The Ultimate Memory Guide
The Memory Market
[Back to the beginning...]
The memory markets
While the majority of this guide talks about how memory functions, this
section is dedicated to describing aspects of the memory business.
DRAM manufacturers
As mentioned, the most important components of a memory module are its memory
chips. The quality of the DRAM chips used determines the overall reliability
of the module.
The large manufacturing plants required to build DRAM chips cost a great deal
of money -- about $1.5 billion for a typical 16-Mbit DRAM plant -- and can
take up to two years to build. Making the decision to build a DRAM manufacturing
facility requires careful consideration. To justify such a decision, a company
must be able to predict the demand for the product two years in advance and
sell the DRAM for a sufficient period of time and at a high enough price to
cover the investment and make a profit.
Add to this the factor of evolving technologies: computer technology advances
at such a rapid pace that by the time a company has built a plant to produce
a particular DRAM chip, the technology and the demand for that chip may be
outdated. Also, if there's a surplus of chips on the market and prices decline,
a company may not be able to cover the cost of building the manufacturing
facility -- let alone make a profit.
Because of the heavy investment and risk involved in manufacturing DRAM chips,
DRAM manufacturers tend to be large, established companies. Many of these
companies are government-subsidized or rely on partnerships with other large
companies (such as Hitachi, Micron, Samsung, Intel, and so on) to generate
the required capital.
[ Table of Contents ]
How memory is sold
Once the manufacturing facilities are built, DRAM manufacturers must make and
sell extremely large quantities of chips in order for the investment to pay
off. Eighty percent of DRAM production is sold to companies that buy in
quantities of 5,000 to 120,000 units based on long-term contracts. The
duration of the contracts can range from three months to one year, during
which time the quantity purchased and the price are guaranteed. This system
protects the chip manufacturers from fluctuations in the DRAM market and
ensures steady profits. DRAM manufacturers tend to limit their contract-based
DRAM sales to well-established companies with whom they have developed
long-term relationships. Companies sell the remaining 20 percent of their
chips -- those not tied to contracts -- to smaller companies through a
distribution channel. Again, this is to protect the DRAM manufacturers from
fluctuations in pricing and to ensure economies of scale.
[ Table of Contents ]
The broker market
In many cases, a company that buys chips on contract ends up with more than
it needs. When this occurs, the company sells the excess inventory to memory
brokers who buy and sell memory the same way a stock broker buys and sells
stock. Brokers typically have sales channels in numerous countries, will buy
from whoever gives them the lowest price, and sell to whoever pays the highest
price. Because the memory market fluctuates daily, memory components may pass
through the hands of several brokers before they end up in a computer.
[ Table of Contents ]
The gray market
The gray market is similar to the broker market; in fact, the terms are often
used interchangeably. The primary distinguishing attribute of the gray market
is that the seller is not authorized by the original manufacturer. For example,
if you buy Kingston memory from someone who is not an authorized Kingston
reseller, you are buying on the gray market. In such a case, you can be sure
the memory has changed hands at least once since it was sold by the last
authorized member of the distribution channel.
[ Table of Contents ]
What drives demand for memory
As you can see, the memory market is governed by classic supply-and-demand
economics. The factors that create demand for memory include:
The development of high-performance software applications
Increased need for memory in a variety of consumer products such as video games, automobiles, and cellular phones
Increased capabilities in film, multimedia, and video conferencing software packages
An increase in both the number of personal computers sold and their standard memory configurations
- In 1994, PC shipments in the United States grew 21 percent to 18.2
million systems; forecasts for 1995 predict sales in excess of 21 million
systems
- Previously, standard configurations ranged from 1 to 4 megabytes of
memory; currently, most new systems come standard with 8 megabytes and
require upgrading to 16MB to utilize new software applications
The migration to Microsoft©, Windows© 95 and NT
- Studies at the time of release show that Windows 95 will require at least
16 megabytes of memory to utilize the full functionality of the system
- Microsoft estimates that 60 percent of all new systems will ship with
Windows 95 installed
- In the corporate sector, migration from other operating systems to Windows
95 will follow the product's announcement by six to nine months
As mentioned in the beginning of this guide, developers of software applications
and operating systems will continue to drive the need for memory. Ultimately,
developers themselves are driven by the needs and expectations of the market.
As computer technologies evolve rapidly, people's expectations of what computers
can do continue to escalate dramatically. Developers must respond to these
changing needs and expectations with additional features and functionality in
their software applications and operating systems. So far, enhanced features
and functionality in software have always required additional memory. All
indications suggest that this trend will continue.
[ Table of Contents ]
Choosing high-quality memory
When the demand for DRAM is higher than the available supply (as has often
been the case), some companies cannot secure enough allocation to fill all of
their memory requirements. This causes people to turn to the gray market or
broker market for additional memory. Because there is no way of knowing how
many times memory purchased from these markets has changed hands, it's
difficult to ascertain its quality and reliability.
Here are two suggestions on evaluating memory at the time of purchase:
- Inspect the chips on the module to see if they come from one of the major
manufacturers. The following table indicates some of the major DRAM manufacturers
along with samples of the part numbers and markings they use to date their
memory components.
- Inspect the date codes imprinted on the memory module's DRAM chips. Most
manufacturers have a way of marking their chips with the manufacturing date.
For example, a Toshiba DRAM chip manufactured in the 9th week of 1994 has a
date code of 9426. Chips that are more than two years old have probably
changed hands several times before getting to you.
[ Table of Contents ]
DRAM manufacturers and sample part numbers
[ Table of Contents ]
| Product Information |
Technical Support |
| About Kingston |
Distributor & Reseller Links |
Main Menu |

Copyright © 1996 Kingston Technology Corporation. All Rights Reserved.

