Memory chip maker Micron launches new pricing experiment for stability

　　div classBodysc17zpet90 cdBBJodivpBy Jane Lanhee Lee and Chavi Mehtap

　　pSAN FRANCISCO Reuters – Chipmaker Micron Technology Inc on Thursday announced it was experimenting with a new pricing model for its chips called forward pricing agreements that would aim to stabilize the steep price fluctuations that plague the industry.pdivdivdiv classBodysc17zpet90 cdBBJodiv

　　p“I‘m super excited to announce that a top 10 customer has already signed up on this model with us, a more than 500 million a year of revenue for a three year agreement,” said Sumit Sadana, Micron’s chief business officer at the companys investor day event.p

　　pHe declined to project how much of the longterm agreements with customers would migrate to this new model of pricing, and emphasized that this was an “experiment”. He said the current longterm agreements are based on volume and not on prices. The forward pricing agreements have both volume and pricing.p

　　pWhen asked about whether the contracts would be enforceable Sadana acknowledged that one party or the other would always be on the wrong side of the price.p

　　pSadana also said that Micron does not plan to lower its gross margins to push the forward pricing agreements ahead.p

　　p“Therell be ups and downs, but the benefits ultimately outweigh the risks of actually doing an agreement like this,” said Sadana.p

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　　pp Reporting By Jane Lanhee Lee in San Francisco, and Chavi Mehta in Bangalore Editing by Nick Zieminskip

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