Rob Zenilman submits: In today's Wall Street Journal, Yun-Hee Kim's Apple, Sony May Drive Chip Boom discusses how the fortunes of flash memory manufacturers are directly tied to the arrival of new hit products, primarily from Apple (AAPL) and Sony (SNE). NAND flash memory prices have been declining this year, due to lower than expected demand. Nonetheless, chip makers are expanding capacity, anticipating that Apple and Sony will introduce new products that will soak up the supply. Examples of products using NAND flash memory are MP3 players (iPods), digital cameras and portable gaming machines like Sony's Playstation Portable.
4 gigabit NAND flash memory chips have declined from $8.93 (late June) to $7.22 (August 28). According to iSuppli Corp. analyst Nam Hyung Kim:
Comment: Lower demand and falling prices helps explain the recent consolidation among flash memory manufacturers - Micron's (MU) purchase of Lexar (LEXR) and SanDisk's acquisition of M-Systems (FLSH). SanDisk is taking matters into its own hands by aggressively increasing its MP3 player market share. The wild card is Microsoft's (MSFT) recent alliance with Toshiba to jointly develop and market the Zune music player. Look how Microsoft has attacked the game console market, first with the Xbox and now with the Xbox-360.
Apple and Sony will decide the destiny of the NAND flash market in the fourth quarter... Potential demand from Apple and Sony could consume up to 40% of the global NAND supply in the fourth quarter. But any delay in new product launches will blow away the supply-and-demand balance and will spur significant oversupply and price declines.
Let's see where the chips fall.