U.S. memory-chip firms rebound as sales take off

September 11, 1995|By New York Times News Service

Straight out of Boise State University, Steven R. Appleton joined a local memory-chip maker called Micron Technology Inc. in 1983. It soon seemed that he had chosen a dead-end career.

In the mid-1980s, the memory-chip business appeared to be lost forever to Japan. One major American semiconductor company after another, even Intel, the memory-chip pioneer, dropped out of the field, figuring that it would always be a poor business.

"Back then," recalled Mr. Appleton, who is now Micron's chairman, "it was just a matter of survival for us."

The company, based in Boise, Idaho, is doing far more than surviving these days. In its 1995 fiscal year, which ended last week, analysts expect its profit to double, to more than $800 million, on sales of $2.8 billion. And Micron has become a Wall Street favorite, as investors have driven up its stock price fivefold since last fall.

Not bad for a company that was barely profitable as recently as three years ago. Indeed, companies like Micron and Texas Instruments have managed a remarkable American comeback in the market for memory chips.

In doing so, they took advantage of a recession in Japan, American trade policy and the boom in personal computers, which more and more have a voracious appetite for memory.

Today, the American memory-chip makers are thriving -- a turnaround that has left experts shaking their heads in surprise and delight.

"In the early 1990s, I had written off memory chips for good as a commodity business," said David B. Yoffie, a Harvard Business School professor and Intel director. "But now it's a very profitable market. It just goes to show that in fast-moving technology businesses, never say never."

Besides Japan's woes and Washington's trade advocacy, the unexpected turn of events is explained by the growth and broadening of the personal computer market -- as the machines increasingly go into homes and people use them to communicate, roam the Internet and play multimedia games.

"We're seeing the personal computer change into something far more than just a machine for crunching numbers and writing reports," said Richard Zwetchkenbaum, an analyst at the International Data Corp., a research firm. "And all these new uses for the PC mean a greater demand for memory."

The latest new demand for computer memory is coming from Windows 95. Over the next year, millions of people are expected to buy Microsoft Corp.'s husky new operating system, with 11 million lines of code.

With too little memory, a machine runs these fancy new programs at a crawl or crashes altogether. The memory chips, known as DRAM (dynamic random access memory), hold the current work on a personal computer for quick access -- as opposed to the computer's hard disk, where software programs are permanently stored.

For many computer users, the decision to buy Windows 95 is soon followed by a realization that they need $200 or more in pTC added memory. Some retailers are selling Windows 95 together with memory upgrades -- typically four megabytes, or four million bytes. (A byte is the amount of memory needed to store one character, like a letter or number.)

Though Microsoft officials say that Windows 95 will run on a personal computer with four megabytes, they recommend eight megabytes. Most computer experts, though, say that 16 megabytes of memory is preferable if one wants to run games, search the Internet and do other things that Windows 95 is intended to make easier.

"The surge in demand was well under way before, but Windows 95 will force more people to buy more memory," said Daniel Klesken, an analyst with Robertson, Stephens & Co.

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