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Kingston Takes Lower Prices to Consumers

Kingston Technology Co. sees a silver lining in an industrywide sales slump that’s pinched the company in the last 18 months.

A big price drop in memory products and components bumped Kingston off the top perch in our annual list of largest private companies in Orange County. But it’s also helped the company enter newer markets.

Its smaller line of flash memory products now targets a broader range of niches in the consumer market, a shift that’s been driven by a drop in prices and strong demand for higher storage capacity on mobile devices and personal computers.

Last year, Kingston—which is headquartered at an expansive campus in Fountain Valley—introduced the Wi-Drive, a wireless USB in 8-gigabit and 16-gigabit formats that allows up three users to access movie files, photos or other data simultaneously.

“It opens up a whole new market, from movies to high-end videos,” said Mark Leathem, vice president of corporate marketing.

The product was geared to add storage to Apple Inc. devices, which tend to have limited capacity and no expansion ports.

“That’s where the Wi-Drive comes in,” Leathem said. “There is no question it was aimed at the Apple market.”

Its introduction quickly opened doors in Apple’s secondary market with U.S. and international consumers who have older versions of iPods, iPads and iPhones.

“We see the second-hand market being a really good driver for us,” Leathem said.

The Business Journal estimates Kingston had sales of $5.8 billion in 2011. That makes it the second-biggest private company in OC, according to this week’s rankings (see list, page 16; related stories throughout issue).

Its annual revenue was down 11% from a record $6.5 billion posted in 2010 amid a global surge in sales of DRAM products, the most common type of memory used in computers and Kingston’s biggest source of revenue.

Kingston is the top memory products maker for computers and consumer electronics. The company had entered 2011 warning that it was “extremely unlikely to meet the same sort of revenue” as the prior year.

The DRAM market has been hotly contested for the past several years, as stiff competition from Asian manufacturers has driven down prices.

Kingston boosted its ownership stake in Taiwanese storage device maker Rexchip Electronics Corp. in March, when it purchased 274 million shares for $128 million. The buy could position Kingston with a steady supply of DRAM chips in the years to come as demand surges for cloud and PC storage.

New Market

That’s helped Kingston make gains in the embedded-storage market for servers as more companies look to the cloud to meet storage needs. The market is a relatively new one for Kingston and shows promising growth, given the volume of unit sales per contract.

“We’re moving towards markets that now take advantage of those price points,” Leathem said. “It’s not all doom and gloom.”

As the average sale price for DRAM falls, solid state drives are much more affordable for the mass market. Kingston is seeing an influx of consumers buying these products to improve computer performance to stream more content, improve video game play and store other data.

“The price for SSDs has come down to the point for less than $80, you can completely revamp the performance of your existing product,” Leathem said. “You’ve seen a dramatic shift in what people think is reasonable DRAM in a system.”

Kingston offers buyers upgrade kits that make installation seamless and easy.

The company has proven to be nimble and adaptive to the changing demands in the market. Kingston prides itself on having operations, engineers and production move where the market is, Leathem said.

Production Capacity

It assembles memory products in Fountain Valley, Taiwan and Shanghai, and each site is capable of producing every device Kingston makes, although each plant has its specialty.

About 825 people work in Fountain Valley and 4,700 companywide.

The company introduces six products per month on average.

“The challenge for Kingston is to keep up with the latest group for our products,” Leathem said. “With prices coming down it means you have to be more creative, look for opportunities outside the obvious box, and you’ve got to explore anything to help your consumer products.”

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