Storage market crisis self-inflicted: Penny-pinchers pay the price
Few large manufacturers from Asia are driving up storage prices and showing Europeans their powerlessness. A commentary.
(Image: c't)
- Bernd Schöne
Without storage, even the most expensive processor idles in the server rack. A simple realization that must have escaped the decision-makers. Easy to understand, technical ignorance is something like a ticket into their circles. At the presentation of the German data center strategy on March 18 by two federal ministers, everything was discussed from energy to trade tax, but not hardware. DRAM, SRAM, flash memory, and hard drives are pricier than ever and difficult to get. Alternatives from domestic production are now hard to find.
The credo of politics: Industry should help itself. But the question is how. Domestic companies with hundreds of millions in revenue face US giants with billions in assets. They react by buying up the supply through nearly inexhaustible financial reserves. With enough cash, they are driving forward the largest construction program in IT history, and arguably in industrial history. Meta alone wants to invest 70 billion dollars in its Hyperion data center, which is to be as large as the core of Manhattan. The other hyperscalers are planning the Tower of Babel to AI Babylon on a similar scale. Hardware becomes an object of speculation.
Europe becomes a pure sales market
The memory manufacturers intend to exploit the demand orgy to the maximum. Production remains throttled, and they coldly switch to the most expensive memory chips in the fabs. These are tailor-made for AI. Let the rest of the industry see how it survives.
In a single generation, Central Europe has transformed from a complete industrial supplier to the world's engineering office, and now to a pure sales market for East Asian electronic products. Nixdorf and AEG-Telefunken are long gone into industrial history. Anyone who doubted the sense of self-diminution was considered a renegade of globalization. The customer is king, and prices only know the way down. Until only cross-subsidized state-owned companies remain as suppliers. As one of the last manufacturing sites, Fujitsu-Siemens closed its sparkling clean and technically sophisticated plant for PCs and servers in Augsburg in 2008. Leaving a market segment happens very quickly. Re-entering it later is almost impossible, even with billions in state subsidies. This is shown by the investor wrangling in Magdeburg and Dresden.
Petty parochial politics instead of joint effort
The newly created dependencies now extend from important raw materials such as high-purity silicon and rare earths to the simple ability to maintain modern manufacturing facilities. "How many well-trained fab engineers are available at the location?" politely smiling Asians and US stock professionals ask when it comes to potential investments in Germany – well aware that we are bare here. It is no longer possible without cooperation with TSMC, Samsung, and GlobalFoundries. Because they know how to operate such a fab. And we don't. But without care and capital from the state, TSMC in Taiwan would never have become what it is today. The seed capital was earned through cheap products, manufactured under sometimes adventurous circumstances.
In China, engineers sit on government benches; in Germany, lawyers do. Asian corporations see themselves as patriots. Shareholder value reigns here. Japanese, Chinese, and Koreans may not like each other, but they stick together against the West. In the EU, however, blatant envy of resources rages. Although the manufacturing plants of Intel, TSMC, and Samsung use wafer steppers from ASML from the Netherlands with optics from Zeiss from Germany. Petty parochial politics has so far prevented the consolidation of existing capabilities into a competitive manufacturing facility for processors and memory in Europe. For this, one would have to agree on a location. Instead, every country, indeed every federal state, is tinkering with its own future plans, far from having the financial or intellectual resources for successful implementation.
China's new Five-Year Plan for IT and AI
Different in China. There, the more than 5,000 delegates of the National People's Congress have just formulated the new Five-Year Plan. At the top are national sovereignty in IT and AI. Xi Jinping is focusing on the development of "new productive forces" through AI to give the competition a hard time. The memory corporations currently only want the money of the former colonial powers. China wants more, much more.
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The crisis is self-inflicted and not part of a sinister conspiracy. But for the already hard-hit middle class, a prolonged storage market crisis could be one burden too many if hardware supplies dwindle or become unaffordable. Perhaps, however, the AI boom will burst meanwhile, and large quantities of no longer needed hardware will drive prices down to a bearable level. So let's hope for a miracle.
(afl)
