The Strategic Calculus: Why GPU Makers Aren't Commoditizing High-Bandwidth Memory

The idea of GPU and TPU manufacturers commoditizing their RAM complement, a strategy to boost sales of their primary product by making associated components cheaper, presents an intriguing business dilemma. While the general principle suggests that making a complementary product more affordable can increase demand for your core offering, the reality for high-performance computing components like GPUs and TPUs is more nuanced.

The "Commoditize Your Complement" Concept

At its core, "commoditize your complement" isn't necessarily about investing in the complementary market itself. Instead, it's a strategic move to benefit your primary business. This could involve various approaches:

IP Licensing: Purchasing IP for RAM manufacturing and licensing it at low prices to new factories.
Public Domain IP: Releasing essential IP into the public domain to drive down costs across the industry.
Direct Investment: In some cases, it might involve expanding manufacturing operations, but the primary goal remains supporting the core product's market.

Why Commoditizing RAM Isn't Straightforward for GPUs

While standard RAM (DRAM) might be considered a commodity, the specialized High Bandwidth Memory (HBM) critical for modern data center GPUs and AI accelerators is far from it. HBM fabrication is highly complex, involving stacked dies, and is currently dominated by a very limited number of manufacturers. This scarcity inherently limits commoditization.

Several strategic and economic factors discourage GPU manufacturers from directly investing in or aggressively commoditizing RAM:

Market Volatility and Risk: The RAM market is notorious for its boom-and-bust cycles. Investing heavily in RAM manufacturing facilities exposes a GPU company to significant financial risk and market fluctuations, diverting capital and focus from their core expertise.
Price-Insensitive Customers: For leading GPU manufacturers, a significant portion of their revenue comes from large enterprise and data center customers. These clients are often "price-insensitive" because the value generated by high-performance GPUs (e.g., in AI training or scientific computing) is orders of magnitude greater than the capital cost of the GPUs and their associated memory. Marginal reductions in RAM prices would likely not significantly increase GPU sales to these critical customers.
Strategic Margin Preservation: Maintaining high margins on their premium GPUs is a priority. Reducing the cost of a complement might increase sales volume but could inadvertently reduce the perceived value or pricing power of the GPU itself, potentially impacting overall revenue if the increased volume doesn't compensate.
Influence Without Investment: GPU manufacturers already wield significant influence over RAM development as major customers. By specifying their requirements and placing large orders, they drive innovation and development without bearing the capital expenditure, operational risks, or R&D costs of memory fabrication.
Focus on Core Competency: Their core business is designing, manufacturing, and selling highly complex GPU architectures and associated software ecosystems. Diversifying into memory fabrication, a distinct and capital-intensive industry, would diffuse focus and resources.
Demand Generation: Ironically, GPU manufacturers benefit when software and applications demand increasingly more RAM, driving the overall market for their products that are memory-intensive.

The current strategy for leading GPU manufacturers like Nvidia appears to be centered on reinforcing their market dominance in high-performance GPUs. They continue to drive technological advancements, leverage the price insensitivity of their key customers, and allow memory manufacturers to manage the complexities and risks of their market, while still ensuring access to cutting-edge memory technologies like HBM.