Jordan Schneider cuts through the geopolitical noise with a provocative, counterintuitive thesis: the United States might actually strengthen its national security and lower consumer prices by welcoming Chinese memory chips into its supply chain. While Washington fixates on decoupling, Schneider argues that the current "RAMageddon"—driven by an AI-fueled shortage of standard memory—creates a unique opening where engaging with China's leading DRAM maker, CXMT, offers a pragmatic lifeline to the global economy. This isn't a plea for open borders; it's a cold-eyed calculation that the market dynamics of 2024 demand a temporary, strategic exception to the rule of containment.
The Economics of Scarcity
Schneider frames the current crisis not as a temporary glitch but as a structural shift caused by the "Big Three" memory manufacturers—SK Hynix, Samsung, and Micron—diverting almost all new capacity toward High-Bandwidth Memory (HBM) for artificial intelligence. This reallocation has left a gaping hole in the supply of commodity DRAM, the chips found in everything from laptops to hospital equipment. "The increased allocation toward high-margin HBM means that not enough capacity is reserved for memory chips for consumer products," Schneider writes, noting that shortages could persist as late as 2028.
The author's analysis of the production timeline is particularly sharp. He points out that while the Big Three are building new fabs, they are designed for the specialized, high-value AI market, not the mass-market chips that keep the consumer economy running. "Samsung's planned memory expansions... are destined for HBM, not commodity DRAM, so such expansions will likely not alleviate the memory crunch," he observes. This creates a scenario where the very technology driving the next industrial revolution is starving the rest of the digital world of basic components.
The RAM shortage is making the bill of materials for common products like smartphones and routers balloon, and allowing CXMT as a competitor will depressurize the market.
Schneider's argument here is compelling because it grounds the abstract concept of "supply chains" in the tangible reality of a gamer unable to find affordable RAM or a school struggling to buy laptops. He suggests that CXMT, China's leading DRAM producer, is the only entity with the immediate capacity to fill this gap. However, critics might note that relying on a Chinese state-subsidized entity introduces a different kind of risk: the potential for the Chinese government to weaponize supply chains in the future, turning a temporary fix into a long-term vulnerability.
The Bargaining Chip Strategy
The most distinctive part of Schneider's piece is his reframing of CXMT not as a primary supplier for the U.S. market, but as a "bargaining chip." He argues that the U.S. doesn't need to buy massive volumes of Chinese memory to benefit; it only needs to qualify CXMT as a viable alternative. This threat alone could force the Big Three to lower their prices and revert to more favorable long-term agreements.
"The advantage is not in securing orders, but in possessing the ability to secure orders," Schneider explains. He details how the memory industry has shifted from fixed-price contracts to volatile post-settlement deals that favor suppliers. By introducing a credible competitor, the U.S. could restore balance. "The inclusion of CXMT as a possible supplier could potentially promote a reversion to fixed-price LTAs or at least lessen the costs of post-settlement prices," he writes.
This logic mirrors the dynamics seen in the historical "Beer Distribution Game," a classic supply chain simulation where small fluctuations in demand create massive oscillations in inventory. Schneider implies that the current memory market is suffering from a similar bullwhip effect, where the rush for AI chips has amplified volatility for everyone else. By adding a new node to the network—CXMT—the system could stabilize. Yet, this strategy relies on the assumption that the Big Three will actually fear losing market share to a competitor they have long dismissed as technologically inferior. If the oligopoly decides to maintain high margins regardless, the threat of CXMT may prove hollow.
Geopolitical Dividends
Perhaps the most surprising argument Schneider makes is that buying Chinese chips could actually hinder China's AI ambitions. He posits that if CXMT can make easy, high-margin profits selling commodity DRAM to the West, they may be less incentivized to pour resources into the difficult, capital-intensive race to develop advanced HBM.
"HBM would be a high-risk venture with certainly low yields (and thus, lower margins) in its early days," Schneider notes. He highlights that CXMT is currently years behind the global leaders in HBM technology, with yield rates far below the inflection point needed for profitability. By luring CXMT into the commodity market, the U.S. might inadvertently keep them there, slowing their progress in the AI sector.
By giving CXMT access to a lucrative market for their DRAM, they may be less incentivized to invest in HBM.
Schneider also points out a secondary benefit: every chip CXMT sells to an American customer is a chip not sold to a Chinese competitor like SMIC. "Every chip going to an American customer is one not going to a Chinese customer," he writes, suggesting that this dynamic could strain the resources available for China's broader advanced-node ambitions. This is a nuanced take on economic statecraft, suggesting that market forces can sometimes achieve what sanctions cannot. However, this assumes the Chinese government will allow CXMT to prioritize profit over national strategic goals, a gamble that may not pay off if Beijing mandates a shift to HBM regardless of short-term margins.
Bottom Line
Jordan Schneider's piece is a masterclass in pragmatic realism, challenging the binary choice between total decoupling and total dependence. His strongest argument lies in the economic logic: the current shortage is a self-inflicted wound of the AI boom, and CXMT is the only immediate remedy. However, the piece's greatest vulnerability is its reliance on market rationality in a geopolitical environment where national security often trumps profit margins. The reader should watch to see if the U.S. administration can resist the political pressure to ban Chinese chips and instead embrace this nuanced, temporary engagement to stabilize the global economy.
The answer to the latter has been debated ad nauseam, and this piece largely follows Derek Thompson's assessment of AI: nobody knows anything.