough ammo to start a ma.s.sive war!
…
In Gorea, at Samsin Corporation, there was a meeting of staff to organize an internal mobilization strategy. Li Jianrong brandished his fist. “Everyone, the battle of life and death has arrived! For this day, we have prepared more than 300 billion in our cash reserves. The government also promised to give us their full support. And this time, our target is a dragon. An abominable beast. Many shareholders are not confident if we can defeat this kind of beast. Samsin cannot be a match for Z country’s government because they have unlimited ammo. However, I don’t agree with that. I believe that we can win against them! Our screens and storage technologies are more advanced. Our yield and production efficiencies are higher so production costs are lower for us. We have an innate advantage! Once the price war starts, they’ll be the ones to suffer greater losses. For every one dollar of losses we incur, they will incur double, triple or even more.”
He slammed his fist on the table. “Just like the battle between a knight and a dragon, every slash of the sword will result in large amounts of blood loss from the wound. But, the knight is only expending a certain amount of physical energy. Lowering the prices by 30% to 50% is only the beginning. We have to reduce our prices by 60% to 70% as their products have poor performance. Otherwise, we will not be able to sell our products. If the prices were cut even more, their government would have to provide backup by spending from their precious state coffers to continue this war. We can afford losses of up to 500 billion. Is their government willing to pay a higher price just to protect those few piddling companies? Will the citizens agree to their government using up their pension money, their blood, sweat, and tears for the sake of this useless war? Ok! Let’s suppose that their government could resist the public pressure and stand against us until the very end. By then, our HBM flash storage should be in widespread use by all relevant manufacturers. The DDR technology that is on the market now would become obsolete. What would they gain from their victory? Can their citizens accept the fact that the government had spent hundreds of billions to protect those few outdated companies? No matter what, the victory of this battle belongs to us. Even the scariest dragons would fall when faced with the excellent swordplay of our knights. This battle will be called ‘Slaughtering The Dragon.’ Everyone, please join this battle alongside me and create glory for Samsin. We’ll create a glorious legacy for us Goreans!”
As the upper management of Samsin listened to this call to war, they felt their blood heating up. They punched their fists in the air and shook them fiercely with a crazed expression.
“Victory belongs to us!”
“Kill the dragon! Kill the dragon!”
“We’ll gain a victory against Z country! We’re the heroes of our race! We’ll be wors.h.i.+pped by all of our citizens!”
“n.o.body in this universe is a match for us Goreans!”
…
At Xing Hai Technologies, in an upper management meeting, the Chairman of Purple Ray Group, Zhao Guo Wei, had made a special trip to Shang Hai for this meeting. Chen Jin looked at him and asked some important questions.
“President Zhao, the Goreans mean to destroy your company with this aggressive approach. Can Purple Ray resist them?”
“This came at a most excellent time!” Zhao Guo Wei smiled disdainfully. “I’m even looking forward to this fight with them.”
Ling Jundong interrupted with a gentle reminder, “Oh, how are you so confident about this, President Zhao? We should not underestimate the enemy.”
“Purple Ray is no longer the same company it was in the past few months.” Zhao Guo Wei shook his head. “The Goreans will never believe that we’ve increased the yield rate of the DDR key pieces from 20% to 99.7% in a short span of four months. Our production efficiency has also been increased by 250%. In terms of production costs, we’ve reduced the per unit cost of a 4GB DDR4 chip to about $3. This is definitely lower than what the Goreans can achieve! The thing that we are least afraid of is a price war.”
The increase in the yield of Purple Ray’s memory chip production was too shocking! Even Chen Jin was astonished. This was where the “virtual factory” displayed its most powerful strength and its greatest terror.
Zhao Guo Wei continued, “We’re not afraid of a price war. What we’re worried about is that our technology might still lag behind theirs. So, we’re developing the DDR6, DDR5, and the high-frequency version of the DDR4 concurrently. The high-frequency DDR4 is more or less settled and we should be able to come up with the DDR5 before the year is out. A team is also tackling the next generation of HBM memory chips, but results will only be apparent next year… I hope that this fight will drag on for a while longer. As long as Samsin does not use their trump card, our victory will be a.s.sured.”
“They won’t.” Chen Jin nodded. “The DDR memory chip is still the mainstream technology. Who would ever play their trump card at the start of the battle? But you also have to ensure that your secrets are well-kept and present a weak image to the enemy. You must not reveal your insider information at all costs before you are ready.”
“I understand. Keeping our works a secret is very important to us.”
…
Purple Ray had given their a.s.sistance. In addition, the government had their backs if they were overpowered. Chen Jin was not especially worried about the powerful challenge initiated Samsin. It was akin to a three-year-old child picking a fight with a full-grown adult. They were only courting their own death.
Then, on the 7th of July, a piece of news came from Zhongxin International, causing a tremor to go through Chen Jin’s body.
A breakthrough had been achieved in the production of the 7-nanometer chip!