Leader from Electronics Weekly - text

[Adam Rose <adam@xxxxxxxx>]

Here is the lead editorial from Electronics Weekly, A UK based electronics
trade mag. I found it interesting because of what it says about the
relationship between various state, regional + multinational capitals.

Commentary will follow.

Adam.


Adam Rose
SWP
Manchester
UK


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EU Obliged to act on DRAM
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Buyers of memory will groan with the news that the European Union
is dusting off its selling price protection scheme, based on the
cost of production and known as the reference price.

But the EU has a moral obligation to reimpose the reference price
scheme which kicks in when the memory price falls below the costs
of production.

The reference price was introduced to protect local memory manufacturers,
and to encourage foreign manufacturers to build wafer fabs in Europe.

In the intervening years Japanese memory suppliers Fujitsu, Hitachi, and
Mitsubishi have all invested in new or existing European memory production
lines.

While demand for memory in 94 and 95 kept prices high everyone forgot
about the reference price. But the price of memory is now plummeting
towards the cost of production. For 4Mbit DRAM's, production cost is
probably a smidgen below $4 - the current market price.

It may be morally correct to reimpose the reference price, but does it
make commercial sense ?

This time around the reimposition of reference pricing will still protect
Siemens and SGS-Thompson but it will primarily act to protect the Japanese
against the Koreans. The Korean memory suppliers are keeping their foot hard
down on the production pedal in a bid to gain market share from the Japanese.
And the best way to do that is by producing and investing flat out through a
slump.

Global battles for industrial supremacy may temporarily benefit the consumer,
but, long term, the reputation of the EU for maintaining stable markets and
a secure investment environment is probably a greater priority.

Those Japanese companies which put production within Europe - Hitachi, NEC,
Fujitsu and Mitsubishi, may have a moral claim to protection against a
free market price for memory in Europe, but it also make long term commercial
sense for the European producers and EU industrial policy.


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