Insufficient memory, aborting sales…

The best of times, the worst of times. That’s the PC industry in 2000. A

boom in Asia pushes demand. But there are no parts. PC vendors face a numbing

component shortage in 2000-01.

It’s global. Vendors are desperately seeking parts, and delaying products.

Memory and LCD is badly hit, in the `worst component shortage ever,’ as

Michael Capellas, Chief, Compaq puts it.

Ergo: prices move up. A 64 MB SDRAM chip is now $ 9, from under $ 5 early

this year. Last year’s shortages pushed that up to $ 20. You need nine of

those chips on one 64 MB SDRAM module. All this adds to the PC price tag.

Why the shortages? There’s no Taiwan quake this year. Only...demand.

The PCs: There are more of ’em out there. And they consume more RAM per PC.

The common RAM spec in India has now doubled to 64 MB, and to 128 MB in the US.

The video card in the PC has moved up from 1 MB to 8 MB. The PC has doubled RAM

demand in a little over a year. Next year will see a 70 percent growth in PC RAM

consumption--even though the PC base will grow only 20 percent.

The non-PCs: Too many of them now demand memory and other chips. Cellphones,

CD and MP3 players, palmtops and set-top boxes…. And most household

devices--from TV and stereo to washing machine and microwave--consume RAM and

processors. Digital cameras pack powerful chips (one Kodak camera runs Doom),

RAM, CCDs--and TFT color screens. Those LCD screens are in severe short supply.

It’s not just PCs and gadgets. The $ 15 billion Solectron (which makes

equipment for Lucent, Cisco, Nortal and HP) has lost $ 500 million in sales, as

shortages disrupt manufacturing. Intel’s 1999-launched 800 MHz chips are still

not available, except to a few big OEMs. On his May visit to Delhi, Craig

Barrett, Chief, Intel, said he expected shortages for a year, with "nil

balance between supply and demand."

Bad news for India, where PC sales could grow 50 percent to 1.7 million this

fiscal. If India’s Internet bandwidth goes up to 10 GBPS, PC sales could touch

two million. But with shortages, we could be below 1.4 million. And that will

affect all of the IT industry, barring software exports.

PC vendors dependent on variable sources have to get their act together. Can

they converge--and pool their sourcing? If Indian auto majors can think of a

common supply chain, why not PC vendors?

This is a good case for manufacturers’ association MAIT, which has been

somewhat hidden in NASSCOM’s shadow, to pursue. At stake is Indian infotech

performance in fiscal 2000-01.