At Valiant Computer in North Austin, personal computer hobbyists have been shocked this month by the sudden runup in prices for computer memory.
A 256-megabyte "stick" -- or module -- of memory that cost as low as US$19 in November cost US$54 on Thursday. The price is far from fixed. Manager Shane Gotcher readjusts his store's memory price up and down almost daily in reaction to the spot market, which has risen dramatically since bottoming out in November.
Memory -- the temporary resting place for retrieving computer data and instructions -- is one of the fundamental elements of any computer. Adding memory is one of the simplest ways of upgrading the performance of a computer, because more memory enables the computer to quickly access more information. Seven years ago, memory was one of the most expensive components in a personal computer, but price wars and technology improvements have made it a relative bargain.
But rock-bottom memory prices have risen by upwards of 200 percent in the past month. The price spike has been fueled by greater demand, primarily due to better PC sales over the holidays, and concerns that consolidation in the industry could limit supply. The prices have caught customers at Valiant Computer and thousands of other computer part suppliers by surprise.
"Some people are buying less memory," Gotcher said. "Some of them are buying more because they expect the price to go up even further."
Gotcher is unperturbed. His store sells DRAM modules at close to cost as a way of bringing in customers to buy other computer-related products. Just as consumers are noticing the surge in memory prices, so are large and small computer manufacturers. Falling prices for memory and many other computer components enabled PC makers like Dell Computer Corp, Compaq Computer Corp and others to drive down product prices in 2001, giving consumers their best bargains ever for high-performance machines. Those bargain-priced machines helped stimulate a recovery in PC buying late lasy year to give the industry a little relief from a prolonged sales slump.
But rising memory prices and expected price stability for other key components, including microprocessors, may force PC makers to take a slower approach to lowering prices. Some analysts say stabilizing prices for computer components could signal a temporary truce in the PC price wars.
"When component costs are rising or stable, some of the advantages of direct distribution are muted," said Bill Shope, an analyst who follows PC stocks for ABN AMRO. "The [PC price] declines we've seen from Dell has been the company passing on component price declines and then some."
Dell is affected more by price swings because it doesn't have nearly as much inventory of components as its competitors. When prices are falling, Dell benefits from not having long-term contracts. When prices rise, Dell pays more than others who locked in a older, lower prices. Dell declined to comment. Compaq said Wednesday when it reported fourth-quarter earnings that stabilizing component costs helped it stem the rapid decline in PC prices that had sapped its profits.
The increase in memory prices alone won't affect computer makers' profits much, analysts say. Companies such as Dell will simply end some promotions of free memory upgrades and pass along higher memory prices to customers.
And memory accounts for much less of the overall cost of a PC today than it did a few years ago. "It used to be couple hundred dollars," said Bear, Stearns analyst Andrew Neff. "Now it's a few dozen or tens of dollars. As a percent of the total cost, it's relatively small. But it gets all the press."
So long as computer makers can get the supplies they need, albeit at higher prices, the impact will be limited. Memory producers voluntarily taking some production offline is far different from the Taiwan earthquakes in late 1999 that crippled production and caused prices to spiral without warning, hurting Dell's earnings because the company couldn't increase prices quickly enough.
"Dell learned from its mistakes from the last time there were memory price spikes," Neff said. Now the company has clauses in supply contracts that allow it to automatically increase prices to allow for changes in component costs.
Analysts say that large manufacturers, such as Dell and Compaq, will continue to get the processors that they need. The losers will be small firms, so-called "white-box" vendors, who build non-brand-name computers. Even at today's higher prices, computer memory is still an incredible bargain. In the early 1990s, adding a single megabyte of memory cost at retail more than US$20. Today it costs a little more than US$0.20. Many dealers no longer sell memory modules that are smaller than 128 megabytes, an amount that would have seemed enormously large just five years ago.
The reason is competition and technical innovation. The 1990s brought a flood of new competitors into the memory chip business and improvements in manufacturing processes multiplied the productive output of each chip factory. Memory went from being in extreme shortage in 1995 to being in heavy oversupply in 1996 and the market hasn't fully recovered since.
The personal computer sales slump hit last year, the price of memory tumbled into a near-death spiral. Worldwide sales of memory chips dropped 62 percent to just under US$11 billion. In the face of weak demand, memory makers dropped prices again and again just to bring revenue in the door.
"It was the worst year ever for the DRAM business," said analyst Brian Matas with IC Insights.
At Samsung Austin Semiconductor's five-year-old memory factory in Northeast Austin, the price of a 128-megabit chip dropped from more than US$10 in the fall of 2000 to less than US$1 in early December, less than it cost to make the chip. The 950-employee chip factory is owned by South Korea's Samsung Electronics Corp, the largest maker of memory chips, with an estimated 30 percent share of the worldwide market.
Having to sell chips for less than cost "sucks the air right out of your lungs," said Samsung spokesman Bill Cryer.
Prices have risen enough in the past month to allow most memory makers to make a modest profit on the chips they sell, analysts say.
The CIA has a message for Chinese government officials worried about their place in Chinese President Xi Jinping’s (習近平) government: Come work with us. The agency released two Mandarin-language videos on social media on Thursday inviting disgruntled officials to contact the CIA. The recruitment videos posted on YouTube and X racked up more than 5 million views combined in their first day. The outreach comes as CIA Director John Ratcliffe has vowed to boost the agency’s use of intelligence from human sources and its focus on China, which has recently targeted US officials with its own espionage operations. The videos are “aimed at
STEADFAST FRIEND: The bills encourage increased Taiwan-US engagement and address China’s distortion of UN Resolution 2758 to isolate Taiwan internationally The Presidential Office yesterday thanked the US House of Representatives for unanimously passing two Taiwan-related bills highlighting its solid support for Taiwan’s democracy and global participation, and for deepening bilateral relations. One of the bills, the Taiwan Assurance Implementation Act, requires the US Department of State to periodically review its guidelines for engagement with Taiwan, and report to the US Congress on the guidelines and plans to lift self-imposed limitations on US-Taiwan engagement. The other bill is the Taiwan International Solidarity Act, which clarifies that UN Resolution 2758 does not address the issue of the representation of Taiwan or its people in
US Indo-Pacific Commander Admiral Samuel Paparo on Friday expressed concern over the rate at which China is diversifying its military exercises, the Financial Times (FT) reported on Saturday. “The rates of change on the depth and breadth of their exercises is the one non-linear effect that I’ve seen in the last year that wakes me up at night or keeps me up at night,” Paparo was quoted by FT as saying while attending the annual Sedona Forum at the McCain Institute in Arizona. Paparo also expressed concern over the speed with which China was expanding its military. While the US
SHIFT: Taiwan’s better-than-expected first-quarter GDP and signs of weakness in the US have driven global capital back to emerging markets, the central bank head said The central bank yesterday blamed market speculation for the steep rise in the local currency, and urged exporters and financial institutions to stay calm and stop panic sell-offs to avoid hurting their own profitability. The nation’s top monetary policymaker said that it would step in, if necessary, to maintain order and stability in the foreign exchange market. The remarks came as the NT dollar yesterday closed up NT$0.919 to NT$30.145 against the US dollar in Taipei trading, after rising as high as NT$29.59 in intraday trading. The local currency has surged 5.85 percent against the greenback over the past two sessions, central
RSS