Nevertheless, this is a very good start from the strategic and marketing point of view: it’s best to get to know the product first, establish slightly different company image, and of course earn a little. Especially, since the memory module manufacturers do not feel very comfortable in the current market situation. For example, Kingston is rumored to have undertaken a pretty unusual move in the end of the month. It looks like the company resorted to actual price dumping having dropped the prices for their memory modules down to the level of the Taiwanese manufacturers, such as A-Data, for instance.
In fact, this is a pretty logical move, since the situation in the memory market kept aggravating pretty rapidly (here I take into account the memory chips market in the first place). The first week passed relatively calm as the market was returning back to senses after Hynix’ dumping experience in February. The prices for 256Mbit DDR400 chips have even grown up a little bit: from $2.85 to $2.9. However, this could hardly affect the general situation. The chip manufacturers hoped to get normal level of demand in the beginning of winter, but their hopes never came true, so they ended up with overloaded warehouses. The customers didn’t hurry to shop for memory chips in March also: who would do it in the traditionally “dead’ season of the year, especially, since the prices keep falling. So, it doesn’t make much sense to buy memory chips now, because this will be an unprofitable purchase (the chip vendors have even started offering “price protection” feature, but it will hardly help).
So, the next week the prices for the same memory chips dropped down to $2.72, and on the third week of March – down to $2.5. And only on the fourth week, when we were celebrating Easter, the memory chip customers made up their mind to buy some. This slowed down slightly the price crash, so that the price dropped from $2.5 to $2.43 only. Keeping in mind that the production cost of a 256Mbit DDR400 chip is about $2.7-$2.8 on average, it becomes evident that many companies are selling at a sacrifice right now.
This is a pretty abnormal situation, I should say. It is not common practice to show losses in this market, at least for a long time. And all in all, it starts to remind me of the spring 1999, when all customers were happy about dramatically low prices (the manufacturers were also suffering losses), then the manufacturers had to start closing their production facilities, and then the fall brought the strongest crisis, when the chip prices sky-rocketed by tens of percents per day. I wouldn’t forecast anything this time, but I would like to stress that the situation is far from normal anyway and should be resolved somehow.
The whole thing becomes even more intriguing due to two opposite factors. On the one hand, the testing facilities offering their services to the memory chip makers will probably have to drop their prices in the near future, supposedly by 5-10%. Although, keeping in mind the shortage of quality services like that, the memory chip makers will have hard time trying to negotiate the price… On the other hand, the price of PBGA wafers used for memory chip manufacturing is expected to start growing at about the same rate or even a little higher in summer.