Secret Atari DRAM Resale Operation Revealed by FBI (2013)

From the AtariAge article:

    If you're looking for the point that Atari
    died, it would be the acquisition of Federated

I was a software engineer at Atari then. We were all pretty mystified about why Jack wanted to buy a retailer. (Jack also tried to turn engineers into salespeople for a while, having us "adopt" stores and try to sell computers there. That did not go well).

I have the feeling that Jack, Sam and Gary Tramiel really only understood the art of the slightly crooked deal; that's how they saw the business world. Secondarily, they understood computer hardware, because a lot of that world involved striking deals with suppliers, and that was the level they were happy working in.

The world of software was largely opaque to them, and they never really invested much in it, and never understood how to run long-term and larger scale projects. Ultimately that marginalized them and they lost to competition (Windows / Mac) that did understand software.

Seems like a better link might be http://atariage.com/forums/topic/207245-secret-atari-dram-re... because the blog post refers to it as the post containing a full explanation.

tl;dr holy moly! In late '80s US government prevented Japan exporting cheap DRAM into US (free trade anyone?). DRAM prices went through roof. Atari covered holes in its own finances by reselling DRAM to major manufacturers (SUN etc). The DRAM they resold was "smuggled" in outside the official agreements. The sites owner has this from FOI requests.

This seems plenty plausible - and is one of many many reasons the WTO was a good idea.

But boy, Atari smuggled DRAM ... Weird

Here's the executive summary provided by the FBI to the Attorney General's office:

May 15, 1989

FBI SA and US Customs Agents advised Assistant US Attorney that source information and investigation had determined that Atari Corporation was importing 256K DRAMS into the US in false packing containers, and without proper import documents in violation of US import laws and contrary to import agreements between the US and the Japanese Ministry of Industry and Trade. Atari purchases large quantities of DRAMS from Japanese manufacturers for use in their Taiwanese manufacturing plants. Purchasing in Taiwan allows Atari to obtain the DRAMS at a greatly reduced price. There are strict import quotes on the DRAMS, because of Japanese flooding of the market in years previously but there are no import duties. By shipping the DRAMS in the U.S., Atari can thereby increase the price by approximately four times their purchase price. The original manufacturers, whether Fujitsu or Mitsubishi would not be allowed to import this quantity at this price into the U.S., because this practice stifles U.S. manufacturers.

Investigation determined that Atari was importing large quantities, 150,000 or more a wekk into the U.S. since May,1988. None were declared through U.S. Customs, and it appears telexes and telephones were used to order specific quantities in furtherance of this scheme.

Based on the above, Assistant US Attorney stated he would consider prosecution of this matter under the Wire Fraud Statutes or 1001 Falsification of Import Documents.

SOURCE: FBI Case 87A-SF-40454, Pages 42-43

This reminds me a bit of a reddit user who as a teenager knew of the coming ban of DRAM so he/she bought piles of them much cheaper before the ban.

And I think he said they had to desolder them from the boards. Then sold it for a very large amount of money.

I forget who the user is maybe that's a good thing!

Trivia: when the DRAM shortage was ending during 1989, 1Mbit DRAM prices fell first. This is partly because Toshiba etc. started converting fabs from 256Kbit to 1Mbit DRAM back in mid-1987 but the demand for 256Kbit DRAM was still increasing (Samsung was able to increase their market share in DRAM due to this). Back then, 1Mbit DRAM yields was much lower than in 1989.

The backdrop (and reason) for this smuggling operation was the 1986 US.-Japan semiconductor trade agreement. A fascinating read can be found here (pdf):

http://www.nber.org/chapters/c8717.pdf