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TECHNOLOGY : Kobe Quake Artificially Jolted Prices for Memory Chips, Analysts Speculate

February 15, 1995|Ross Kerber, Times staff writer

Prices for computer memory chips and other components rose quickly after the earthquake that hit Kobe, Japan, last month, as international buyers worried whether they could obtain sufficient supplies of the critical parts.

But the Orange County distributors and manufacturers that dominate the U.S. resale market for those chips say that opportunistic brokers--rather than damage to factories--was the main cause of the price hike.

Wholesale prices for the dynamic random-access memory chips (DRAMs) have since fallen after soaring almost 30% after the 6.8-magnitude quake hit. In personal computers, these chips are used to store data so that it can be accessed quickly. The chips now sell just slightly above their prices at the end of the year, said David Tremblay, sales director for Viking Components Inc. in Laguna Hills.

"Whenever there's any kind of event that the spot market can use to do a price increase, they'll use it, but it's really a lot of hype," Tremblay said. "Our price and our allocations (from Japanese factories) weren't affected whatsoever, which is usually how you can tell when the spot market is trying to pump something up."

Viking, which makes memory upgrade products, gets about 60% of its chips from Asian factories, though it had to pay more for chips on the spot market, Tremblay said.

The company did not, in turn, raise its prices, he said.

Alexx Wood, a spokeswoman for Kelly Micro Systems Inc. in Irvine, said the company had $10 million of inventory on hand when the quake hit, protecting Kelly from shipment delays.

Kelly has gradually raised prices for its memory boards, she said, in order to avoid having to make a sharp price increase later on.

"It's had an effect as far as prices, but as far as an effect on shipments, that hasn't happened," she said. "We're taking a wait-and-see attitude."

Even before the earthquake in Kobe, which is a distribution point, memory chip prices were increasing. Rapidly advancing technologies discouraged manufacturers from investing $1 billion or more in new plants that could quickly become obsolete. At the same time, PC makers' demand for the chips has risen as ever-more complex software requires more memory.

Rob Reed, president of privately held Memory International Inc. in Irvine, said the heightened demand and limited supply makes the market for memory chips particularly vulnerable to rumors.

He compared the gloomy forecasts that followed the earthquake to similar rumors that followed a fire at a Japanese resin factory in 1993. That factory's problems also had little effect on component prices after several weeks. Resin is used to cover the circuitry in DRAMs and other semiconductors.

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