Uh-oh. Memory chips are getting cheaper again, way too fast.

Chip maker and memory module designer SMART Modular Technologies (Nasdaq: SMOD) just revealed another oversupply and slow demand imbalance, mirroring the problems that triggered the last memory price wars. Only this time, the oversupply seems to be limited to the Brazilian market -- which is where SMART is busy building factories and planning a huge future.

Hefty price declines on DRAM memory in Brazil led SMART to miss sales targets in the first quarter. Non-GAAP earnings of $0.27 per share more than tripled the year-ago tally thanks to the economies of scale that come with growing sales but largely fixed costs; however, it was a slight downtick from the previous quarter. So far, not too shabby.

But since the Brazilian memory problems just started, SMOD baked that trend into next quarter's guidance. Hence, second-quarter sales will disappoint anyone still looking at last night's analyst estimates, and earnings should come in at about half of the projected total. That's why shares are more than 15% cheaper today.

And the market is treating these troubles as SMART's and SMART's alone. Reading industrywide issues in SMART's tea leaves would also damage the share prices of primary competitors, but Micron Technology (Nasdaq: MU) and Sanmina-SCI (Nasdaq: SANM) are down less than 0.5% as of this writing while Netlist and STEC (Nasdaq: STEC) are outperforming the Nasdaq benchmark. In short, nobody expects the Brazilian oversupply to bleed into other markets.

So should you sell your SMART shares and run screaming in the other direction? I don't think so at all.

The stock was dirt cheap yesterday, it was cheap after jumping 13% overnight in October, and it's even cheaper today. This for a company that is solidly profitable even in the projected lean times, carries negligible debt and lots of cash on its balance sheet, and is involved in some serious growth stories like solid-state drives. There are no sure bets in this crazy market of ours, but buying SMART Modular on a short-term dip like this is pretty darn close to it.