For providers like Shikatronics Inc. and Mobel Electronics Inc., selling memory is like surfing. Ride the market through its fluctuations and you’ll come out on top; fight it and you’re sunk.
When Montreal-based Shikatronics started in 1989, the waves were smaller and there were fewer surfers
out there. “”I guess back then the industry was still quite young,”” says Shikatronics president Alnoor Sherrif. “”It was five or six years’ old. It was still in the infancy stage and there were not that many players in the industry. Anybody who could get in was guaranteed growth. We started at the right time.””
The company started out selling 1MB SIMMs before the word Pentium became synonymous with computing. “”It was hard to get product because I guess all the fabs were just ramping up and getting used to the new market,”” he says. “”It was very exciting, I would say, especially when you’re building a company.””
The market is infinitely more complex today because the types and speeds of memory available are numerous. Three years ago, the top seller at Shikatronics was SDRAM and the firm was just getting into the Rambus market. SDRAM has since given way to DDR, according to Sherrif, and Rambus is barely on the horizon anymore.
Mobel’s Canadian retail product manager, Jean-Michel Beauregard, agrees. “”The demand for Rambus was never as big as I think it was expected to be,”” he says. “”The market went to DDR as an alternate solution pretty early on. Sales of Rambus right now are down terribly, but then again, DDR has tripled. I think the market has adjusted.””
Pointe-Claire, Que.-based Mobel was established in 1983. The firm is best known for its Azen line of memory products, including SIMM, DIMM and DDR modules. Beauregard has been in the business for about six years. In that time, the market has become “”bigger, better, faster,”” he says. “”I think the industry as a whole has got a little bit more intelligent with the technologies that exist and maybe a little bit more up to speed with what works with what. It’s not as big a mystery as it used to be.””
The vendors need to be smarter because the customers have matured with the market, he adds. “”They know what they need, they know what works. . . . If you’re looking five, six, seven years ago, there were two or three types of memory. It was big margin at the time, because most people didn’t understand what worked in their systems.””
Now the market is flooded with memory and RAM is a cheap commodity. To the casual observer, it may seem like a no-win business. Most users can upgrade their memory with the money they find in their couch cushions, but the way to ride that wave is just make more of it.
“”The volume always increases,”” says Sherrif. “”We’re lucky in that people still want more RAM. It seems like it’s almost drugs.
“”In 1992, I was selling 1MB SIMM for say $30. Today, I am selling 128MB DIMM for $30. The margins are the same but the capacity I’m shipping is 128 times more.””
It’s a trend that’s relatively stable in the memory business, says Beauregard. A few years ago, 128MB of RAM was standard for the PC market. Now it’s 256MB. “”As the prices halve, the capacities double, so you’re pretty much always around the same sell point. Every time the market tries to go down, something else comes up and takes its place.””
There are outside forces at work to upset that balance, such as grey market distributors, says Beauregard, or short-lived companies that flood the market with product to make a quick buck, says Sherrif.
Fighting the trends or second-guessing the market by holding on to product just doesn’t work for companies that are in it for the long haul, says Beauregard. “”Sometimes you make a little more, sometimes a little less, but we stay pretty much on average. A good, steady flow of product is the key to our success always. If you try to hold on too long, you end up getting burnt. It moves too quickly.””
There’s also a general malaise that has affected the IT industry at large. PC upgrade cycles, for example, have slowed down from three years to four or five years. Shikatronics has tried to combat that trend by branching out into memory for personal digital assistants and routers.
Beauregard says the refurbished PC market is helping counter the slowdown. It may not be a boon to the OEMs that are putting out new product, but memory firms can benefit by adding RAM to old PC chassis.
Partnerships with other providers also help to weather industry ups and downs, he adds. Two years ago, Mobel formed an alliance with American memory powerhouse Kingston Technology to distribute its product into the Canadian retail channel. Another deal is in the works with Austin, Tex.-based Avant Technology.
The key to longevity is the same for the memory market as it is for almost any business, says Sherrif. “”You have to stay focused on your business and make sure you’re listening to your customers.
“”And, of course, stay profitable.””
