The panic-induced artificial shortages of memory chips we warned about last week (CI No 2,212) arrived with a vengeance yesterday as the heavy news media picked up on the story and found analysts and distributors reported that spot prices for the parts have risen at least 30% and in some cases doubled. The panic is not immediately affecting major manufacturers, because they have large inventories, but small companies, which make only a few dozen machines daily, are very exposed. According to Associated Press, five distributors quoted prices of between $65 and $72 for a 1M-byte module that cost $33 early last week. The cause of the panic is of course that explosion that wiped out the Sumitomo Chemical Co epoxy resin plant that had been supplying 60% of the world’s demand for the epoxy used in chip encapsulation. The reasons the price rises look like panic rather than genuine shortage are that the other suppliers of the epoxy were running at well below capacity, and manufacturers will generally have vats of the stuff in their warehouses. According to the Wall Street Journal, chip makers are playing down the impact of the Sumitomo explosion, but have begun studying their options should resin supplies dwindle. Motorola Inc and Advanced Micro Devices Inc have each assembled task forces to seek alternate ways to encapsulate chips and Texas Instruments Inc says it doesn’t have enough information to understand the long-term issue. In the medium term, the panic is likely to lead to a faster move to 16M-bit parts in machines capable of taking them, since only as much epoxy is needed to encapsulate a 16M as is needed for a 4M.
