VARs Might Not Like This Trip Down Memory Lane
Though some DRAM vendors such as Kingston Technology, Fountain Valley, Calif., say they are confident they can meet the market's needs for an eyeball-popping 2 Gbytes of memory to support Vista, signs of memory price increases are leading to a growing belief that DRAM could be in such heavy deployment that seasonal price increases may become more than seasonal.
"With a new OS out there, the resources required are high," said Jalil Mahini, owner of Micronet Systems, a Niles, Ill.-based system builder. "Many people will want 1 Gbyte or 2 Gbytes of RAM. I am expecting that to happen in the next three to six months, though not immediately."
Mahini said a small increase in DRAM pricing could likely be absorbed by system builders and tier-one PC makers. "But a bigger increase—nobody can eat the cost if memory pricing goes up 20 percent or higher," Mahini said.
According to an analysis of pricing posted by the Web site dramxchange.com over the past year, spot pricing for DDR 2 512- Mbyte 64 mx8 at 533MHz has climbed by more than 30 percent in the past six months and is about 50 percent higher than a year ago. Though the spot price can fluctuate greatly from month to month, system builders say normal seasonal increases in the fourth quarter are not unheard of. Interviews with several system builders found most saw no alarming changes of late in memory pricing, though some said signs of pricing increases have begun to emerge.
"In the last six months, it's gone up a lot," said Mark Bose, president of Mark Bose and Associates, a Tampa, Fla.-based system builder and solution provider. "But it's hard to say why. This time of year, pricing always goes up in memory."
Over the past month, key vendors have begun spelling out their estimates on how the DRAM and hardware components will be impacted by new technologies in the near term. According to them, it can be described in a word: dramatic.
WILL MICROSOFT'S VISTA BE A RIPPLE TO THE COMPONENT SPACE, OR A TSUNAMI?
The first significant metrics on the impact of Vista on the PC market began appearing several weeks ago. Last month, Samsung executives met with analysts and reporters to talk about their outlook for 2007. Leading off the discussion for Samsung, a Ridgefield, N.J.-based global supplier of memory components, was its analysis of the DRAM space in the coming months and the impact of the 3-D-friendly Vista operating system.
"In the case of DRAM, it's a little bit different because of Windows Vista," said Woo-Sik Chu, a Samsung senior vice president, in his presentation to analysts. "The PC OEMs are ordering Vista-ready," Chu said, "implying they are putting in more than a Gbyte of DRAM."
If they are building systems with a Gbyte or more of DRAM, there's good cause. One vendor, Dell, Round Rock, Texas, posted information on its corporate blog ahead of the Vista launch based on its analysis of memory needs of PCs running Vista. According to Dell's calculations, a PC running Vista with 1 Gbyte of RAM and an integrated graphics card, with Office applications loaded but not open and Internet Explorer open, needs 77 percent of a system's memory. But with 2 Gbytes of memory and a 256-Mbyte graphics card, the system running the same applications the same way requires 35 percent memory utilization.
Samsung estimates that, on a year-over-year basis, Vista's memory requirements will lead to a 46 percent increase, per system, in memory deployment. But the company also says, at the same time, it is moving to a more efficient, cost-effective manufacturing process that could at the very least help out with its own margins and supply capabilities.
While some are banking on new memory requirements as the sign of brisker business ahead, others are less sure that will be the case.
"I'm not under the impression a lot of people are out there running, 'Oh I have to have Vista.' There's nothing inherently wrong with XP, and there's no killer application that needs Vista," Bose said. "Even friends of mine in large corporate environments, they're not even rolling out IE 7. I don't think you're going to see people with older, slower technology jumping on the Vista bandwagon when they see they have to put $200 of extra memory in the machine."
Micronet's Mahini said he has not seen much interest in Vista from his small-business customers, either.
But James Huang, marketing director at Amax Information Technology, a Fremont, Calif.-based system builder and contract manufacturer, said there are early indications of interest from OEM customers. "From our side, we have a lot of people asking for Vista, stable-image platforms from Nvidia and Intel," Huang said. Those configurations do require increased memory, according to Huang.
INDUSTRY IN 'A POOR STATE OF HARDWARE READINESS'
Softchoice, a Toronto-based industry consultant, issued a report earlier this month stating that it found the industry is not prepared to upgrade to a new operating environment.
"A close look at the average business PC reveals that roughly half are unable to support Microsoft's new Vista operating system," Softchoice concluded. Its report found a "poor state of hardware readiness among North American organizations."
"Fifty percent of the PCs included in [our study] are unable to meet Windows Vista's basic system requirements while a staggering 94 percent are unable to meet the 'Premium' Vista system requirements," the Softchoice report said. The study found 41 percent of PCs would require RAM upgrades to run Vista Basic, while 78 percent would need more memory to run Vista Premium.
"And since many organizations are maintaining PC life cycles of 48 to 60 months, it could take two years or more before hardware requirements cease to be a concern for organizations planning to adopt the new OS—unless Vista forces organizations to make major PC refreshes," the report concluded.
THERE'S MORE THAN VISTA IN THE MIX
Vista won't be alone in the potential to create additional market requirements for memory and other hardware components.
According to Samsung, handset manufacturers have already designed new systems for 2007 that will require greater memory configurations and the memory supplier has already begun receiving their orders. Throw Sony's new PlayStation 3 into the mix—which carries 20-Gbyte and 60-Gbyte hard-drive capacities and which has several slots for memory cards to handle even the most intense, 3-D games—and memory vendors are looking at a busy next few months.
A spokesman for Kingston said there is not currently any DRAM shortage, adding that it has never had any issues in the past. In addition, the spokesman said that Kingston knows demand is high, but the company has always been able to meet it.
Even with price increases in some areas, PC system builders in the United States say they haven't had any problems yet with supply or getting enough memory components. The Kingston spokesman said his company had not seen any supply issues, either. But even beyond Vista, some system builders are bracing for another wave of memory market issues later in 2007, when a new quad-core processing architecture from Advanced Micro Devices is released.
"When AMD releases quad-core next spring, that I think would really drive up the memory market," said Amax's Huang. THE ENTERPRISE OUTLOOK
Whether the industry is hardware-ready or not, higher-end systems with added functionality may be enough to increase sales into the enterprise—and that may impact the market, too.
A recent study by Merrill Lynch, New York, found that "CIOs appear willing to pay an incremental $79 for 10-plus hours of battery life in a notebook and $53 for 'instant-on' technology."
That, and Vista's added functionality, will at least get the PC upgrade discussion off the dime, some industry players believe.
Mike Zabaneh, COO of Tangent Computer, a Burlingame, Calif.-based system builder, says his customers are already opting for greater amounts of memory even if they're not migrating to a new operating system.
And that has him thinking bigger.
"I hope to God Vista will create a large demand for PCs, and people will want to upgrade," Zabaneh said.