Over the past two months memory prices have tumbled to an all-time low. Why are prices so low? What’s your short-term outlook?
It is incorrect to say that this is the lowest the market has ever been. In absolute dollar per gigabyte of memory, this has been the lowest. However, in the past, the memory market has seen lows where all manufacturers were selling below production cost. Today, we have reason to believe that despite such low prices at least the market leader Samsung is making money. We are also told that most of the other leading memory makers are losing money.
The reason for the low prices is because supply surpasses demand. PC OEMs have been conservative, the forecasts are not good for the next two quarters, hence there are reasons to assume that prices will remain low.
If you look at the way memory prices have fallen over the past decade or two, you would note that whenever a new memory chip has been introduced it has taken 2-3 years for prices to fall below production cost. It’s therefore alarming that the 2GB (8x256MB) memory module, which was introduced just a year back, is already below production cost for some manufacturers.
HP recently announced its decision to spin off its PC division or find a buyer for it. How do you think this will impact the PC OEM industry?
There have been rumors for long about a possible spin-off or sale, yet the timing of the announcement and the manner in which they announced it were perhaps not apt. When a market leader makes a public statement that it wants to exit from that industry it is certainly not good news for anyone in that industry. It does not inspire anyone associated with the business.
As a memory module manufacturer which thrives primarily on the white-box system builder market, does it worry you that this market is shrinking?
We are not seeing any fall in numbers in the system builder market. I agree that the notebook market is growing, and that the overall desktop market is not growing in absolute numbers. Nevertheless, the white-box market continues to be large in India and in most markets we operate in, and we expect no drastic changes in the next few quarters.
What’s the size of the Indian memory module market? How has Strontium positioned itself here?
It would definitely be in excess of 800,000 modules every month. We are presently selling 175,000-200,000 units every month. In a short period we have become one of the top three in the market along with Kingston and Transcend. We have two brands—Strontium, that is priced at a slight premium, and EVM, which is our value brand. Strontium accounts for 25 percent of our sales, while EVM would account for the rest. Presently we have two national distributors in Redington and Fortune Marketing, and three regional distributors in KVC Computech in Delhi, Sree Computer Sales in Kolkata, and Hundia Infosolutions in Mumbai. We would address the market in south India this quarter.
Most memory module manufacturers, including Strontium, have entered the business of manufacturing SSD drives. Where do you see the SSD market going?
There is little doubt that SSD is the future because SSD is a far [more] reliable technology. At present the cost is a little above $2 for a GB on the retail market, while normal hard drives average at a dollar for 10GB. But SSD prices are dropping, and I would say that the real tipping point would come once the price is about a dollar for 2GB, which may happen in a year or two. Once SSD is able to break that price barrier you would see a huge spike in volumes. Still, I do not see the HDD getting killed because new reliable hybrid technologies are emerging there.
The global economy seems to be slipping into another slowdown. Are you concerned?
Most Taiwanese and Chinese manufacturers have indicated slow growth or negative growth when their Q2 results were announced. The situation is very curious; on one hand there seems to be a slowdown, but inflation rates are high which is not the case when there’s a recession. The slowdown in 2008 and 2009 was more or less neutralized by government spending to boost economies. We cannot really bet on that in the next few years.
