Shortages Cause Sky-Rocketing RAM Prices
I’m not talking about 2026 and the AI RAM apocalypse, but instead talking about 1988.
It first started in 1985 with the computer industry in relative doldrums. This was the year the 16-bit Atari ST and Amiga were introduced and before PCs had put a stranglehold on the industry. As a transition period, fewer computers were sold that year and RAM prices dropped a lot.
This benefited Atari and their newly released 520ST which came with a whopping 512K of RAM, enormous for the time, especially on such a low-priced computer. This low-priced RAM lead to the 1040ST in early 1986 with 1MB of RAM (the first computer with 1MB of RAM for under $1000) and it kept the price of the 520ST low throughout 1986 where some deals had monochrome systems for as low as $500! 1986 was a banner year for Atari (they even went public), but dark clouds were on the horizon.
The semiconductor industry in the US didn’t like this cheap RAM and complained that Japan was dumping RAM into the US market below market price, making it harder for US companies to compete. This resulted in the US putting economic sanctions on Japan in 1986, which caused the price of RAM to double.
In 1986/1987, computers did not typically have a lot of RAM. 640K was very common for PCs. Computers with more than 1MB were less common, led by the 1040ST and Macintosh SE. But when RAM prices double, all manufacturers are affected.
Apple could certainly handle RAM price increases due to its high margins, but Atari had slim margins which caused its computer prices to rise from the low-price bargains of 1986 back up to near list price.
The sanctions ended in late 1987, but a different problem emerged. Due to more worry about below-market RAM flooding the market, manufacturing of lower capacity chips was cut back and higher capacity chips were produced instead. But those higher capacity chips proved more difficult to make.
And thus the shortage. The lower capacity chips that most computer manufacturers wanted were in short supply because they were not being made in enough quantity and the higher capacity chips had lower yields, also limiting quantities. And low quantities combined with high demand means high prices.
This definitely hurt budget computer makers more because they just didn’t have the margins to absorb this.
Worse for Atari, they had announced their new Mega ST lineup in late 1986 and those computers were primarily differentiated by more RAM (2MB and 4MB), which was made more expensive during the sanctions.
Atari delayed the Mega ST to late 1987, coincidently about when the sanctions ended, but the problems didn’t stop there. Because the price of the higher capacity RAM remained high and quantities low, the Mega ST computers ended up costing more than what people anticipated.
And the prices for Atari ST computers that had started creeping back up in 1987 stayed flat into 1988. This certainly didn’t fit well with Atari’s business plan of continuing to lower the price of its computers over time.
The RAM shortage and pricing problems eventually sorted themselves out by 1989, which is when Atari released the 1040STE that had SIMM sockets to allow owners to upgrade RAM themselves. This allowed Atari to ship the inexpensive 1MB version and let owners deal with fluctuations in RAM prices themselves.
But by this point, the damage had been done. Atari’s computer business never really recovered and slowly faded away over the next few years.
Was this RAM shortage solely responsible for the demise of Atari? Not at all. But I absolutely feel like it was a strong contributor.