For Makers of Memory, Chips No Longer Down

An oversupply of computer memory that drove prices down through much of 1996 has finally evaporated, analysts said, and that means the price hikes of recent weeks are likely to continue through the end of the year.

The price of 16 megabytes of memory for a Pentium computer was about $250 at ACP Superstore in Santa Ana last week, up $70 from two weeks earlier. That’s still cheap compared to the $400 consumers would have paid a year ago, said store President Dave Freeman, but prices are climbing.

The news may be discouraging to consumers but signals a return to stability for Orange County’s giant memory companies, including Kingston Technology in Fountain Valley. “When prices are falling, it’s nerve-racking,” said Gary MacDonald, vice president of marketing at Kingston. He said the company has shipped far more units this year than in 1995, but “from a revenue perspective, it’s been a challenge.”

A combination of forces flooded the memory market last winter, including a huge boost in production by manufacturers counting on the release of Windows 95 to fuel demand for computers and memory products. Sales of Windows 95, the Microsoft operating system, were disappointing, MacDonald said, and manufacturers were left holding huge inventories produced in plants they had spent billions of dollars to construct in recent years.

“What’s happened now is that excess inventory has finally been consumed,” said Sherry Garber, an analyst at Semico Research in Phoenix. “And October and November are the highest-demand months for memory and computers.”

That combination will probably push prices up through the holidays, she said, “but after Christmas they’ll start coming down again.”