Memory Module Pricing Trends28 May, 2002 By: Buyers Laboratory, Inc. imageSource
Memory Module Pricing Trends
past January marked the end of an 18-month free-fall in memory prices, primarily
impacting the price of modules made of DRAM (Dynamic Random-Access Memory) and
SDRAM (synchronous DRAM) chips. During that time period, steep discounting on
memory modules occurred due to excess inventory, reportedly caused by lagging PC
sales. Memory manufacturers were simply generating more product than the
industry needed. Production slow-downs, coupled with better than expected
holiday PC sales, has leveled supply and demand and, in some instances, has
created module shortages. Consequently, memory module prices for everything from
consumer electronics to office products (digital copiers, printers, scanners,
faxes and multifunctional devices) are on a fast track upward.
SLOW PACE OF CHANGE
increases are inevitable, but as Rich Holloway, Director of Technical Operations
for Buyers Laboratory, notes, “large companies cannot adjust prices-up or
down-fast enough to keep up with the street.” Case in point is Konica Business
Technologies, Inc., which is now adjusting prices downward after experiencing a
doubling of prices back in 1999, following a Hong Kong chip factory fire.
Konica’s Marketing Manager, Jena Braun, acknowledges that Konica has not kept
pace with the fluctuations in memory chip market prices but says it is remedying
the situation. “We plan to adjust our prices accordingly,” says Braun.
“Though the memory business is not a focal point for Konica, we are a ‘one
stop shop’ for our strong dealer and direct channels.”
USE DOMESTIC SOURCES FOR MEMORY MODULES?
suppliers, companies such as Delkin Devices, Inc., Memory Experts, Inc. and
Kingston Technology provide a valuable service, competitive pricing and, most
importantly, just-in-time inventory. According to Delkin’s Pearce,
“component prices can be exorbitant, but we nonetheless can offer OEMs 50
percent discounts over prices paid to their factory in Japan. Moreover, an order
placed with Delkin at 3:00 pm on Wednesday arrives the next morning.” Pearce
adds, “buying from Japan involves forecasting months in advance, an inexact
science that could leave the company with too much or too little inventory.
Another good reason to source close to home.”
Panasonic, Konica also sources memory modules in the United States. “On
occasion, we go back to Japan for a proprietary module, but most of our memory
is sourced here,” says Konica’s Braun. “We jumped on the U.S. sourcing
bandwagon when our engineering group began printer controller development, in
the early days of digital. With a direct sales organization, we needed our own
supplier in order to make memory upgrades quickly available to our major
accounts.” Braun also points out that Konica is very careful to source from
vendors whose memory modules adhere perfectly to its specifications. Clearly,
the trend has been away from factory-sourced to locally procured memory modules,
effectively cutting out the parent company. Does losing market share in the
parts business trouble companies like Matsushita? No, says Panasonic’s
Wharton, “the factory does not want to be an inhibitor to sales, especially on
such a low-margin portion of the business. In reality, we are able to negotiate
better prices. The factory deals with subcontractors in Japan, Korea, and Taiwan
and they may not be as aggressive when bargaining. We have a greater interest in
negotiating harder for our dealers.”
$64,000 QUESTION: IS THE MEMORY PROPRIETARY?
makes a memory module so special that it has to be purchased from the
manufacturer? It is not usual to hear that a particular memory module is
“proprietary,” meaning that there are special physical and electrical
characteristics that make the module unique. According to Memory Expert,
Inc.’s Reusing, “proprietary products account for 50 percent of our new
memory production,” adding that, “generic modules are based on
industry-standard formats and use the same components.” Does this mean that
generic or off-the-shelf modules made for a PC, perhaps a 128-MB DIMM of PC-133,
can be plugged into a copier or printer? Lawrence says, “No. There are many
variations and differences in the components and programming used in order for
the modules to be compatible with the host copier, fax or printer.” Delkin’s
Pearce adds that, “a 128-MB DIMM for a printer controller may have two
variations in speed, with four different configurations, or types of DRAM.
Therefore, some modules’ attributes need to be specifically programmed to the
controller. So, while two modules may look alike, one will work and one will
not. Some dealers will try to install memory purchased from a retail outlet like
CompUSA, only to find that it doesn’t work. Others will not run the risk.”
there are clearly special memory requirements for complex systems, Panasonic’s
Wharton has questioned the proprietary or “special” nature of memory modules
in the past. “This was a concept perpetuated a few years ago by a manufacturer
of printer controllers that required customers to purchase their memory at
exorbitant prices, presumably to guarantee performance,” says Wharton.
Manufacturers would not ensure the performance of the product if third-party
memory was installed. OEMs questioned this business practice, stating “the
module doesn’t look special,” and sent samples to memory manufacturers for
testing and, in fact, found nothing unique. Panasonic, Konica, and undoubtedly
others, said to U.S. memory suppliers, “give us an equivalent.”
Manufacturers ran their own bench tests and presto, it worked. There was no
are no longer in an oversupply situation in the worldwide memory module market.
That means pricing for memory upgrades on office products, such as copiers,
printers, faxes, and MFPs, could climb this year. However, many
factors-inventory in the pipeline, demand for new PCs (with memory-hungry
operating systems), production levels in Asia, and even the time of year-will
determine how significant those increases will be. Whereas today you can buy a
64-MB Lexmark Optra C 710n memory module for $22.49, tomorrow that same module
may cost double. On the other hand, check another source and you may pay less.
It is anyone’s guess.