From: keithl@klic.rain.com (Keith Lofstrom)
Newsgroups: comp.sys.ibm.pc.misc
Subject: Re: MEMORY PRICE GOUGING?:Call your senator/representative
Date: 17 Nov 92 20:42:32 GMT
Article-I.D.: klic.1992Nov17.204232.19502
Organization: Keith Lofstrom Integrated Circuits

In article <1992Nov17.105756.1@sscvx1.ssc.gov> schludermann@sscvx1.ssc.gov writes:
>
>   Are you suspect about the reasoning for the increase in memory prices?
>It's months away till the actual likely hood for the tariffs being imposed.
>I can understand the wholesalers worrying about replacement costs but six
>months ahead? Who holds memory that long? I suspect price gouging. So I
>suggest we call our congresspeople and put our tax dollars to work. Maybe
>they can get a strait answer.
>
>Kris


If somebody charges too much, it's gouging.
If somebody charges too little, it's dumping.
If somebody charges the same amount, it's collusion.

Nobody is holding a gun to anybody's head and forcing them to buy RAM.  One
result of a tariff - even an anticipated one - is that production volumes
drop.  Since semiconductor plants are extremely expensive, companies in
Korea that make RAMs are going to invest in fewer fabs, bring fabs on line
more slowly, and invest their time and money looking for other, non-US
markets.  Some of these effects are immediate, others are longer term, but
the net effect is a shortage of RAM, a shortage that is corrected by raising
prices until people ask for less.  Since a large portion of the RAM market
is on fixed price, long term contracts that do not adjust flow rates very
rapidly, the difference is made up in the spot market.  That's you and me,
folks.  I haven't heard many complaints about RAM prices from the Dells
and Compaqs and Apples of the world - they're still getting their RAMs on
contract.  The AVERAGE price of RAMs probably hasn't changed much.  Spot
prices will come back down after the market adjusts, and after Micron
(who all this was done for) can ramp up production - if they can;  RAMs are
harder to make than french fries.

If you want a straight answer, read a book on microeconomics or price 
theory.  I would suggest "Price Theory" by David Friedman;  yes, his dad
is Milton, but I think David is more fun.  For more information on the 
economics of RAM manufacturing, you should look at "Microcosm" by George
Gilder.

If you want a crooked, lying, fantasy answer, call your congressman.
After all, protecting you from the truth is what they are there for.
All they ask in return is your freedom, self respect, and future earnings,
which for many people aren't worth much.

It's funny, in a black sort of way.  People start Asian bashing.  The 
nimble Asian steps aside, and the lethargic Asian bashers end up clubbing
themselves.  Andy Grove of Intel was one of the lead proponents of the
big tariffs against Japanese RAM.  At the time, Intel was already getting
out of the RAM business, and getting into the board business.  The increased
RAM prices certainly weren't healthy for Intel's board business, which is
in real trouble.  Increased RAM prices also lower the demand for Intel
processors.  And while Andy was back east buying drinks for congressoids,
the P5 project wanders aimlessly and is now over a year late.  I imagine
a similar thing will happen with Micron, except they don't have processors
and EPROMs to fall back on.

If you REALLY want to do some good, call your congresscritter and threaten
him with bodily harm if he votes for any more tariffs.

Keith

-- 
Keith Lofstrom         keithl@klic.rain.com       Voice (503)-520-1993
KLIC --- Keith Lofstrom Integrated Circuits --- "Your Ideas in Silicon"
Design Contracting in Bipolar and CMOS - Analog, Digital, and Power ICs
Newsgroups: comp.sys.ibm.pc.misc