Computer hardware runs our digital world. We wouldn’t have software or media (including this post) without the devices which power them all. For most of us, this includes our laptops, phones and Wi-Fi routers.
But with the recent shortages of RAM, SSDs and hard drives, we seen first-hand the cost of high-cost hardware. In turn, hardware supplier diversity has never been more important.
Here, I’ll explain why.
Costs
One of the problems of a monopolistic or oligopolistic market is prices are higher than a rational market. Take for instance Intel CPUs during the early-to-mid 2010s, consumers were kept captive: if you wanted a high-end system you had to use Intel CPUs. AMD and ARM chips were exclusive for lower-end systems.
Intel sold quad-core, eight-thread flagship CPUs for over nine years until AMD became a serious rival. Back then, prices remained high while performance only got marginally better with successive generations.
Now, AMD, Apple and Intel are rivaling each other for better silicon: faster performance, better efficiency, etc. This is signs of a healthy market.
Innovation
Another disadvantage of monopolistic hardware suppliers is innovation goes down. One set of engineers might have one set of ideas. But different engineers who can’t get employment at a monopoly firm would have no way for their ideas to reach the market. And even if they could, corporate culture may not allow it. Good ideas become undiscovered.
In a competitive hardware environment, ideas can surface regardless of where an engineer gains employment. An engineer rejected from Intel but employed by AMD can pitch cutting-edge ideas for AMD, and vice versa.
And this isn’t just for hardware: this idea rings true for all industries.
Priorities
Back in 2019, new mid-range HPE ProLiant servers were reasonably affordable for a home lab environment. For instance, the ML110 Gen10 tower model cost only $700. But in 2023, the successor model, ML110 Gen11 became unaffordable, starting at $2300. Why? Because HPE refocused on higher-end servers for large enterprises.
But prior to the RAM and SSD shortage, the silver lining was rival Asian manufacturers such as ASRock and Minisforum. ASRock made a much faster, more efficient mid-range platform based on AMD’s Ryzen chips. Minisforum made small desktop and server systems with better silicon than HPE’s pricier MicroServer. Pre-RAM shortagem, ASRock and Minisforum systems cost more than half of the HPE equivalents.
In comparison, when the DRAM industry pivoted towards HBM for AI systems, there were not large-scale alternative mass-market DRAM suppliers to focus on lower-end DRAM. While China’s CXMT is gaining ground in this market, even they want to sell HBM for AI companies.
Supply Chain
Back in 2011, there was flooding at a hard drive facility in Thailand. This raised the prices of hard drives for a while until the facilities were rebuilt. This was caused by inadequate competition, as Samsung just sold their hard drive business to Seagate.
More recently, while not explicitly the final hardware product, the Iran war temporarily constrained Helium supplies. This hurt the manufacture of MRI machines, hard drives and computer chips, many of which are essential devices.
In both cases, relying on a small number of suppliers means a fewer of factories, and more points of failure if something goes wrong.
Conclusion
While it’s tempting for an industry to be a monopoly or oligopoly, in reality it’s a bad idea, especially for hardware. From natural disasters and wars to artificial DRAM shortages, things can go wrong anytime.
Take for instance the internet: it was built by the military as a network of networks. It was built to withstand outages caused by warfare. Compare that to the 20th century AT&T telephone network where it was built to be a monopoly. This shows the internet is built around interconnection and resilience whereas telephone network was built around a common provider, not unlike modern Big Tech platforms.
The same logic could also be applied to hardware suppliers. Yes, a company building unique technology should have the right to profit from it. Even in software, monopolies exist from becoming standardized, like Microsoft Word or Adobe Photoshop, which leads to a large trained talent pool.
But for commoditized components like memory and hard drives, diversity is essential. Nobody can predict the future. If an essential supplier leaves or pivots, as has happened to RAM, or a natural disaster occurs, it leaves consumers and affected OEMs holding the bag.