Kingston Technology Co.’s charge into memory for consumer electronics is paying off, even if it wasn’t a popular idea at first.
Since the Fountain Valley-based company came out with flash memory for digital cameras and other gadgets in 2003, sales of the products have at least doubled every year, said Mark Leathem, who heads up marketing and business development for flash.
“There were a lot of naysayers as to whether we should move into those markets, and I was one of those,” Leathem said. “I thought it was a niche market that didn’t have any long-term business potential for us.”
Kingston isn’t saying, but flash memory now could be a third of its $3 billion in yearly sales.
The company is the king of traditional memory boards for computers and networking gear known as dynamic random access memory, or DRAM. It claims 17% of the market.
The No. 2 player, Fremont-based Smart Modular Technologies Inc., gets just 5.5%, according to market tracker iSuppli Inc. in El Segundo.
Now some observers see Kingston muscling in on the flash market, despite some intense competition from players large and small.
Kingston is privately held and doesn’t offer a breakdown of its sales. ISuppli analyst Nam Hyung Kim figures DRAM is about 70% of Kingston’s sales, down from 85% in 2004. It’s a fair assumption that much of the other business is flash.
In 2004, Kingston had said it hoped to grow its flash revenue from $300 million in 2004 to around $600 million in 2005.
Leathem declined to give specifics. The company could double its flash business again this year, he said.
People outside the company persuaded Kingston to go after the flash market, he said.
“I would like to claim we are visionaries,” Leathem said. “But the simple truth is that we rely on our customers and suppliers.”
Kingston should be able to use its connections in the memory market to drive growth in flash, iSuppli’s Kim said. The company has solid ties to retailers and chipmakers who provide memory chips, he said.
“They know the market very well,” Kim said.
With both DRAM and flash, Kingston buys memory chips from suppliers such as Samsung Electronics Co. and Toshiba Corp. and assembles them onto circuit boards that go in computers or cards used in consumer electronics.
Flash seems more promising than DRAM. While DRAM’s sales have been sluggish with prices slipping, flash shipments could grow by 187% this year and about that in 2007, iSuppli said.
Still, prices have been falling for flash because of too much supply. Kim cut his flash sales forecast,for flash memory chips, not the cards Kingston and others make,from $16 billion to $13.8 billion for 2006. The oversupply should ease in the second half of the year, according to Kim.
Flash has seen demand boom with consumer gadgets. Digital cameras, wireless phones, digital music players and other devices use flash memory for storage.
Competition is plentiful.
Sunnyvale-based SanDisk Corp. and Lexar Media Inc. of Fremont are big sellers of flash. Earlier this year, memory chipmaker Micron Technology Inc. said it planned to buy Lexar Media.
Kingston’s edge is its production, distribution and sales muscle honed after years in the DRAM market, Kim said.
“Many companies want to copy and follow the Kingston model,” he said.
The flash market has its parallels for Kingston, the company’s Leathem said.
When Kingston entered DRAM in the 1980s, it went up against big players that long ago left the market, including IBM Corp. and Hewlett-Packard Co.
“You learn a lot when you go through 18 years of … learning to focus on what you’re doing, being consistent and having a clear message,” Leathem said.
But flash and its customers are new to many at Kingston.
The company has sought outside sales and marketing help for its push into the consumer and retail market with flash, Leathem said.
One stretch: packaging.
“Packaging is something I had never really given any thought to,” Leathem said. “The business guy doesn’t want it to be difficult to open. But in the consumer space, just something like packaging can dominate your thoughts for years on end. It’s amazing.”
The company is reworking packaging, he said.
Kingston’s flash sales began with a focus on corporate customers and has shifted to consumers, according to Leathem.
The company has been busy.
In January, Kingston announced a pact with H & R; Block Inc. to sell USB flash drives that load tax software onto a computer.
Also in January, the company came out with a 256 megabyte flash card for mobile gadgets. In April, Kingston came out with a flash card with twice as much storage.
In March: a 4-gigabyte USB flash drive aimed at executives who want tight security technology and lots of storage they can take on the go.
