It’s easy to feel sorry for memory companies these days. But Kingston Technology Co. doesn’t want pity.
Even as the Fountain Valley memory maker has watched the once-heady memory market growth go anemic, Kingston believes it has a strategy to help ride out a severe slowdown.
It’s betting that a focus on newer, high-growth areas should help position the company to take advantage of any upturn in the market.
“The market is down about 30 percent overall, yet our sales are down only 15 percent year-over-year on a unit basis,” said Kingston Chief Executive John Tu. “This means that we are taking market share, which is key to surviving a down market.”
Kingston’s overall revenue is on course to be up slightly from last year’s $1.5 billion, Tu said.
One of the reasons is that Kingston has begun making memory boards for other companies instead of peddling its own branded boards. In the past year, the company has brought nearly all of its plants online for contract manufacturing.
Last year, privately held Kingston invested more than $100 million in Payton, a wholly-owned subsidiary that is one of the first processors of semiconductor wafers, the building blocks for the company’s memory module products.
The results have been good: the company is a contract manufacturer for nine of the 10 major PC makers and is seeing contract manufacturing sales grow some 30 percent annually, according to Tu.
Kingston also is stepping up its sales to consumers. Along with a campaign launched in 1999 to sell a product called ValueRAM generic memory products sold through retail stores Kingston recently launched ShopKingston.com. The site is geared toward consumers looking to buy memory products to speed up their computers.
But until these plans start to yield results, Kingston said it will continue to rely on sales of the silicon boards that contain dynamic random access memory, or DRAM, which account for about 80 percent of the company’s revenue.
And when the market might recover is a big question. Consumers have stopped shelling out the bucks for slicker, faster computers, and businesses have halted new computer purchases. Meanwhile, makers of memory inside PCs have taken it on the chin.
With shipments of DRAM memory modules down, memory makers have watched inventories at PC manufacturers such as Dell Computer Corp., Compaq Computer Inc. and Hewlett-Packard Co. skyrocket.
And it doesn’t look like it will get much better. Total DRAM sales will decline 18 percent this year to $23.8 billion, according to International Data Corp.
Kingston sells 2,000 types of memory modules for products that range from printers to personal computers. Company executives contend that its reputation for integrity spearheaded by founders Tu and Executive Vice President David Sun gives it an edge against its competitors. And with no outstanding debt and the cash to make investments in new technology, the company is doing better than most.