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Toshiba Latest Casualty of DRAM Price Wars

Posted by ryuzaki0 on from the might-be-a-good-time-to-buy-memory dept.

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."

12 of 117 comments (clear)

  1. Who didn't see this coming? by Andorion · · Score: 4, Interesting

    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

  2. Why in MY DAY!!!! by gatesh8r · · Score: 4, Funny
    We had to pay TEN THOUSAND DOLLARS for one MESELY 32k of RAM! We had IRON CORES to actually use. And we didn't have these flimsy PCBs to work with we were lucky to have VACCUM TUBES!

    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
  3. DRAM Schme-RAM by CaptainAlbert · · Score: 5, Interesting

    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
    1. Re:DRAM Schme-RAM by seanadams.com · · Score: 4, Interesting

      we have next to no DRAM on our boards - it's all SRAM and fast DPRAM

      I'm very curious - do you have any idea what you're paying for SRAM? My company is paying $3.00 a pop for 128KB standard 60ns SRAMs, and it seems incredibly high in light of the plummeting DRAM prices. In fact SRAM prices don't seem to have budged in the last year.

    2. Re:DRAM Schme-RAM by adubey · · Score: 3, Insightful

      CaptainAlbert,

      I'm having a hard time understanding what you've written! You're saying that the DRAM market is hard to understand because once you have it, you don't want it anymore? But isn't this true of most goods? Also, the "wearing out" bit doesn't make any sense: I have a Maytag washing machine that hasn't worn out since the days when DECs had 64K of memory. This doesn't make the market for washing machines any harder to understand.

      How does having a huge domestic market imply you'll be in constant over-supply?

      Rather than some pseudo-economic reasons as to why the DRAM market is bottoming out, how about some real ones. First it is a commodity, so there is no chance of making an "economic profit" on DRAM. Second, the main market for DRAM, personal computers, it itself declining, causing a decline in the DRAM market. Third, better technology has made DRAM cheaper and cheaper. While in the early days of computing, the declining cost of RAM was matched by increasing volumes (ie every computer coming with more RAM). Recently, however, the cost to produce a megabyte has been decreasing faster than the avg. megabyte/computer has been increasing.

    3. Re:DRAM Schme-RAM by CaptainAlbert · · Score: 4, Interesting

      > I'm having a hard time understanding what you've written!

      <re-reads own post> hmm... so am I :-) Lack of coffee, I think.

      I don't think I meant it was "hard to understand", I think I meant it was more fickle and quite unlike a lot of other silicon markets. Most chips and circuit boards are never sold directly to the general public; they're designed, manufactured and purchased by the various companies who manufacture hardware for end-users. Thus, applying the same analysis that you might use when considering, say, high speed digital-to-analogue converters, might yield some phoney results.

      The PC (and related components) market is different from the washing machine market, because people expect the product they buy to be obsolete within a year, and worthless within three. That's not because it will break down, but because of the speed at which the technological developments are progressing. I guess that was true when the washing machine was first invented, too.

      All I was saying was that for some reason, a lot of investors and analysts have assumed without any solid justification that the growth curve in sales of DRAM/mobile phones/PCs/etc. can be extrapolated skywards without any consideration of external factors.

      Because the market trends are not quite the same as that for any other products, I think there were lots of mistakes ready to be made. If only 64KB *had* been enough for everyone :-)

      --
      These sigs are more interesting tha
  4. Micron not doing so hot either by nyquist_theorem · · Score: 4, Interesting

    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)
  5. Re:If you were smart... and other stuff by cloudturtle · · Score: 3, Funny

    RAM may be more usefull, but my big ole block of gold will not be made worthless by DDR GOLD, GOLD 2700, or the ever overpriced RD-GOLD.

    The problem with RAM price flux is that the price always does go back up, but often it is the result of a new RAM product entering the market (pc100, pc133 ect) rather than the old stuff shooting up in price (although this does happen some). This makes it very hard to arbitrage (buy low, sell high) the ram market, because you buy the old stuff low, and when the market jumps it is for the new stuff (meaning you get stuck holding the old RAM).

  6. Simple Economics by thebigwaffle · · Score: 4, Interesting

    "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.

  7. what a load of CRAP! by standards · · Score: 4, Insightful

    "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.

  8. Here's A Better Way For Them To Make A Living by istartedi · · Score: 5, Funny

    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"?
  9. Don't despair--just read carefully by John+Murdoch · · Score: 3, Insightful

    Hi!

    A key reason behind Toshiba's decision to exit commodity DRAM production is a long slide in DRAM prices that began in the summer of 2000, which has pushed prices to below-cost levels leaving Toshiba, and almost all DRAM makers, losing money on every chip they sell. [Emphasis mine]

    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:

    1. This suggests strongly that we won't see a DRAM price rise anytime soon. Several posts on this topic have pointed out that when you see market players exiting, supply tightens up and prices rise--but in this case supply isn't going to decrease, only the brand names will change.
    2. This is also extremely interesting to those of us who heard of the "vaunted Japanese electronics industry" throughout the '80s and '90s. The dominance of the DRAM market by Toshiba and NEC was so overwhelming that Peters and Waterman bent over backwards to chronicle the contrarian investments of an Idaho potato farmer named J.R. Simplot. Simplot, who more-or-less invented the frozen french fry, was watching TI and Motorola bail from the commodity DRAM market, and plowing his millions into a plucky upstart...by the name of Micron. 12 or 13 years after In Search of Excellence featured Micron in a clearly David-vs-Goliath-and-we're-not-betting-on-David tone, it would seem that an American company has beaten the Japanese electronics industry at their own game, driving them from the marketplace. That is an interesting story.