Micron last week signed long-term agreements with both Gateway and Compaq as PC vendors begin to try to guarantee memory supplies and allay reseller concerns.
The five-year, $20 billion deal with Compaq, which makes Micron the company's single largest memory supplier, was followed two days later by a five-year deal with Gateway to provide a "near majority" of its memory requirements. Micron did not disclose the terms of its deal with Gateway.
Although Gateway's deal with Micron lasts five years, the company's main concern was to meet increasing memory requirements in the run-up to Christmas without reducing memory configurations. Compaq was also anxious to meet demand for memory.
The announcements come at a time when concern about memory shortages are at a high following production cutbacks and the disruption caused by the Taiwan earthquake. Memory costs are high, as is demand for PCs in the holiday season, but consumers are not willing to pay more for their computers.
Analysts believe that both Compaq and Gateway will receive a guaranteed supply of chips in return for giving Micron a minimum order size and price.
The agreement enables the two companies to jump the queue for DRam, which may anger Micron's other customers.
Sukh Rayat, managing director of Flashpoint, said: "While this is a good move from Micron's, Compaq's and Gateway's points of view, it's going to put everyone else at the back of the queue. The allocation period for Micron products is already 12 weeks and this deal could lengthen the delay for other customers. The distribution market is suffering already."
Others believe the deal will be difficult to implement before the end of the year.
One source from a rival supplier said: "Compaq is a very demanding company. It will take time for the two to get all the bills approved and for Micron to get the lines set up."
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