The memory market is facing a dramatic turn of events. By simply looking online you can see that pricing is at an all time low point. Great for consumers, but what about the companies who make a living from the sales?
An enthusiast user can now buy quality, ‘value’ branded 4GB memory kits from makers such as Corsair, for as little as £19.90 inc vat. It is hard to believe that Corsair can make any money from this, and we can only imagine the cost to a huge system manufacturer such as Dell, who often buy memory in hundreds of thousands of units, at a time.
The cut price deals aren’t just limited to the value brands however, because if we move up the range a little, Corsair are able to sell their Vengeance blue 8GB kit, with oversized heatspreaders for £40.79 inc vat.
Still too much? Well then, a 4GB kit of Crucial Ballistix Elite 4GB @ 1600mhz can be bought for £35.99 inc vat. Moving down even more in price we can see that the excellent G.Skill RipJawsX 4GB 1600mhz kit is only £29.99 inc vat – an undisputed bargain for a enthusiast user building a new system.
But if this is still too rich for your blood, then fear not, because Kingston are selling their HyperX Genesis 4GB 1600mhz kit (with lovely grey heatsinks) for a staggering £17.99 inc vat.
The prices really are crazy, and we wonder how a company can make a tangible profit from selling memory in 2011. OCZ Technologies must have had a handle on the market some time ago, as they decided to opt out completely, focusing instead on the growing Solid State drives market.
They issued an official statement on the subject a short while ago which read:
“…In August 2010, the Company announced a strategic optimization of its memory products whereby it discontinued certain unprofitable commodity memory module products with the intent to continue only with certain high-performance memory products. However, since that time, there has been well-chronicled, continued weakness in the global DRAM markets.
Having balanced this DRAM market weakness against the capital needs of the Company’s growing SSD products, the board has determined that it is in the best interests of the stockholders to accelerate plans to discontinue its remaining DRAM module products by the end of its current fiscal year of February 28, 2011. Accordingly, our DRAM products are now expected to have minimal, if any, sales in the next fiscal year and beyond.
Reporting on a GAAP basis, which includes certain items related to the accelerated discontinuation of the Company’s DRAM products, the acquisition of certain intellectual property, changes in warrant derivative valuation, and other non cash charges, GAAP net loss for Q3’11 was $8.3 million, or $0.29 loss per diluted share. This compares to GAAP net loss of $1.0 million, or $0.05 loss per share in Q3’10….”
Is the market really as dire as it looks? We spoke to Bernd Dombrowsky, the Inside Sales Director for EMEA at Kingston.
We asked him if the DDR memory market was as tough as it looked. He said “This might be the toughest time for some market players since the last tough time. What we are seeing is an environment which only the strongest participants with the most resilient business models can survive. It is not sufficient to look at revenue and shipping volume announcements but ask: Do they make money or are they loosing it by the bucket loads? The memory industry inherent challenges are meeting wider IT-industry challenges (like HDD shortages) and the overall economic crisis. This perfect storm will drown some out of the market.”
Clearly there is some hope then, but how are Kingston dealing with falling product prices and a shrinking market?
He was quick to respond “There is always opportunity to grow business. Whether the economy is bad or not. One has to take stock of how one is competing, what efficiencies can be made? How can we improve what we are doing and what to focus on? At Kingston, we ask ourselves these questions all the time. By improving our purchasing, and improving relationships and process for partners, we can improve sales and continue to grow business by taking market share from competitors.”
We thought back to OCZ leaving the memory market to focus on Solid State Drives and asked the question – How important with the transition to SSD be for Kingston’s memory manufacturing operations?
He pondered the question for a few moments and said “SSD contributes a small but rapidly growing share to our multibillion dollar memory business. We believe that 2012 will see SSD become more prevalent; consumers are now recognising that the SSD offers great value as an upgrade to an existing PC. The selling points that have been there all along – higher speed, lower power consumption, durability remain the same, but in Q4 2011 the HDD-shortage has created an opportunity for the channel to tap into market segments which so far have been sitting on the fence due to the cost per GB.
We will see a tipping point for the SSD in 2012 as the gap in price per GB reduces. For SSD manufacturers, the volume will certainly go up. More for some than for others. However, as per our comments on the DRAM industry, high revenues do not mean profitable companies. It is important to look behind the headline figures: What does it mean for the long term future of a manufacturer if their revenue and shipping volumes are up but they are losing money. At Kingston we focus on hitting the right balance, good business practice has mean that Kingston have survived for more than 23 years .”
Kingston clearly have a business model in place to deal with the tough economic climate, and the ever declining price of memory, but what about the other players in the industry with less reserve money in their coffers, will 2012 be the year that several of them may be forced to bow out?
Kitguru says: The memory market is one of the toughest in the industry with fierce competition and low profit margins. Only the toughest will survive.