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Toshiba Latest Casualty of DRAM Price Wars
Tsar writes: "ITWorld.com tells the story: Toshiba is getting out of the DRAM business. They had 6.2% of the world market last year, but soon their Manassas, VA facilities will belong to Micron, the Yokkaichi plant's DRAM production will be reduced to a trickle, and Toshiba will be out of the commodity memory market. Guess you can sell DRAM for a hundred bucks a gigabyte, but you can't make a living at it yet."
kaffie ?
Since hitting a high of around US$9 per 64M-bit chip in 2000, the price has fallen to below $1 and newer, more advanced chips are also under price pressure
... I can still remember my first 8086.... blah blah" posts...
Prepare for flood of "Why in my day, RAM cost
"Ask me about Loom"
RAM prices are at obscene low levels right now (not that I mind)... will it stay this way or is there really a manufacturing glut right now? Another question is why would manufacturers price their memory to lose money and go out of business? Yeah, sure, cheaper is cheaper, but couldn't the companies that charge higher prices tout some feature? Like, higher reliability or better failure rate or some shit? Mostly PR, but can boost your sales.
Another question is now that a semi-major chip supplier is going out of business, will prices jack up overnight?
Ok, enough deepish thinking it.
Vote monkeys into Congress. They are cheaper and more trustworthy.
It looks like companies really are finding out the hard way, that just because a market is really expensive to enter
:)
(A 'chip' factory is definitely one of the most expensive things you can build) that hasn't prevented savage competition when it was profitable.
Then the market saturates, and people stop buying. Prices crash, and that really expensive factory you bought is a white elephant.
Course, that doesn't stop me feeling all enthusiastic about 4Gb of RAM in a desktop
Toshiba didn't have much going on in the ram market for a while now...
Check out the toshiba pieces up on pricewatch to see what I mean.
Wonder when we're going to see the DRAM market bottom out.... soon as enough people drop out of it I guess.
-Berj
only if you have a beowolf cluster of them... i swear to dog, im going to compile a list of stupid slashdot jokes, give each a universal identification number and then sell t-shirts to all you geeks saying... "I told joke #SD10763 on slashdot!" Of course I'd then patent this numbering system along with its respective jokes through some techno-babble on a patent office form and then you'd all have to pay royalties to me every time you want to tell your stupid ass jokes. Maybe I'll give the T-shirts away free if you license a certain number of jokes. What do you think sirs?
Color flashing, thunder crashing, dynamite machines.
Well.. its not like the fabs are closing. They are just being sold off. Big deal. And if anyone knew what was good for them, they would buy a shitload of ram while its cheap. The price WILL go back up. It always does. Its kinda like gold, but only more useful.
Why I remember when we used punch cards too and we programmed on the BARE METAL! Why we were lucky to have an ASSEMBLER or a punch card!
Why you kids NEVER had it rough!
Karma whorin' since 1999
DRAM is a funny product. Market analysis is harder because the demand for it is not governed by your "ordinary" factors. For a start, it doesn't wear out half as fast as you might expect (particularly if you compare its failure rate to the average lifetime of a home PC). Demand in recent years has been similar to that for mobile handsets - the technology matures and people want it... until they *have* it, then they don't need any more.
If you imagine that every household didn't have an electric jug kettle, and someone suddenly invented it and sold it at an affordable price... well you get the idea.
DRAM is in over-supply because it's one of the only silicon products which has a huge domestic market. My company makes telecoms base-station hardware, and we have next to no DRAM on our boards - it's all SRAM and fast DPRAM embedded in ASICs. The demand for *those* is easier to analyse because the market is steadier and less "faddy".
Shame they couldn't put the plants they're closing to better use though... it's not like there aren't more exciting designs around the corner waiting to be spun...
These sigs are more interesting tha
Sorry about the AC bit I am a long time reader but don't comment much...
I used to work for one of the biggest wafer companies in the world (MEMC) I got laid off in March when everything went to hell. I'm suprised it took this long for the chip companies to start feeling the pressure. We kept hearing it was a temporary setback and they has to clear out some old inventory. Well since our company is just about cleared out of 'old inventoy' I'm not suprised the upper steps of the ladder aren't feeling some pain,
I know, it's hard to click on that link, we're all guilty of it sometimes.
They're selling the plant, intact, to Micron who will continue to produce chips out of the plant, they'll just have a different name stamped on them.
The supply isn't going anywhere, and I doubt seriously that this sale will have any noticible impact on RAM sales.
"You worthless post!"
-Shakespeare, 2 Gentlemen of Verona, 1. 1. 147
Ooh! Put me down for a:
I hilariously misspelt Windoze, and all I got was this lousy T-shirt
£9.99 to the usual address?
According to this story Micron's not exactly picking the money trees either.
One interesting tidbit from that article to give you an idea just how much the DRAM market has turned - Micron recorded a record $625-million loss for its entire 2001 fiscal year, which came after a record $1.5 billion profit in fiscal 2000.
So I wonder if it's not that Toshiba wasn't doing ok (relatively speaking) but rather that they didn't have the pockets (or desire) to hang in there to watch it turn back (as one would expect it to in time).
-- "Ignorance more frequently begets confidence than does knowledge." (Charles Darwin)
I tried to get a job at that plant....they hardly hire any entry-level techs and stuff.
Yeah, I live near it...only about 5 or 6 miles...10 miles to the new AOL building....my god..Manassas is turning into Herndon/Stearling/Reston, VA
But, about RAM prices....haven't they been up lately because of christmas? I don't follow this as much as some people, I'm not that much of a nerd.
NEC too?!
NEC was the other IC manufacturer that I've had really "far" above par experiences with...
I think I am going to pass out...
- Me
So, Micron really needs to get their products out to the market faster. I hope they've got it out before I build a new computer for my parents.
Employee of Inrupt, Project Release Manager and Community Manager for Solid
"Toshiba is not alone in wanting to exit the **commodity** DRAM market. Earlier this year NEC Corp. said it would end DRAM production by 2004 and transfer all operations to Elpida Memory Inc., a joint venture formed with Hitachi Ltd. to insulate the two companies from the cyclical swings of the market."
//emphasis mine
Well, there you have it; a perfect example of classical economics. Whenever you have a particular market where profits are above normal (excess earnings after you pay your overhead), competitors will enter the market place. As more competitors make more product, the supply of the product increases (shifts the supply curve right, for all you Econ buffs) and pushes prices down. That's all and dandy but it doesn't last forever. Because prices are pushed down (and profits back to normal or below), competitors/entrepreneurs/Toshiba will exit. It makes sense. Why stick around?
Be careful folks. As this model suggests, as supply decreases, the price will rise. Exiting an industry preludes price increase; it's inevitable.
The submitter of the story makes the observation that you can sell RAM for 100$ a Gig, but you can't make a living doing so. I think this important because it really sets up what we as the consumers need to know, how much do you have to sell RAM for to make a living. From the looks of it - with Toshiba and Micron both losing money - the market is selling below cost. Does anyone know enough about the manufacturing process to offer an educated estimate as to how much these chips cost to create. We really need to know this because market consolidation will only go on for so long before the major players (Micron, Samsung) decide that losing money isn't cool, stop buying up floundering competitors, and start making money again. A little price war isn't so bad because it allows the market to patrol it's self. Eventually though, this will wear off, and we as consumers should be aware of where the market is going so as to not be completely floored when the price bounces off the roof.
I sure hope this doesn't leave to increases! Crucial had 128MB for 30 bucks last I checked!
And the people shall be oppressed, every one by another, and every one by his neighbour Isaiah 3:5
The solution is not to reduce output or make RAM more expensive. The solution is more bloatware to force more consumption of RAM.
I live in Manassas, Virginia; it has a history:
First, IBM sold out to some unknown company, then they sold out to Lockheed Martin, then they sold out to BAE. Now we have the same problem with Dominion Superconductor. And shoot, I wanted to get a job there.
"ph34r my 1337 n3kk1d ski11z!" - largo of megatokyo
"DRAM Manufactureres are losing money on every chip they sell".
Well THAT'S a load of bullshit. Then why are they selling?
"We'll sell you a million of them. That'll cost us a $1,000,000, but let's do it anyway."
It's NOT true.
Chip manufacturers MAKE money each time they sell a chip. And if they sold enough chips, they'd walk away with a tidy profit. And - SURPRISE - they do!
The problem is that they've expended lots of money building new fabrication facilities, and then, whoops!, the PC economy takes a hit. It isn't that DRAM prices got more expensive - it's that they over-invested in fabrication. And let me tell you - the plants themselves aren't the most expensive part - it's the people and managers that run them.
What's the answer? To sell off the facilities to those who won't be competitors. Heck, why sell something good to a competetor? Therefore, the entry into "vertical markets" by the likes of Toshiba, selling off the facilities to Micron. As long as there is no competition between partners, they're happy.
So what does this mean to DRAM prices? They might fluctuate a little, but the trend will continue downwards as real manufacturing costs are lowered and the technology improves.
Commodity RAM...Flibbildy Floo! In my day we had to put together our own memory cards! We didn't have any of those fancy 30 pin SIMM cards with their flashy gold or tin pins! We had to pay some guy working in his parent's basement to etch a board that we new wasn't going to fit in any of the S-100 slot of the backplane then we had to drill our own holes and solder our own chips. Those little bastard chips cost us $25.00 each. Then when we'd solder them in the iron would slip and we burn ourselves and we'd say "Oh look at me! I've got third degree burns from all this sloppy soldering!" and thats the way it was AND WE LIKED IT!
In terms of market structure, prior to Toshiba's divesture I think 4 companies produced about 80% of the world DRAM supply. Is this level of concentration sufficient to maintain collusive behavior? It all depends.
In one commonly used model of price wars, the memory chip market is in fact collusive. A key assumption is that firms cannot perfectly predict demand conditions ahead of time. Suppose that you and I are the only two producers, and we agree to the following arrangement. In period 1 we both will charge $1. If at the end of period 1 the realized price is $0.90 or greater, we charge $1 in period 2. If it is less than $0.90 cents, we begin a punishment phase in period 2 and charge our marginal cost (and earn zero profits). The realized price may differ from the ex ante declared price because of weak demand for the product or because of cheating. Finally, if the punishment phase has been in effect for 3 periods, we then revert to charging $1; in other words, the punishment lasts 3 periods.
This may in fact characterize the DRAM market. Because of a fall-off in demand for memory late last year and into this year, prices plummeted. Hence, the four DRAM producers began a punishment-phase price war. In the past several months demand for PC's and DRAM has stabilized somewhat, and the firms (ex post) realize this. The price war is now over, and the firms are returning to a high-demand stage where the higher collusive price is charged.
Perhaps this sounds implausible to you, but in fact it is one of the most common models of collusive behavior in the economics profession. Of course, I've left out a ton of details, but the main point is clear: firms in an industry cannot perfectly observe demand, and so falling prices (whether due to low demand or actual cheating) must result in punishment. Once the punishment phase is over and demand returns to its normal level, the higher cartel price can again be charged.
Sig (appended to the end of comments you post, 120 chars)
"...but soon their Manassas, VA facilities will belong to Micron..."
I have quite a few friends who work there, and the japanese never really seemed all that great at managing Americans in a factory environment. Hopefully Micron can do better...
I find it fascinating that DRAM can be had for $100 per GB these days. I remember buying 1 MB SIMMs for $100 apiece 10 years ago.
The really interesting part is that magnetic drive storage capabilities have risen and the costs decreased over the past 10 years, too.
Otherwise, if we had 1990 vintage hard drives and costs, the DRAM would look real tempting to use as an artificial "hard drive", albeit with doodads to keep it powered up full-time.
So, 10 years from now, when 1 TB DRAM sells for $100, will disk drive technology have kept pace?
"Provided by the management for your protection."
I Work in a independent OEM computer store that sells custom boxes and the word on the street for a long time is this: Micron has been intentionally selling below cost to kill off its smaller competitors. The market had become to competitive and beyond the control of the larger industry leading companies. They no longer could control pricing and the profit margins were not to their liking, so Micron responded by starting a price war to force smaller manufacturers out of the business. Prices will go back up when they can contrlol the market again and make extremely high profits.
The price war is just a power play to regain control of a market that was priced to high for the consumer but good for the bank book.
I was going to respond with a point by point critique. But you're a troll, and you don't even understand basic economics, so as soon as you read a good book or two, come back, apologize, and we'll move on. Start with "commodity market".
They are actually loosing a LOT of money. But it is not easy to throw away all the (expensive) machines needed in a fab.
If they sell chips at a bigger price than the competitors (some of whom were supported by the local government), of course they go out of business, and, in the long term, is better to loose money now than close all the expensive facilities they have and loose money forever. Obvious.
And people (even managers) are a very little cost, compared to everything else is needed in a wafer FAB...
Guess you can sell DRAM for a hundred bucks a gigabyte, but you can't make a living at it yet."
Give the DRAM away for free, and sell support for it.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
I've bought a pile of EDO 32 megs when it was worth near nothing, for maxing out my older PCs, now I sell them for 3 or 4 times as much on ebay :) I've bought a load of 512MB ECC DDR when it was worth next to nothing a few months ago.., it's already doubled back :) hell, f** the .COMs :)
Seriously, it's always the same curves every year for the memory, end of the summer, prices at their lowest, a month before xmas, "something happens" and the prices jumps back (xmas sales being the non-official reason).
--- Metamoderating abusive downgraders since my 300th post.
DRAM has become a commodity, that's why pricing fluctuates like other commodities markets. Commodities follow the laws of supply and demand more so than any other types of products. Oil producing nations realized this and formed OPEC to regulate supply and in turn regulate price.
The ONLY way DRAM manufactures will stabililze prices is to band together and form a cartel like OPEC. They must collaboratively develop DRAM technologies and adhere to production caps to regulate price. This sucks for consumers, but that's how energy companies regulate oil prices and make money.
-ted
Firms sell at a loss when they lose less by selling than by sitting idle. If my choices are to sit still and lose two billion from my idle plant that I'm stuck with, or to pay another half a billion to produce a billion and a half in revenue, I choose the latter, losing one billion instead of two.
hawk, economist
One of the great breakthroughs was when memory prices dropped below "a buck a byte"--for the monthly rental . . .
hawk
The profitability of DRAM chips depends highly on the cost and availability of
Low ESR Tantalum. While not the only factor in profitability, this is quite often more than 75% of the cost of materials in a DRAM chip. Any shift in the price of low ESR tantalum will shift the cost of building each DRAM chip.
the easiest way to 'save' money is a die shrink since it dramatically reduces the amount of materials used to build the same quantity of RAM.
If you're using 64-mbit chips and the competitor can fit 256-mbit per chip, (because of a die shrink) they have the advantage in materials. The downside is the cost of developing such high densities and then deploying them.
Also, I beleive that micron is loosing money mostly on the development of new density chips etc. The pricing on crucial.com seems to compensate adequately for manfacturing costs, other than research.
https://www.gnu.org/philosophy/free-sw.html
As players jump off the memory bandwagon, competition will decrease. When that happens, surviving manufacturers will have no reason to keep the prices low. I suppose it'd be a good idea to buy up RAM now.
Why bother.
I just got a box of RDRAM from Dell today to upgrade a bunch of my clients servers. How funny is it that not only are they using Rambus (blech), but that they are buying it from a company that is getting out of the business.
Ummm, Jon, aren't you supposed to be dead...? - Otter(3800)
Now off to my studies for my final in CPU design...
Karma whorin' since 1999
Hi!
In other words, there is a price war going on. And, if ITWorld's sources are correct, there is at least one producer who is making money manufacturing DRAM at these prices. Given that Micron is buying the DRAM plant (and running TV ads selling DRAM via Crucial), it seems clear that Micron a) thinks they can make money in the DRAM business, and b) thinks that they can use that plant in Virginia to make DRAM more competitively than Toshiba did.
Two points:
We currently have 1/10 the farmers we used to, and they're now producing 5 times as much food. It's a good thing, becaues these people that "lived the land" are now filling other jobs. Without such people, we would be lacking on scientists, and software developers, and just about any other profession we can think of.
DRAM still has a market. Once we cut the number of manufacturers in half again, the market will be visible! Toshiba has done the other DRAM manufacturers a favor by leaving. They've done themselves a favor, by deciding to only focus on markets that haven't been pushed to the max. They've done us (consumers) a favor, because whatever market they move their focus to will advance faster. (It's about time for a big drop in notebook prices!)
Eventually, the factories will just be a large building full of robots who run the machines and fix them. All the people fired from the factories will be scientists, discovering new ways to make manufacturing cheaper, and how to build a station on Mars. I'll be happy with the change. Whoever wrote the article above will be complaining. It will be the same article, just the names will change.
Micron (Crucial) is a more recognizable name in the commercial RAM market than Toshiba. Toshiba RAM is marketed more towards high-end computing ie servers/workstation/laptops/etc. but most of the money, I'm assuming, is to be made in the desktop microcomputer market. Crucial also markets to these markets, but isn't as dependent as Toshiba. And lastly, just from reading various reviews in hardware sites you'd know Crucial has a reputation of being of superior than most other brands.