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DRAM Price Fixing
AEton writes "There's an interesting article up at Newsforge, an OSDN sibling site, about price fixing in the DRAM market. According to Melanie Hollands, a technology analyst, market consolidation and uncertain prices have contributed to subtle cooperation between the major DRAM "competitors" to keep prices high. While she finds little "hard evidence of collusion", there are strong circumstantial trends which last year sparked a secretive Department of Justice antitrust inquiry." Allegations of this have been floating around for a while - heck, you can even join the suit.
Big deal, happens to everything. Sooner or later one of them breaks down with money issues and that bottom falls out or some upstart comes along and cleans house. With memory prices as low as they are right now this is like getting bent about a "price fixing" problem with paper clips. How about they figure out how to get gas down from 2.50 a pop...
Neck_of_the_Woods
#/usr/local/surf/glassy/overhead
Aww, so Infineon, Micron, Samsung and all the others fix DRAM prices eh ? well SCREW them bastards. Let's all boycott RAM, let's all run our entire systems in SWAP !! That'll teach them !
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
Way back... a plastics manufacturer had the only plant currently set up to produce the epoxy resin used in most plast ICs.
RAM prices tripled overnight.
No other chips raised in price, and the epoxy, still priced around US$5-US$6 a pound, had a 6 month stockpile sitting at the site. All of the RAM manufacturers also had 6 month stockpiles of the stuff.
Plants in the US and Japan could have bene brought online in months, and Sumitomo had their plant back online within 6 months.
RAM sellers suck. I don't know where the exact problem is, but it's treated as a commodity, and it's wrong.
Whichever companies outlast the others and able to secure enough financing to pay for the next major technology node will be able to set whatever price they want - the profit margin is already so low (negative!) that no one will want to become a competitor.
IBM was pretty smart to get out of that business years ago.
"While she finds little "hard evidence of collusion", there are strong circumstantial trends which last year sparked a secretive Department of Justice antitrust inquiry." Allegations of this have been floating around for a while - heck, you can even join the suit."
Hey, who needs evidence!! "It was HIM" That's all the evidence I need!
So lynch mobs are ok if they go for large companies? How peculiar!
Get some proof, or fuck off.
According to /me, a technology analyst, market consolidation and Windows upgrade cycles have contributed to subtle cooperation between the major DRAM "competitors" and Microsoft to keep demand high.
The small number of memory makers forming a cartel, I guess, is a signal we might need an open design for RAM. After the Intel-Via settlement, looks like we might even need a free-design CPU as well. Hard disks, FDDs, CDROMs and CD writers are okay I guess. RAM and CPUs need to be fixed urgently.
If you keep throwing chairs, one day you'll break windows....
If there's been price-fixing, it certainly hasn't been very competently done. DRAM prices have been in the flusher for quite a while now, and the manufacturers are losing money at an amazing rate.
It's actually a stupid law. Anti-price fixing that is.
In fact, the most important commodity in America is readily purchased from a price-fixing cartel (aka OPEC).
Here's the howto on legalized price-fixing in America.
Monday... from the Wall Street Journal, "AT&T announces a 4.3% price increase in consumer long distance rates across the board."
Tuesday... from the NY Times, "MCI announces a 4.35% price increase in consumer long distance rates..."
(Result: A successful price fixing.)
Or it could go like this....
Monday... WSJ Reports "AT&T announces a 6% increase in consumer l.d. rates.
Tuesday... WSJ Report "MCI announces a 3% rate hike."
Wednesday... "WSJ Reports "AT&T announces a 50% decrease in a previously announces rate hike due to customer complaints..."
(Result: A successful price fixing in two stages.)
Shit happens man.
When a very limited number of companies control the whole world's market, things like this happen.
The user is helpless when they have so much control. Reached this point, competition is not enough and the market doesn't regulate itself at all. This is when free market means free for big corporations to abuse and screw the rest.
I know it looks funny, but think about the market dynamics. Most chip manufactures can change photomasks and either make DRAM, Flash RAM, Cell Phone chips, Network Chips, etc. The market has some fluctiuations. When the price is up, management shifts to produce what is profitable. When the market is down, they sell off inventory and tool for other chips. I know Intel closed a flash plant when flash prices fell. They started again when Cell Phones needed lots more memory driving the price back up. The market swings. The manufactures can't instantly deliver. It takes time to react to the market. Starting a new product line takes several months from new raw wafers to finished deliverable components. It's easy to flood the market if you don't know your compeditors are also trying to fill 100% of a shortage. A shortage of 500,000 units could quickly become a glut of 1,500,000 units as 3 manufactures come on line to supply the shortage. They all get stung with the rapid price drop while trying to recover the manufacturing costs. The margins are quite thin most of the time in the DRAM market. Bumps in demand do catch the suppliers off guard.
The truth shall set you free!
I don't understand the problem. 1GB (2x512MB) of PC2700 DDR memory can be bought under $100.
DoJ should investigate OS or Office suite price fixing instead. These are horribly overpriced.
A) Memory is NOT a commodity at least by definition - nor is it a service. I DO think it should be listed on stock markets as such though. I think DRAM, a "combined finished product", would have to be rewritten as a raw material. I think if there were this type of regulation, rather than regulation on small arms of companies like Samsung, there would be more stabilization. Contrary to what the article makes it seem like though, I think RAM has been VERY reasonable, it has also been been a help to a partial turn around in PC sales over the past 2 years, by helping margins.
There are also a lot of companies producing RAM, at least more than enough for capatilist competition. I can name at least 6 seperate manufacturers off the top of my head. We don't see the same problem in industries where there is less competition. ( Samsung, Hyundai, Motorola, Kingston, Centon(Kbyte) PNY )
2)The area of concentration for price fixing shouldn't be DRAM it should be FlashRAM. As far as I can tell, this type of RAM is outselling DRAM at this point. (If someone could post a link to comparisons it would be appreciated) I haven't seen compareable Flash RAM decreases. The interesting thing about Flash RAM is that it appears to be cheaper to make and easier to sell. There are also LOTS of competition. Most people can't see through the gimmicky 30x 70x flash RAM, and most don't buy into the Kingston, Viking theory of better RAM. (Novices will not attribute their computer problems to bad RAM they got for $10 after rebate)
IF RAM were made a commodity you'd see it traded like crude oil. Venezuelan and British oil do better because of the refining process. The "clear gas" at Amoco really is better than than the gas from Texaco! The RAM from Kingston really is better than the RAM from KByte.
Yell & scream & rant & rave... it's no use... you need a shaaaave ~ Bugs Bunny
Come one, RAM manufacturers are in deep trouble, and have been for many months if not years. RAM prices have fallen to their lowest point in history, much stronger even than CPU prices have tumbled.
How can anyone claim they "kept the prices high"?!
Or more interesting: Are they going to smoke it all alone or are they going to pass it around?
Well, I looked into 2Gig of DDR memory for a Dell 8500 laptop. The price is $3300. If you go to Microns crucial website it is $999/gig. This is about 99 cents per gig which is cheap compared to the 60% markup Dell wants on the stuff. So! poor Dell can't make a buck because memory isn't cheap enough. Sheesh! gimme a break Dell. You say it amounts to 5-6% of the PC cost which is $150 on a $3K laptop. Hmmm, maybe you need to redo the math. Micron is trying to make an honest buck while you are doing highway robbery! Now who has to get their quaterly earnings up, Micron is at $9 per share whilst' Dell is at $30 per share. Hmmm, something doesn't compute here. In fact with all the announced Intel price decreases and chip decreases I wonder why Dell doesn't reduce their laptop/workstation website price. Seems like Dell is the one doing price fixing to me since other competitors are very few -- down to about two left. This means that Dells prices will not come down but only go up!
I always found it suspicious that everytime RAM prices came down, the factory was on fire, blown away by tornado, or was hit by an earthquake. It was like they really had a bad case of Sim City.
I think it's a tad more accurate to say it worked AGAINST Iraq...
I remember back in the 1970's -- before this nasty price fixing -- when you could buy an Altair S-100 1K RAM card assembled and tested for only $139. So, if you needed 512MB of RAM, it would only have required 524,288 of those S-100 boards and the cost would have been a mere $72,876,032.00.
Now those bastards are gouging us with their price fixing. I just checked on Crucial's web site and 512MB (DDR PC2100) costs $65.99!
Sooner or later they will manage to fix prices, and you will be able to tell by consistant profits by memory manufacturers.
Remember the first lesson in business 101 is never be forced to compete. Read Warren Buffet's advice for stock picking: you want a business with a "franchise" that allows it to prevent competitors from eating their lunch, thats where the profits are.
Wumpus
Wow! Where'd you get your MBA? Tim's MBA-o-rama? "Actualize their cost-effectiveness", "key technical infrastructure has to be optimised". Good boy! Here's a donut.
Remember when DRAM was $40 a MEGABYTE?!?!
i've always wondered why the major memory chip producers did not create an OPEC type consortium for DRAM. they would be able to control the price of ram chips and hopefully hold it at a level that would be cheap enough to ensure brisk sales, while ensuring that they would make enough profit to a) keep their workers employeed all of the time, b) keep their production lines running at a certain capacity, c) be able to invest in memory chip technology.
the DRAM constortium could raise the prices on memory chips to a point where consumers would find it too expensive to buy chips, but a) the smaller manufacturers could offer cheaper products b) like OPEFC the consortium does not want to alienate its consumers through higher prices.
on another note, "Regarding the latter "conspiracy", the three main culprits appear to be Samsung and Hynix, both of Korea; and Taiwan's Nanya." though these three companies are geographically more closely located than the other major companies, it does not necessarily mean that they would want to devise a plan to price fix. don't airlines in the U.S. price fix also?
Why did I lurk so long before registering for a Slashdot account? I could have had a Slashdot ID of less than 100000.
What concerns me is the price fixing going in with gasoline. All the gas stations in my area always jack up the prices on the same day, and they're always the same price. There's no way that's not collusion! I only buy RAM once a year or so, but I have to buy gas once a week. I buy way more gas than RAM, so RAM price fixing doesn't concern me as much.
-- I am. Therefore, I think!
http://www.converge.com/eWebApp/jsp/pricetrends/Ca tegoryDescDetail.jsp
Take a look at the graphs on this page. The only segment of the market that appears to be climbing is the PC100 and PC133 products. This is common for products as they are phased out of production. I'd say the author picked a poor time to post this article. DRAM makers like Micron won't be able to survive if the current pricing continues.
It might be a little more fun to vilify a company like Rambus which is suing it's way to profitability, bending all consumers over with it's illegal obtained patent portfolio. (allegedly)
I agree that they don't just mothball a FAB. However they do retool to other product so one product is running in the head of the fab while the last of the old product is completing in the back end. Sometimes they do mothball a fab to re-tool. Intel held on to the 858 process past it's planned end of life (8 inch aluminum interconnect tech) due to the demand for the Pentium III chips. They eventualy migrated FAB 20 to the 860 process (faster copper interconnects). Fabs can and do adjust the downtime for upgrades depending on the current demand for product. During the tech downturn one of the new fabs was put on hold mid construction. During recovery, they completed it. Construction was idle for about 8 months except to get the roof on to protect it from the elements.
It is true that a FAB isn't usualy just mothballed, but tooling and process upgrades and new product introductions do adjust to the demand swings. Notice Intel is kinda quiet on the Strata Flash memory? Notice they are hot on wireless chipsets? Do you think this is because flash is a high demand, high price product? I don't think so. I do think wireless notebooks, PDA's and wireless web enabled phones are hot items. They are promoting WIFI hotspots and long battery life with wireless connections. Somehow I don't think the flash fab is making just flash chips waiting for the next memory market upturn.
I don't think it's a conspiracy to hold memory products off the market to drive up prices. I think it's making something else while the memory price is in the low-nil-loss profit range.
I expect wireless products to also go into some serious volume/price/demand bumps.
The truth shall set you free!
WTH does 1 dollar per DRAM Chip mean? They make it for one dollar? And is this reguardless of the memory density of the chip.
I'm assuming that they're speaking of the chips themselves and not the assembled DRAM Bank chips on PCB ready to be put into computers.
I don't know if its tough times, the recent bad business press, Microsoft, or what, but it seems like the entire business world is being run by the Mafia, only with less ostentatious taste in clothes and a little less violence.
It's all about fixing prices, monopolies, screwing your employees, cheating investors, lining your own pockets, lying and stealing.
Have I suddenly just woken up from a dream world where businesses worked to build better products because better products sold better and made for happier consumers?
Dell Computer Corp. chairman Michael Dell has publicly voiced his displeasure at excessive consolidation in the DRAM business, which has 40 percent fewer players now than in the mid-1990s. And Dell has voted with his checkbook: In early June Dell Computer and Taiwan's Nanya signed a five-year agreement that calls on Nanya to supply up to $3 billion worth of DRAM modules to Dell.
Yeah, we really need to worry about those mem prices , because they are killer when buying a computer or gadget. Wrong. Get the real monopolist as in Microsoft. Put sanctions on this company and tell OEM(manufacturers) to drop all OS tie-ins and make people buy their software off shelves. Then we will see how much people love microsoft.
The article does not make a compelling case that there has been any anti-competitive behavior by the DRAM companies. In a competitive market, prices of different suppliers will converge: this is to be expected and is not evidence that anything anti-competitive is occurring. Withholding goods for sale in the hopes that prices will go up is also fine. Hopefully, there's not a supplier in a market with monopoly power, and the DRAM market is competitive enough that there is no such supplier. Now, if the suppliers got together and came to an agreement to reduce supply, e.g. "I won't expand my factory if you don't" or "I will limit my sales if you do too" this would be anti-competitive, but it doesn't look to me like this is happening.
According to RAM Price Index, RAM prices have been generally dropping for the past five months.
Furthermoe, the Koreans also viciously attempt to prevent non-Koreans from buying Korean businesses. Please read "Micron/Hynix Deal Dead".
The irony about the xenophobic Korean duplicity is that we Westerners actually subsidize the Koreans to destroy our own industries. Back in 1997, the Korean government subsidizing Korean firms to destroy Western competitors nearly bankrupted the Korean treasury. The kindhearted but naive Americans actually supported the International Monetary Fund (IMF) to give $19 billion to the Korean government to tie it over until the end of the 1997 Asian financial crisis.
What we Westerners should have done was to refuse to give any financial aid to Korea. The Korean government would have then defaulted on its financial obligations. This default would have indirectly bankrupted many Korean companies. Then, companies like IBM, GM, Ford, Micron, etc. could have easily gone into Korea and forcibly bought companies like Samsung, Hyundai, Kia, etc.
Uhhhh I think you need to double-check your terms. DRAM is a larger, cheaper, but slower, alternative to SRAM. It's basically a FET and a capacitor as opposed to SRAM which takes a couple FETs. There are many variants of DRAM, such as SDRAM, RDRAM, etc used in PCs which as far as I know, mainly affect how they're clocked (I've only ever interfaced to vanilla DRAM myself).
Anyway, you're probably thinking of RDRAM (RIMMs). That said, faster memory == good, so long as the bus can keep up.
I think price-fixing in dram is not a major problem compared to other areas like CPUs, because there is a strong counterforce: extreme elasticity of demand.
Most people would find their computing experience degrade quite heftily by leaving this CPU out of their box, while using just 8 256 Mbit chips instead of 16 will often be hardly noticeable.
Remember when dram prices went through the roof some 4 years ago ? I went to my computer dealer, told I would need 256Mbyte ram with the new box, heard what he had to charge for it, and went home to take an 128Mbyte Dimm out of another box.
Remember all the machines selling with 1GHz Cpus and 64Mbyte of ram at the discounters during that time, that would swap like a VAX750 with a hundred users?
Remember all the utility programs that would reclaim unused Ram portions of some processes in the Mac when it didn't use a mpu ?
Therefore, I think that currently, price fixing is not a problem. If it raises prices in the short run, it may even be beneficial to the consumer, because it may keep some of the smaller vendors in the market and allow the industry to speed development of yet bigger and cheaper memories.
However, if it is used to kill off the competition, then we may come to a situation like that in the CPU market before AMD came back as a competitive player with the Athlon.
I think that historically, the Ram in a computer has always cost the same or even more than the CPU, and the disk-drive was much more expensive still. In the last years, this trend has changed, and I would think because the disk-drive and the DRAM-Market are much more competitive and commoditised as compared to the CPU market.
The problem is that DRAM manufacturers did collaborate from time to time to either hike up the price or pull the price to artificially low level.
I still remember the time when Hynix (of Korea) was in big trouble - not that it isn't in deep doo-doo right now - Samsung collaborated with Microns to pull the DRAM price to some ridiculously low level and they did so for one simple reason - they wanted Hynix to be D-E-A-D so they can get rid of one of their most competitive competitors.
Muchas Gracias, Señor Edward Snowden !