DRAM manufacturers get it wrong again
Stop, before it's too late
Opinion What exactly is wrong with the memory market today? Why is there a disproportionate difference between the highest and lowest prices for products in the market? We are talking about OEM product, not third party. Original memory modules direct from the DRAM manufacturer. For the last month or so, we have seen market prices in memory varying at such levels as to suspect something abnormal is happening. In a global market we do expect to see price differences. Different countries have different price structures, but usually the prices are in line with each other. DRAM manufacturers traditionally sell directly to PC manufacturers, third party module manufacturers and then through distribution. The majority do not sell to any old Tom, Dick or Harry that wants to place a huge memory order. These business ethics have worked for many years; they are structured and everybody knows where they stand in the pecking order. They have all suffered over the last few years, some manufacturers have even pulled out of DRAM manufacture, citing unprofitability and global overproduction. The sensible ones have worked hard to protect their market. They understand that if they overproduce or saturate the market with cheap product, their competitors will have to do the same. Prices will fall and we will all be in the same situation as last year. No orders, no profit and no bloody use selling memory. We believe that the DRAM manufacturers are to blame. After all they produce the product, they have control over where the product is sold and they determine the market price for the product. Remember the lowest prices ever for memory last year and remember that this was fuelled by overproduction. We all thought that since they got their fingers burned and lost money on the memory that they produced, that this would prompt them to get their houses in order. Between them they slowly massaged the prices up to a profitable level. However, somewhere along the line, some of them got greedy again. Yes, prices at the OEM and distribution end are stable, but why is OEM equipment currently available on the grey market, in vast quantities, at 10-12 per cent below market price? This shows that some DRAM manufacturers are producing lots of product. More than they have taken billings for. Some bright spark probably thinks that they can dump this excess in the open market. The only way to dump product is to dump it at a favourable price. Alternatively they are selling to people who are committing VAT fraud. How else can 10-12 per cent price difference be accounted for? Surely these guys must know what their customers do, surely they have some inkling about their customers target market. They must be able to control the resale of their products. We then get the situation when PC manufacturers and memory distributors start moaning about this cheap product, and that all Dram manufacturers flatly deny is available in the market. The only alternative is for distribution to buy the cheap product, and sell it to the PC manufacturers. The only thing that will happen is that the DRAM OEMs will drive their own market price down. So, if any of you are listening, if you can't sell it, don't make it in the first place. Or if you have to, make sure it actually goes to a trusted customer whom you can rely on to honour the worth of your products. We are not accusing all Dram manufacturers of these practices, but those that we are, know who they are. Stop it, stop selling your products out of the back door, stop pretending that everything is OK, and stop screwing the market up for everyone else. Remember last year. If you don't stop now, you will suffer the consequences. ® Alan Stanley is UK managing director of memory company Dane-Elec
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