Total recall: thanks for the memory
System memory is becoming big business with PC technology increasingly being used in ever more innovative ways. Products will come and go, but Dave Stott explains why the demand for memory will continue to flourish.
Second only to the processor itself, memory is the most importanting component of any PC system. Memory is used in a variety of products from graphics and sound cards to peripherals such as laser printers. In addition, many other electronic digital devices such as cameras, PDAs, palmtop and laptop PCs, and cellular telephones, rely heavily on the use of different types of memory to provide temporary and permanent storage. So it should come as no surprise to find that the potential for memory products is enormous.
But the market for memory is extremely variable, mainly due to the fact that the technology appears to be constantly changing with recent products appearing all the time.
While the market continues to grow, there are regular, if unpredictable, peaks and troughs that affect both supply and demand, according to Alan Stanley, general manager of distributor Dane-Elec. "All predictions show that the market is constantly growing, but sometimes less than others.
Historically, there's always a year-on-year revenue growth. But this year has been below expectations. The first six months have been the toughest yet and, as a result, many of our competitors have closed down or stopped selling memory altogether.
"As for the resellers, memory sales are linked to PC sales, and so far this year, they have been dire. Now demand is on the up, with the industry slowly digging its way out of one of the biggest troughs in many years.
Manufacturers have been over-producing certain types of memory, such as SDRam for the first quarter of the year, for a market that has not expanded to prediction. Most manufacturers have realised this and have cut back production. They are now able to sell at a profit, something that has not happened since January," he adds.
This view is echoed by Jackie Barrera, workstation and server business manager of Kingston Technology. "The market is in transition, due to changes in product mix and capacity crossover. Recent technologies are phasing out the old. There is much speculation and controversy over the impending introduction of technologies such as Rambus, PC 133, and the Double Data Rate-Synchronous DRam (DDR-SDRam), but the vendors are still making money.
"This year it's taken three times the volume to get the same revenue we were able to the year before. This is because the average selling price has dropped due to factors such as producing larger memory chips that reduce overall component costs.
"Fortunately, the amount of base memory built into PC systems continues to grow. Where 32Mb was the norm, we're now seeing the majority of recent PCs sold with a minimum of 64Mb or 128Mb. Similarly, memory upgrades are becoming increasingly popular. As a result, the first thing people do is add more memory which is naturally good for business," she adds.
As with hard disk storage, it seems that the typical PC user has a voracious appetite for memory. The more they have, the more they want. Without doubt the two most significant trends that have driven demand for memory are operating system upgrades and application software bloat.
The release of Windows 95 and its successor Windows 98 had a significant effect on the demand for memory. Alan Case, UK sales manager of Hypertec, highlights the launch of Windows 95 as a golden opportunity for memory suppliers. "As recently as three years ago, many companies barely considered upgrading to a 16Mb or 32Mb platform to cope with the increased demands of operating systems and application software.
"Along came Windows 95 and the demand for more memory really took off. Now, the average minimum desktop platform is 128Mb. At the moment, this seems to be perfectly adequate for most users, but I expect the imminent launch of Windows 2000 to refuel the demand," he says.
"Additional demands are being made on PC memory resources with the introduction of each generation of application software. The impending doom of the year 2000 issue, added to demand, has been the biggest driving force in corporate memory spend in the past 12 months."
Case adds: "Since mid-1998, there has been a terrific increase in the amount of memory upgrade business compared with recent desktop supply."
Not only is base memory in PC systems on the increase, but other key elements, such as graphics adapters and sound cards, are being introduced with higher memory fitted as standard. Five years ago, the typical graphics adapter might have had 1Mb of memory, with the option of adding a further 1Mb using upgrade chips.
But now the increased demand for higher display resolution and greater colour depth means that most graphics adapters arrive with a minimum of 8Mb of Ram, with the option of doubling this if required. But even 16Mb is not necessarily enough for really high-end video, and after ATI introduced the first 32Mb graphics adapter, other manufacturers were quick to follow. As a result, 32Mb graphics adapters are now fairly common and will probably become the norm in the near future.
The same sort of thing, albeit to a slightly lesser extent, has been happening with sound cards. The demand for higher quality sound for multimedia applications has meant that companies such as Creative Labs and Turtle Beach have added more memory to their products. Add to this the growing popularity of using PCs to play music and it is easy to see why demand for additional memory on sound cards is booming.
Apart from fluctuations in overall demand, the main influence on memory prices are the relatively short cycles of products that feed off them, caused by the constant development of technologies.
As with most hi-tech products, prices tend to start off rather high when products are first introduced to the market by the vendors. This is mainly due to the research and development costs associated with the latest technology.
Manufacturers also often need to introduce recent production facilities for each generation of memory product. Gradually, as the volume of production begins to meet demand, prices begin to fall. Once a product enters mass manufacturing, its price will be governed by market demand, meaning that competition will drive prices further down.
Eventually, as a product reaches the end of its life, prices will rise because manufacturers will have decreased output to concentrate on the next generation of memory products. As a result, it's quite common for older technology to cost more than some recent memory products. This often confuses the customer, who simply can't understand why, for example, 16Mb of EDO Ram should cost more than 32Mb of SDRam.
Supply and demand is the key factor with both recent and old technologies driving the market. So long as people still need computers, the memory market will cater for whatever type of products are required. The difficulty that manufacturers face is in balancing their output to meet the market demands for different products at any one time. This is why memory prices appear to be in a constant state of flux.
So is memory simply a commodity or can it be used to add value? Case believes it can be both. "The average reseller account manager views the memory market as a commodity sale. But this sale is also viewed by the reseller as one of the few opportunities to make margin on a deal," he says.
"As memory prices have fallen over the years, so has the cost of the standard desktop. Often, margins are fixed or at least extremely thin. Introducing third party options into the sale is one way to increase the overall margin," Case adds.
Stanley agrees. "Stack it high and sell it cheap. PC builders do not care about the quality of the products they are using - they will buy any old equipment as long as it's cheap," he claims.
"As this accounts for about 70 per cent of volume memory sales, it could be called a commodity. If a distributor is stocking and not back-to-backing memory, there is normally a better quality product, as well as backup for returns. In such case, memory isn't quite a commodity product."
While some dealers will treat memory as no more than a commodity, Paul Sangster, sales and marketing director of Hammer Distribution, believes this should be discouraged as much as possible. "As with all commodity products, the number of units sold grows while revenue and profit declines.
Similarly, broadline distributors devalue the market and sell everything the same. They are not focused and can't provide resellers with market information and the support they need."
Sangster adds: "Resellers have to make a decision as to why they are selling memory, especially if there is no added value. Resellers must be versatile and can't sell on price alone, as this only worsens decreasing margins."
It is possible to add value to memory sales, but it requires considerable effort to achieve. Stanley states that there are fundamental principles that need to be followed.
"First of all, dealers need to supply the correct products first time and ensure that they work - and that's not as easy as it sounds. Second, they must offer after sales support and honour all warranties.
"Real value add comes when supplying proprietary upgrades for OEM branded computers. It's an extremely specialised area that involves a lot of knowledge by the distributor to supply the correct products and present them as a viable alternative to the OEM memory upgrade," he says.
According to Case, value is also added by consistency of supply. "Many of the leading OEMs still fail to offer acceptable lead times to resellers that are traditionally measured on their level of service.
"As a UK-based manufacturer, we benefit from good stock control and efficient stock profiling with our reseller accounts, resulting in acceptable lead times," he claims.
One thing is certain - that memory technology does not stand still. As processor speeds continue to increase, memory has had to be developed to keep up and prevent performance bottlenecks. Just as Fast Page Mode Ram was replaced by EDO Ram, and that in turn was superseded by SDRam, faster products are on the horizon.
Older technologies are constantly being phased out and there is great speculation and controversy concerning competing products such as Rambus, PC 133 and DDR, which is causing manufacturers to wonder where to focus and build up production.
The big buzz in the industry is Rambus, which potentially offers the most improvements in speed, moving peak bandwidth from SD Ram's 125Mbps to an astounding 1.6Gbps. The architecture of Rambus is based on the electrical requirements of the Direct Rambus channel, a very high-speed bus operating at a clock rate of 400MHz - meaning that Rambus is not backwards compatible with existing system architectures, and fresh motherboards will have to be designed to cater for it.
Rambus is also much harder to manufacture than the SDRam at present and, consequently, it will be much more expensive. The introduction of Rambus to the channel will initially force prices up, with the emphasis mainly on constraint of supply. Because of its complex nature, only a few vendors are likely to be involved in Rambus, and it's predicted that many third-party memory companies will take a back seat until it becomes firmly established in the market.
While offering a degree of speed improvement, both the PC 133 and DDR-SDRam are likely to struggle against Rambus. They are cheaper to build, but it's performance that counts and customers may be prepared to pay a premium for the ultimate in speed.
As long as the overall PC market continues to expand, then the market for memory products will follow suit. Even if the volume of PC sales begins to slump, the software bloat will undoubtedly continue to maintain the demand for memory upgrades and provide market growth for some time to come.
Fortunately, memory is not confined to just PCs. Mainstream consumer products, such as mobile phones, digital cameras and DVD players, will also fuel the demand for more memory.
TOOLS TO IMPROVE YOUR MEMORY
Upgrading PC systems is seen as one of the best opportunities for supplying memory products. But it's also one of the biggest challenges facing dealers as there are so many options. With varying formats such as Simms, Sips, Dimms, 72 pin, 168 pin - not to mention different speeds such 60ns and 80ns - it's very easy to get confused when dealing with memory products.
So when a customer decides to upgrade the memory in 50 or 100 PCs, possibly from different manufacturers, how to go about matching the existing memory configurations in the PCs, and ensure compatibility with the products to be supplied is a bit of a problem. Fortunately, the leading manufacturers have several tools which can help to ensure that the correct components are supplied.
Kingston Technology has a web-based online configurator and as long as the manufacturer and model name of a PC is known, the configurator can identify compatible memory products. For offline use, there is the Kingston Electronic Product Library Easy Reference (Kepler) CD-Rom which details more than 6,000 products.
Hypertec offers similar tools with its web or paper-based memory configurator guide which lists an enormous range of machines, OEM and Hypertec compatible part codes. It also has graphical diagrams showing possible legal permutations of size of memory and the minimum multiples that can be fitted at a time.
For customers with less resources and time, the company has developed the managed audit and managed install services. Managed audit identifies the customer's machine type, denominations and form factors in memory used in reaching its existing configuration. It then selects the most effective permutations of upgrade for a PC.
The managed install tool may then be used to install the memory in the shortest and most effective manner. To minimise any disruption and to save time, this can be done out of hours and the company's managed install team may, subject to site survey, upgrade the install base of machines to the target capacity on the fly, and then invoice the reseller or customer for the memory used.