Interview: Corsair Still Sets Own Course
NOV. 26, 2011 • One of the side effects of video game cycles that stretch on for a decade or more is that the game technology torch is passed to personal computers. While console development is locked into a stationary hardware specification, developers who want to push into advanced content territory can only do so on PCs.
There’s a stable core of gamers out there who are well aware of this technology shift, and who modify, or self-build, their computers to boost performance to enjoy every ounce of advanced graphics or content available. For more than a decade Corsair Components has been a premier provider of high-performance memory modules to these enthusiasts. In the process the company has nurtured a loyal following and much success. The kind of success that has allowed Corsair to branch out into a host of complementary PC components and peripherals targeted at high-end gamers.
The Fremont, Calif.-based company has eyes on future growth and acquisitions, and filed an IPO application in April, 2010 to raise an estimated $86.25 million. To get a better grounding on the enthusiast PC hardware business, and Corsair’s position in the segment, DFC went to founder and chief executive, Andy Paul.
DFC: It’s a long journey from making L2 cache modules in 1994 to where Corsair is today. Give us the big picture overview of the company. How did you get started, how did your product lines develop, who are your major partners, what are your current major products, and how many consumers do you estimate purchase your products?
Andy: Well as you note we started the company to make L2 cache modules because we saw a gap in the market for them. We did quite well and made a name for ourselves in the PC components world but within 2 years Intel had completely integrated cache into their CPUs so that was the end of those products! During the late ‘90s consumers began to find out that it was quite easy to build their own computers and also to overclock them for higher performance, and we began to make components to support that trend. We spent eight years developing our memory business until by 2006, we were clearly the leader in supplying memory modules to enthusiasts and were shipping some 8 million to 9 million modules per year. I think we figured out at that time, given that most consumers buy modules in pairs, that we were selling to about 5 million customers. That’s a lot considering that we figure the home built computer market is between 10million and 15 million consumers.
At that point we realized that our brand was so strong that we could move into other products, and so we embarked upon a strategy to make as many components as possible for the PC enthusiast market. Power supplies (PSUs) were our first additional enthusiast product. We now also make computer cases, liquid coolers for CPUs, solid state drives (SSDs), speakers, headsets, USB drives, gaming mice and gaming keyboards – the latter two categories we just launched in September of 2011.
The peripherals are important, because while as I said there are 10 million to 15 million people building their own computers, there some 200 million people actively playing PC games. We ship into more than 60 countries. Our Memory business is now less than 50% of our total business.
DFC: As someone who hails from across the pond, how did you end up in the United States making memory for serious fussy gits who build their own gaming computers?
Andy: I didn’t really come over here for that reason! I was working in the semiconductor business and felt like Silicon Valley was the place to be. Once I arrived, I worked for a few companies and then got the startup bug. Now here I am.
DFC: How does the custom memory market today compare to 10 years ago?
Andy: Our sense is that the market is growing, especially in Asia. As you know few research companies have done deep dives on this. So we largely have to go by our numbers, which are growing strongly.
DFC: Corsair memory modules have a very good reputation with enthusiast gamers. How long did it take you to earn that reputation?
Andy: Actually we have been supplying modules used for overclocking since 1998, so 13 years now. Probably 90% of those who build or mod their PCs play games. At the start the market was quite small so we became a market leader very quickly, and we have managed to hold onto the lead.
DFC: Who do you consider your primary competitors, and how do each of you rank in market share?
Andy: With eight product lines now, the list of competitors is very long and different for each product line. We really don’t have anyone with the breadth of products that we have for this enthusiast market. Clearly we have to watch Kingston in memory because they are very large. For cases and PSUs there several companies such as Antec and Coolermaster that do well, and for gaming peripherals its Logitech and Razer.
DFC: With these new product segments like gaming headsets, gaming keyboards, and gaming mice there already was a lot of established competition. Was entering the fray now difficult?
Andy: Actually there is far less competition in peripherals than we have had in components such as Memory, PSUs and Cases.
DFC: What sets Corsair memory apart from similar products from a Patriot, G.Skill, Kingston, or Crucial?
Andy: Firstly, we are very focused on our core customer base, and we design modules and components for their needs. Secondly, we are very focused on quality and customer support. Not to say that the companies you mention do a poor job on any of these things, but we do a little better
DFC: What is your most popular memory product, and why?
Andy: Our Vengeance line is the fastest growing, and in terms of size of module, we are seeing most gamers move to 16GB per system.
DFC: Corsair maintains strong relationships with major PC manufacturers. Yet, even with a performance PC, makers of retail systems have little tolerance for high performance components that can sometimes contribute to errors and glitches. How does Corsair balance the needs of PC makers, and those of enthusiast builders who have a higher tolerance for minor errors in the search for higher performance?
Andy: Generally in the past, when we have made products for HP or Dell for their gaming PCs, they will end up picking products that are fast, but not at the very edge, so they can maintain some margin. I would say all of our products are designed to run in a stable mode at their advertised speeds, though clearly many of our consumers will overclock them until they are right at the edge.
DFC: What percentage of you memory business is accounted for by major manufacturers like Alienware?
Andy: Actually these days we ship mostly to consumer builds. It is very difficult; to to be profitable shipping to volume OEM houses.
DFC: What are your top sales regions in the world today, and where are you showing the most growth?
Andy: Europe is number one, and the United States is number two. Asia is the fastest growing over the past few years, same as the market trends.
DFC: How do you adapt Corsair’s products for gamers outside your core U.S. market?
Andy: Aside from the obvious AC voltage requirements and the languages on boxes, the only other difference is what we print on the keys of our keyboards.
DFC: How big a deal was your patented DHX head spreader design to your business? How did DHX and DHX+ set you apart from your competition?
Andy: At the time we did DHX, there was a huge focus on Memory overclocking because it was the bottleneck of the whole system. So it made a massive difference, and certainly helped us maintain our market lead.
DFC: Some PC gamers, when they get a little older, tend to value less noise and less twitchy computers for their gameplay. Have you noticed this pattern in any way with consumers who buy Corsair memory, power supplies, PC cases, or CPU coolers? How does Corsair cater to users who still want better performance, yet also place a premium on reducing heat and noise in their garage-built systems?
Andy: One of our very successful product lines is our range of liquid coolers for CPUs, which are designed to cool without making lots of noise. Also high-efficiency PSUs mean less heat to get rid of with noisy fans, and well designed cases help this as well. No one wants a noisy system.
DFC: Last October you launched what Corsair billed as the first high-performance quad-channel 32GB memory kit, the 1866 MHz Dominator. What does this product tell us about Corsair versus the competition?
Andy: Well it says that our customers are the ones who want 32GB in the system as soon as they can get it and they want it to be fast.
DFC: What has been the effect of the recession on what memory products gaming consumers purchase? Are they purchasing less-expensive DIMMs? How have you had to adjust your product line-up?
Andy: Not really any change for us. Memory has, in fact, gotten cheaper. With less general consumers buying PCs – compared to forecasts – component prices are down and so the raw chip prices are less. So if anything we have been seeing people get larger sticks of memory because they are more cost effective
DFC: The transition to DDR3 went rather smoothly, what’s going to be the next big thing in the memory business, and what will that transition be like?
Andy: Not for some time. DDR3 is now more than 80% of our memory business. We figure at least two years or more before we see the follow on from DDR3. The next big thing is Intel’s four-channel platform, which clearly works best with four channels of Memory.
DFC: How are gamers taking to SSDs? What’s the acceptance curve like for applications as boot drives, etc.?
Andy: I would say the 90% of gamers and enthusiasts who use SSDs also use spinning drives to store data. So what the industry calls boot drives, or cache drives, is in fact what most gamers are doing with their SSD drives. I don’t know too many people in a desktop gaming system who would use just an SSD drive. That would be a very expensive proposition. Different on a laptop, obviously where you can’t have two drives.
DFC: What is Corsair’s design philosophy for gaming peripherals compared to a competitor like Razer? How is Corsair distinctive?
Andy: We are using Cherry Red mechanical key switches that give a very positive action, this is obviously very important in FPS games where multiple rapid key strokes are required. We have two families of keyboards and mice, one for FPS games and one for MMO games. Both are designed precisely for the needs of the gamers who play those particular games. And our Industrial design is really good.
DFC: What has been the feedback from gamers so far on your headsets and input devices? What advice have you taken to heart for your future designs?
Andy: Great response from those who have seen them, although they were not released all that long ago and its still very early. It’s also too early yet to have incorporated customers feedback, but our next-gen designs will obviously include them. That’s what we do with customer feedback on all our product lines
DFC: If we visited your vineyard, which of your wines would you encourage us to taste, and why?
Andy: Mouverdre, because it is unknown generally in the U.S., but is gaining in popularity. This is one of the grapes used in Chateauneuf du Pape, and, in fact, the vines I am growing actually are cuttings from one of the famous French produces of CDP.