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TECHNOLOGY: Memory Prices Rebound, but For How Long?

Memory Prices Rebound, but For How Long?

By ANDREW SIMONS

The price for the most basic form of computer memory has gone up about 75% in the past few weeks, reversing a yearlong decline that has had noticeable effects on Orange County memory makers.

At recent check, the price for a single 128 megabyte memory chip,the most basic model,went for $1.60.

“The prices change daily, but that price has stayed pretty stable,” said Stephen Rodriguez, director of strategic marketing for Fountain Valley-based memory products maker Kingston Technology Co.

The sharp decline in the price for memory,exacerbated by a slowing economy and lackluster computer sales,has caused nearly all memory companies to tighten belts.

Kingston and Rancho Santa Margarita-based Viking Components Inc. both have cut jobs as they try to reconcile their spending with slower sales. And Santa Ana-based SimpleTech Inc. has scaled back on its own expansion plans.

The recent increase in prices gives memory makers, many of which are based in OC, reason to smile.

“We hope it’s not temporary,” said Michel Nubel, vice president of sales for Viking Components.

Business has been frenetic in the past couple of weeks, executives at OC memory makers said.

Some customers who normally order only a nominal amount of memory modules have dramatically increased orders before prices rise further.

Kingston said it has set up a special team to handle such orders.

But memory makers aren’t ready to declare a comeback. While memory prices are up, they’re nothing like what they were a year ago when a 128 megabyte chip went for $7.

The memory business follows a cycle marked by long periods of growth broken by periods of correction. Memory industry insiders hadn’t expected that business would return to a growth phase until next summer. That could mean memory prices,while temporarily stable,could go down again.

“The issue here is one of supply, not demand,” Nubel said.

One reason for the price increase, OC memory makers suggest, is a temporary blip in the supply of the memory chips. About two weeks ago, memory chip makers Micron Electronics Inc. and Samsung Electronics Co.,facing huge losses from their low-end memory business,cut production to artificially raise prices, OC memory makers said.

“They tried to raise the price up to two bucks a chip,” said SimpleTech Chief Executive Manouch Moshayedi. “They wanted to create some sort of panic in the market. They were not successful. Memory prices have settled and we feel the price now won’t hold on a long-term basis. Nothing has changed, fundamentally.”

What may change are the long-term contracts between computer companies and memory chip makers, which are set to be renegotiated in the next couple of weeks.

“The prices they agree on there determine our pricing,” Nubel said. n

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