Memory price surge causing customers to forgo upgrades
Marcia Savage
San Francisco -- Fueled partly by labor unrest in South Korea, memory prices are rising after a plunge that has lasted more than two years.
DRAM prices have been on a rebound for a few months, and some vendors and resellers said the spike is causing some customers to shy away from upgrades.
"Usually, at this time of year, Chinese New Year, the Asian DRAM manufacturers are dumping their inventory to clear their warehouses, and the price normally goes down," said Brian Hamilton, national sales manager at components maker Pine Technology USA, Fremont, Calif. "But this year, it's the opposite."
Prices of older memory products, such as extended data out (EDO) DRAM, have gone up the most dramatically, said Hamilton and other sources. Prices of 16-Mbit EDO DRAM shot up 30 percent in January, according to NECX, an open market exchange for computer components and products in Peabody, Mass.
SDRAM prices also rose some 30 percent, and the price of the newer PC 100 memory products rose about 35 percent, NECX said.
"From a DRAM standpoint, across the board, prices are higher now than they've been since December 1997," said Stuart Atkins, marketing analyst and product manager at Kingston Technology Corp., Fountain Valley, Calif.
The labor unrest at LG Semicon Co. in South Korea contributed to the recent price rise, said Steve Cullen, senior DRAM analyst at In-Stat Group, Scottsdale, Ariz. The LG Semicon fabrication plant shut down in late January as workers walked out in a dispute over job guarantees in the wake of the company's sale to Hyundai Electronics Industries Co. Ltd.
Other factors influencing memory prices remain, said sources. Major Asian suppliers slowed production early last year, creating a tighter supply. Plus, manufacturers are phasing out older technologies.
"Memory manufacturers overall are concentrating on the higher-margin, newer technologies and not the current technology or the older technology," said Frank Cavallaro, NECX general manager.
Customers are not buying as much memory because of the price hikes, said Mike Yaeger, president of Arizona Computers LLC, Phoenix. "For someone to upgrade their memory, it wasn't a big deal. Now people are holding off on it," he said.
Some VARs have been affected by the surge in memory prices for about two months. "People definitely are buying less memory because they can't afford it. The memory market is probably the only thing going up; everything else is going down," said Nathan Curtis, sales manager at Worldcom Computers Inc., Santa Ana, Calif.
Other VARs have had difficulty getting quality PC 100 memory products. Kathy Hajj, purchaser at MAT Microsystems, Signal Hill, Calif., said her company has had to return substitute products that vendors ship as replacements.
Pine Technology's Hamilton said talks with DRAM vendors indicate prices will continue to rise over the next two months. "But in reality, it's more of a correction to the market because DRAM [prices] just got too low," he said.
Copyright ® 1999 CMP Media Inc.
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