Steep price rise of memories shakes the market

Gunjan Gupta

NEW DELHI: RAM prices worldwide have been mounting consecutively for the past three months now. The shuffle that started in November when prices once touched as low as Rs 450 and were mainly switching between Rs 450 to Rs 550 for local brands, since then has witnessed about 300 percent growth.

Currently, the price of 128 MB RAM by high-end brand Transcend is about Rs 3,300-3400. Same from Simtronics and alike is available between Rs 1,700-1,900. The ones that come through grey channel are also not very cheap, primarily switching between Rs 1,400-1,500.

Interestingly, though the prices are now stable abroad they have been going down since past two weeks in India. And this is in line with the trend because dealers here had excess stocks which they bought much before prices started rising. And now all are selling it at a cool discount of 10 to 20 percent, which is much lower than the worldwide prices.

RAM prices were actually around this last to last quarter but then fierce competition forced all the major manufacturers worldwide to constantly decrease their prices in order to sell more. In international terms, the prices actually came down to as low as $10 within a span of one year, from the market price of $150. The manufacturing cost for the RAM is estimated to be around $20-25.

Market sources are also cautious about future as a tie up between Hynix Semiconductor Inc and Micron Technology Inc is rolling in the air. If that happens, prices can go up to any extent. Also, a shortage may also occur because then the control of prices would be in the hands of the manufacturers.

Observed Sachin Jindal, Director, Bhartiya Electronics, "If prices are that high, the demand might come down and thus in effect the prices would be forced to reduce. But if the tie up goes positive, all that might happen is keeping everybody anxious--extraordinarily high prices, shortage, whatever. But then there is also a possibility that prices may become stable. Since the present news is quite sure of the coupling, it also may give a tough time to Samsung. But things are still not very clear."

This, of course, has had an adverse effect on the market in the sense that the cost for assemblers has gone up by Rs 500-800 when they work on almost the same margin. As Shyam Modi, Director, Modi Peripherals, explained, "This is actually a bad news for people who had old orders in hand. They have to suffer a huge loss as compared to the margins we work on presently. But it is good for the new orders that would come in now, for the same reason."

Added Anil Sachdeva, CEO, Kadam Marketing, "Sales have surely gone down because of the frequent fluctuation in prices and this is not a good news for the market when the year closing is due. Again, if the tie up happens, there are two possibilities. Either the price becomes stable, which would at least be better than the fluctuation. But if it increases further, then the market would be up in arms."

Various reports on the Net say that the shuffle started when lot of local companies came in the market with their own brand of DRAMs and SDRAMs. The established players then took it upon themselves to eliminate these small and sub-standard players from the market. They all agreed mutually to reduce the prices till the extent where these small ones cannot bear. Also because they were established, they could afford to bear losses.

(Hynix has since broken off merger talks with Micron and is reported to be in discussion with Korean chipmaker Infineon.)