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Component shortages shouldn't hurt

Sun, others say DRAM, monitor, disk supplies OK

By Mark Cappell

July  1995
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On June 27, a fire on a Penang Island, Malaysia bridge knocked out power to 203 factories, including several large semiconductor fabricators. Full power was not expected to return for 20 days, causing the affected plants to take turns operating three days at a time.

This was bad news not only for the factory owners and their workers, but to the chip buyers at computer companies around the world. Although it has not yet resulted in higher prices for consumers, there are some shortages of crucial computer components, including DRAM, monitors, hard disks, and notebook batteries.

The impact of the shortages depends on the status of the global PC boom at the end of the year, analysts said. Second-tier vendors may shoulder the worst of the situation, as component makers favor their largest customers, said Katsushi Shiga, PC analyst at Dataquest Japan K.K.

"What's limiting the amount of PCs that can be sold right now is getting the components to go in them. We're out there scrambling like everybody else," said Chet Pribonic, vice president of mobile products at AST Research Inc., which manufactures its notebooks in Taiwan.

Of particular concern for vendors are the dynamic RAM chips used for a PC's main memory. DRAMs already are in such short supply that vendors are dipping into the spot market.

Although Japanese and Korean vendors are furiously ramping up production to meet the DRAM demand, most of the increase in volume won't come until next year, according to officials at those companies. In the meantime, sales of memory-hungry applications written for Microsoft Corp.'s forthcoming Windows 95, coupled with the proliferation of high-end Pentium systems, will further tax the limited supplies, according to officials at systems makers and component suppliers.

"In the second half of fiscal '95, we will see a serious shortage of DRAMs," said Hajime Sasaki, executive vice president at NEC Corp., the world's second largest supplier of DRAMs.

DRAMs are not the only memory chips in short supply. Static RAM chips -- such as the 256K-bit or better fast SRAMs for Level 2 cache also are rationed by leading suppliers such as US-based Cypress Semiconductor Corp., officials said.

"We expect the SRAM shortage to last throughout the year. And although demand might slacken a bit during the summer low season, shortages will occur during the fourth-quarter high tide in the PC business," said David Fleischer, Cypress's Singapore-based director of Asia-Pacific sales.

The shortages of SRAMs result mainly from a shortage of fabrication plants with 0.5-micron process technology able to supply 3.3-volt SRAM chips.

Fleischer added that SRAM pricing is expected to remain stable at its current level -- for 256K-bit SRAMs, prices are close to US$4, with gray market prices somewhat over $4.


Meanwhile, the growing demand for better battery life in notebook PCs, coupled with PC makers' reliance primarily on Sony Corp. for lithium-ion batteries, may lead to constraints on high-end notebooks by November and may delay the appearance of the long-life batteries on lower-end systems.

Asian monitor manufacturers are also scrambling, with demand for CRTs currently surpassing supply. Manufacturers based in Japan, South Korea and Taiwan currently supply some 93 percent of the world's CRT monitors, according to Taiwan's government-funded Market Intelligence Center.

So far, the CRT shortage is hurting mainly smaller, second- and third-tier suppliers, sources said.

In an interview with SunWorld Online sister publication Computerworld, a Hewlett Packard vice president, said "As far as I know every vendor is potentially booked up, and [prices may go up] if the computer market keeps growing, not just PCs.

"[It is not] just DRAM, but some chip-sets suppliers. Silicon is finite. People aren't building foundries fast enough, so we could get into some trouble."

According to Dataquest, the worldwide market for DRAM is expected to grow 40 percent in 1995 to $45 billion.

What about Sun?
First-tier computer makers state they are riding out these shortages just fine for now.

"Sun has a multivendor strategy in place to assure the company adequate DRAM supply. Sun enjoys a very good relationship with all of our suppliers," a Sun spokesperson said, adding the company expects DRAM prices increasing over the long term due largely to the strength of the Yen.

Similarly, Sun has not faced a CRT shortage. "Sun uses a Sony high-performance aperture-grille CRT. We are among Sony's top customers and [it has] committed sufficient capacity to [Sun]. Lower-priced, shadow-mask monitors [buyers] are feeling the CRT shortage, however," Sun says.

Computer makers are experiencing shortages of disk drives, "stemming largely from the fact that drive makers are pushing technologies faster than they can come up the learning curve. However, drive makers can increase manufacturing capacity fast, much more quickly than chip makers can, for instance," a Sun spokesperson said.

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