While the US faces a massive withdrawal of 3.5 floppies from its market due to threats of a punitive anti-dumping tariff (CI No 1,017), the Japanese-led 3.5 industry is being pummelled this week with serious charges of tacky workmanship and careless quality assurance practices that add up to offering little value for money. According to the US firm Memory Control Technology Corp, Memcon, just out with its 1988 3.5 Floppy Disk Quality Report, the cute little claim certified error free on the side of the diskette box is no protection against shoddy goods. What’s more, the prices paid for the junkier brands are probably higher than for quality ones. Memcon, based in Omaha, Nebraska, is a neutral third party, with no ostensible bone to pick with anyone. It makes disk duplicating and certifying machines, claiming a 20% share of the world market. It also runs a software duplicating service for US firms such as AT&T, Borland, Santa Cruz Operation, Hewlett-Packard, Motorola, 3Com, Novell, Peachtree and Lotus. As such it buys lots of blank floppies, half a million each month. Its motive is publishing the survey, says Memcon’s 35-year-old president Jerry Korth, is the desire to be associated with quality and see that the media boys keep their end up. Doing reports like this isn’t hurting the company’s fame any, either. Still talking In the US they’re still talking about Memcon’s first report published a year ago on 5.25 floppies. Stories about it ran in practically every American computer magazine; even dailies like US Today, The Denver Post and Pittsburgh Post-Gazette covered it. Naturally large-volume disk buyers latched on to it and uses wrote to Memcon asking for updates and expanded coverage. Korth says the reports stem from Memcon’s normal in-bound media testing and quality assurance screening. Before last year’s 5.25 study, Memcon bought primarily 3M floppies. As a result of its findings, it switched to BASF. This year it’s gone from Kao 3.5s to Memorex, unless a particular brand is specified by a client, though it would prefer to buy TDK but finds them scarce. Korth thinks the most significant finding of the 3.5 floppy report, especially for consumers, is the lack of any real relationship between brand and quality, or, for that matter, between price and quality. Moreover, he says, despite an odd reluctance in certain technical quarters to accept the idea, the study finds that there is a direct correlation between quality and functionality. All the diskettes that ultimately failed to format and verify also failed the crucial ANSI Missing Bit and Extra Bit tests. To do its analysis, Memcon bought 10 boxes each of double-sided double density 135-tpi 1Mb 3.5 floppy disks from 25 different manufacturers including BASF, Brown, Centech, C Itoh, Dysan, Fuji, IBM, JVC, Kao, Kodak, Maxell, Memorex, Memoty Media, Nashua, Opus, Polaroid, SKC, Sentinel, Sony, Syncom, TDK, 3M, Verbatim, Wabash and Xidex. In procuring them, it found out that 3.5 floppies are generally in short supply in the US. Many of the distributors they went to – and Memcon picked 50 different suppliers from all over the country – were on allocation, if they could get product at all. Part of the problem Korth says, is the fact that demand for 3.5 floppies escalated so abruptly. Production has gone from 50m to 500m units in the last 12 months but it isn’t enough. Current capacity, split between 5.25s and 3.5s and projected to total 1,000m units this year, is stretched, with a shortfall in the US alone of some 50m to 100m 3.5s. That isn’t the whole story however. The US has pretty much jettisoned its native production capacity and let the things be made overseas – a decision it may be about to rue. At least 17 of the 25 brands Memcon tested are made in Japan and the Japanese, along with other Far Eastern producers, are currently threatening to restrict supplies or even pull their 3.5s off the US market completely as a result of the anti-dumping suit brought by Verbatim and the US Commerce Department against Sony, Maxell and Fuji. They are convinced they’r
e going to lose and get hit with punitive tariffs. Some of them have already bailed out though price competition may really be the determining factor. Konica, for example revealed to Memcon that it had removed all 3.5 product from the US, intimating that it had no near-term plans to re-enter the market. Goldstar removed itself from Memcon’s evaluation, citing poor product availability and a renewed emphasis on the more competitive 5.25s. JVC and TDK admitted that few if any of their branded 3.5s were available and C Itoh went so far as to suggest to Memcon that if it couldn’t find any double-sided C Itoh floppies, it should buy single-sided instead and test them as double-sided. Because of the scarcity, Memcon found that disk makers are raising prices and improving their profit margins. Since May when Memcon first went out and bought disks for its study, Korth reckons that retail prices have escalated 100%. OEM prices are up almost 40%. Distributors Memcon bought the disks it tested from distributors, not retail stores, so it didn’t pay street prices. On the other hand it didn’t ask for a discount and paid the prices quoted. Prices averaged $13.60 for a box of 10 but varied widely from a low of $13 a box for JVC and Nashua to a hefty $40 a box for IBM. The price variation within a brand was also significant with a box of IBM floppies going for $22 for one distributor and $40 from another. The study also proved that high-quality floppies, free from defect, could be bought for near or below the average market price. Only four of the 25 samples scored 100% on the two key ANSI tests of quality. Of these, Memcon says, three could be purchased at reasonable prices with C Itoh averaging $20.20 and Sony $19.60 both at or around the population’s average price at $17.50. (IBM passed but sells at a premium). Thanks to the shortages and better prices branded disks fetch over the bulk product used by the likes of Memcon, firms are funnelling the bulk of their output, or around 80%, into branded channels, Korth says. The strategy is playing havoc with medium-sized software companies. Details of the test results will appear in a future issue.
