Local Source for DDR Memory

[dsr at tao.merseine.nu]

On Wed, Oct 27, 2004 at 08:42:56AM -0400, trlists at clayst.com wrote:
> On 27 Oct 2004 dsr at tao.merseine.nu wrote:
> 
> That all makes sense and I probably would have said some of the same 
> things if I had had to answer the question for others.  But I think 
> it's curious that memory is this way and nothing else, as far as I know 
> -- perhaps with the exception of say lettuce :-).   Maybe it is because 
> when buying memory we are "close" in manufacturing steps to the bare 
> chips whereas other stuff is farther away.
> 
> Why do memory prices fluctuate daily whereas others do not?  Or is it 
> that others do but other assemblies are more complex and manufacturers 
> absorb the variations?

Here are the defining characteristics of RAM:
- it is a good that can be defined and ordered in a specific
  grade that many people want to buy.
- it is also a finished good; people want it in exactly the form
  that it is sold on a wholesale level.
- there are a reasonable number of manufacturers, such that no
  small group can form a monopoly or controlling consortium.
- the costs of entry for manufacturers are high -- you can't
  decide to plant DDR3200 this year instead of lettuce.
- profits are low, so competition is fierce.
- efficiency is variable. A batch of contaminated silicon will
  destroy a whole cycle of production; a new X-ray lithograph
  will boost capacity.
- There is an exceedingly short lead time from production to
  delivery. The "season" of a field of wheat is 4-6 months; the
  "season" for RAM may be as little as 4-6 days.
- There is almost no wastage. Supply and demand are very closely
  balanced.

You can predict and easily hedge your investments in steel,
aluminum, silver; at 13 cents apiece, you can stockpile PCI
connectors until someone buys them; if your usual source doesn't
have 400 watt ATX power supplies, the guy next door has them.
Run out of Western Digital 200GB EIDE drives? Substitute
Seagates. People who demand the WD brand are also willing to
wait. But just try selling a PC without RAM.

Now, when you're at the scale of Dell, you can afford to keep
more in inventory. You have a good idea -- plus or minus 10
percent -- of what you expect to sell in the next quarter. But
you'll notice that they sell RAM at a price closer to OfficeMax
than to Crucial -- that inventory means that they need the
margin.

-dsr-