Fresh from settling its embarrassing little spat with Atari Corp, Boise, Idaho memory chip maker Micron Technology Inc is trying to avoid such problems in future by giving its customers the chance to sign long-term, non-cancellable supply contracts – to insulate itself from the price gyrations that have been a continual feature in the industry. Chairman Joseph Parkinson told Dow Jones Professional Investor Reports that the company is seeking to lock up a substantial portion of its production for the two-year period beginning January 1989 with such long-term contracts. We’ll do a very, very substantial portion of our business on that basis if we’re able to, he said. The long-term contracts would feature limited pricing flexibility, with quarterly adjustments up to a certain percentage. Customers would be locked in for a certain level of demand, and Parkinson said such long-term customers would be provided with additional chips if needed. At present, the market is characterised by short-term contracts and more flexible pricing. Parkinson stressed that the company was not trying to lock in some bizarre high price, but instead would offer customers reasonable prices on the assumption it’s a long-term relationship. Micron wanted to offer such long-term contracts on all of its products: 64K, 256K and 1M dynamic memory chips as well as its 16K, 64K and 256K statics and 256K video RAMs.
Micron reported storming results for its first fiscal nine months – see Company Results – and late last week the shares were trading at $25.50, against the $17 at which they were trading when we first highlighted their attractions as the memory chip shortage and high prices really began to bite.
