Aeneon: Cheap memory or an alternative for white boxes and retail?

Aeneon may not be a familiar term even for users who are frequently shopping for computer components and upgrades for their PC. But there is a good chance that you will soon stumble across the name, which aims to spread throughout the North American retail business and wants to be recognized as alternative to popular DRAM brands. Dr. Carsten Gatzke, who is the general manager of Infineon’s Aeneon business unit, answered TG Daily’s questions about the young brand, its strategy and the road ahead.

TG Daily : When did you launch Aeneon and what are your goals with this new brand ?

Dr. Gatzke : We leverage the brand Aeneon to answer white box manufacturer’s and retail’s demand for DRAM memory modules with a high price-performance ratio. We launched the new brand initially in 2004 in Eastern Europe and in the U.S. In the meantime, Aeneon memory modules have become available not online in the US and in Europe, but also in the whole APAC [asia-pacific] region. With the addition of our most recent distributor, EMPA, we also have begun to offer Aeneon modules in the Arabian region.

We founded the business unit Aeneon to focus on the white box and retail market. Often, the demands of white box manufacturers are different from those of the large OEMs. Additionally, the white box market is much more fragmented and requires different distribution channels than the OEM business, which is mainly based on a one-to-one customer relationship. As a result, we are using distributors in this market segment.

TG Daily : How large is the white box market in those individual regions ? Are there different rules to play in this market ?

Dr. Gatzke : It is impossible to put a number on the size of the white box market in each country. However, we learned that the white box market in so called emerging countries, for example in Eastern Europe, is somewhere between 80 and 90 percent of the total market. Even in Western Europe and North America, small manufacturers hold about 30 percent of the total market.

There are different rules in the white box market in the view that white box manufacturers are focused on the highest possible compatibility with standard PC platforms, which basically involves standard motherboards. OEMs, in contrast, define the characteristics of memory modules directly with memory manufacturers, as they use off-the-shelve boards but also need modules for a variety of other applications, such as servers or workstations.

In addition to that, the price-performance ratio plays a decisive role in the white box and retail market. In this respect, our Aeneon modules are a very attractive product.

TG Daily : Why did you choose a new brand ? Why not go with "Infineon Value RAM" ?

Dr. Gatzke : We intended to create a new brand with Aeneon. The separate brand name signals the product family’s focus on the white box and retail market. This results in additional expenses for communication, of course, but we gladly meet this challenge.

TG Daily : Does Infineon’s idea of a "sub-brand" work in the real world ? Do you see market adoption of these products ?

Dr. Gatzke : In terms of unit volume, our success justifies the move. Just in the second quarter we were able to sell more than two million Aeneon modules. In comparison to our competition, we have done a great job. Our distributors ship more than 90 percent of the modules to white box manufacturers. The remaining 10 percent are sold in retail.

TG Daily : How do you explain the clearly lower pricing of Aeneon modules compared to Infineon modules ? What components do you use to save money ?

Dr. Gatzke : The lower pricing is a direct result of pricing advantages we were able to achieve. In terms of quality and support, we meet the expectations of our target market - white box and retail. The savings are a result of the differences to the OEM business. In the OEM DRAM business, significant costs develop through design-in efforts and engineering services - namely support - during active production of OEM systems.

Also, when producing for an OEM, you are often bound to a certain production facility, which results in a loss of flexibility for the DRAM manufacturer. This is another cost factor. We are substantially more flexible when producing Aeneon products. Additionally, there are no design-in and support costs involved. These cost advantages are handed down to the end customer.

TG Daily : Which process technology do you use for Aeneon ? Can you provide some detail on the validation and support concept ?

Dr. Gatzke : The process technology used to manufactures Aeneon components does not differ from the technology we use for Infineon devices. Someone who purchases an Aeneon module therefore can be certain to receive a high quality, fast and attractively priced product. To ensure 100 percent compatibility, we are partnering with popular chipset and motherboard manufacturers in validation tests. Among others, these include SIS, Via, AMD, ATI, Asus, Gigabyte, ECS, MSI and Foxconn. Together with all these partners, we are conducting comprehensive validation tests on a platform level - both in the development and during the production stage.

If an individual module should turn out not compatible - which rarely is the case, according to our return ratio - we offer a sound service and support concept for the white box and retail market. The customer either gets a new module or receives a coupon. However, the details of our customer and support services always depend on the contract between distributor and reseller.

TG Daily : Which products do you offer at this time ?

Dr. Gatzke : Our product portfolio covers all mainstream modules for the desktop and notebook segment. We offer DDR and DDR2 modules in different types and capacities. The Aeneon flagship model in the DDR segment for the PC currently is a 1 GByte unbuffered DIMM DDR400 CL3 ; for the notebook it is a 512 MByte DDR400 CL3 SO-DIMM. For DDR2, the top of the line is a 2 GByte DDR2-533 CL4 DIMM device.

The demand in the notebook segment is limited exclusively to DDR2-533 SO-DIMMs units, as notebook chipsets for DDR2-667 are expected to arrive next year. Of course, we will adjust our product portfolio to market demand and expand our offering over time.

TG Daily : Who are your distributors ?

Dr Gatzke : Among our distribution partners are EMPA, Wilk, Memorysolution, MSC and Arrow Microtronica in EMEA. In North and South America we have contracts with WINTEC und ASI. In APAC, we are working with Apacer, Hexon, Kreton and PQI to distribute our modules. Greenhouse currently is our sole distributor for Japan.

TG Daily : Where do you produce Aeneon modules ?

Dr. Gatzke : The design and production of the chips is done in our development and production facilities in Europe, USA and Asia. We partner with sub-contractors to build modules and - in part - to develop PCB designs. This is common practice in the DRAM business.

TG Daily : Is it correct to say that different and changing sub-contractors can cause variations in quality ?

Dr. Gatzke : From our point of view - no. We are collaborating with our sub-contractors and production partners through a method of "best practice sharing". This ensures that everyone is kept on the same know-how level in terms of production techniques. These processes also ensure that quality standards are continuously synchronized between different locations.

TG Daily : Do you believe that two commitments to different markets - the OEM business on the one side and the white box market on the other - can result in neglecting your OEM business - for example by planning the wrong product mix ?

Dr. Gatzke : Infineon will not endanger the existing OEM business by creating the new brand. In the case of Aeneon, we are ensuring the required production capacity through a flexible combination out of in-house and contracted production. This means we can exclude the conflict you mentioned.

TG Daily : Will Aeneon limit its business to DRAM ? Would "Aeneon Flash" make sense ?

Dr. Gatzke : Possibly. But our production capacities and our market share in Flash do not justify such a move at this time.