X-bit labs: With so many partners and customers, you certainly need quite a bit of a production volume to satisfy them all. Could you please tell us a little bit about Patriot’s production facilities? Where are they located? How big is the turnout?
Paul Jones: Well, a lot of people get wrapped up in “how many units you can phase out, what are your quantities, etc”. Being a manufacturer, you really look at it as a number of placements you are able to make. Some manufacturers claim that they can produce X amount of memory modules per day/week/month, and that may sound very impressive. When you find out the amount of placements that you need to make and the amount of test time you need to spend on this particular module, it is not so good, then maybe that number if is a little bit misleading. As a manufacturer, you always look at how many placements you can make, and that dictates how many units you can actually produce. In the United States, we can place 5,000,000 units a day. I would say that amount of placements in the industry is one of the larger ones out there. Now, memory module manufacturers tend to be privately held, and it can be really difficult to get real data. But I know it very well that 5,000,000 placements a day is our capability. In the Far East, our placements are roughly 50% of this number which is about 2,000,000 placements a day.
X-bit labs: And where are the production lines located?
Paul Jones: We have production lines here in Fremont, California (Sunny Fremont, generally sunny, but not really that sunny lately :)) and in Taipei, Taiwan.
X-bit labs: A lot of production facilities are being moved to China these days in search for lower production costs and better-value labor. Any intention to follow this trend and do the same thing with Patriot production lines?
Paul Jones: That is what was happening in 2000 to 2001 and that is where the Patriot brand came out. A lot of partners moved their production facilities to China. There are few reasons. One reason, you have already mentioned, is the cost, the labor cost, which is much cheaper in China than in the U.S. The other reason would be to infiltrate the local Chinese market, especially when you realize that it is a large market and there is a lot of desire to be in that market. Our Taiwan facility is focused on getting into the China market. The reason I have put so much time and effort and money into the U.S. market is because I think it is very important to have a U.S. manufacturer servicing the U.S. market. Generally speaking, the memory market is driven heavily by the supply chain. If you don’t get parts to your end-partner or end-customer, they will look elsewhere to find the product. If you don’t have the local manufacturing to service the market, it is difficult to service your customer. I think it is very-very important to have manufacturing in the United States. Now, let’s talk about cost. If you are looking at memory products that are labor intensive, sure, China makes sense. If you are doing any product that is labor intensive, then you should go to China. Our memory products are fairly automated. Not totally automated, but fairly. I will compete with China very well from a cost stand point when it comes to our modules. Because I am able to place so many products fairly automated. I am an old guy in the industry. All my machines are paid off and we are producing modules with a labor force that is not as cheap as China in the beginning, but because of the automation, it is as cheap as China in the end. If you take your labor person in the U.S. versus China but you look at the automation here in the United States versus the labor cost in China, and then you factor in shipping cost, and lead times, I would say that our costs are actually lower.