Fountain Valley-based Kingston Technology Co. plans to build a division around its growing business selling memory cards for consumer electronics.
Kingston, the largest maker of memory products for computers, networking gear and consumer gadgets, next year plans to shift its flash memory business into a separate unit called Kingston Digital Inc.
The unit will make memory cards for digital cameras, cell phones and other devices, plus USB drives and readers that allow memory cards to be read on computers.
The memory cards, some the size of postage stamps, store photos, songs and data. They got the name flash for their ability to store or erase files in a “flash.”
Sales of flash memory products are about a quarter of privately held Kingston’s $4 billion in yearly sales. The bulk of Kingston’s business comes from memory circuit boards that speed up the performance of computers. It counts about 20% of the memory board market.
The growth of the flash business is “a major accomplishment for Kingston,” said Vimal “Al” Soni, senior vice president of strategic alliances.
Soni, who handles Kingston’s buying of memory chips from big Asian makers, is set to head Kingston Digital as its general manager. He’s been at the company for 11 years.
Kingston has proven itself in flash over a short period of time. Sales have grown from nothing just two years ago.
“We are now the No. 2 company in the world for flash products” after Milpitas-based SanDisk Corp., said Mark Leathem, director of business development and marketing for flash. “We were 12 years late. But we are No. 2. So I post-rationalize it and say, yes, our timing was absolutely perfect.”
The company is looking to have flash products account for half of overall sales in the future.
Kingston is able call upon its relationships with memory chipmakers, Soni said, including Japan’s Toshiba Corp. and South Korea’s Hynix Semiconductor Inc. and Samsung Corp.
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U.S. flash suppliers include Intel Corp. and Micron Technology Inc.
Kingston is setting apart its flash business because of the different way the products are marketed, Soni said.
“Flash is a consumer product, where you actually touch and feel and look at it,” he said. “The cosmetics, the looks, the feel of the product become important. That is a big difference.”
Kingston Digital will have about 100 workers dedicated to product engineering, design and sales in Fountain Valley, where the company employs about 800 in all.
All of the flash packaging design and marketing also are done by Kingston.
Other operational functions, such as human resources, tech support and accounting, will be shared with the rest of Kingston.
Most of Kingston’s flash devices are made at its plants in Taiwan and China.
Kingston competes with long-established flash players, including SanDisk and Taiwan’s A-Data Technology Co.
“We are competing with companies that are doing only flash, so they are a lot more focused,” Soni said.
Memory products are a cutthroat business.
Profits are slim, even on consumer products.
Kingston’s challenge is to stay efficient while maximizing flash product sales.
“We don’t want to duplicate the work so much that we double our head count,” Soni said. “We are trying to not create more costs because these days, the margins are slim. We are trying to do what’s most efficient without adding too much overhead.”
Kingston got into flash only a few years ago, after a lot of debate.
“I was behind not going into flash because I thought it was a complete waste of time,” Leathem said. “It seemed like it was kind of a niche product. If you go back five years, it was mainly the photo market. I didn’t think it was too appealing.”
Industry watchers say Kingston was late to the game.
“I’d say they are right,” said Darwin Chen, director of flash operations. “I don’t think that’s any secret at all. We don’t view first-to-market as a definite advantage. We try to see if the opportunity is right. That’s why it took us a while to figure out if we had what it takes to win in this space.”
Selling consumer flash gear has helped Kingston cement its brand and logo, a “red head” that was inspired by stone carvings on Easter Island, an isolated island in the south eastern Pacific Ocean.
One thing you may never see at Kingston: heavy advertising and marketing for its flash products.
Kingston “isn’t good at educating the market, like Apple,” Chen said.
What it offers is scale, he said.
“When the technology is ripe, we are very good at taking it from the fabrication plant to the consumer’s hand,” Chen said.
