Low Flash Memory Prices Pressure Chip Makers

In an article presented Thursday at DigiTimes, there was more bad news for manufacturers of NAND flash memory. And perhaps another negative for Apple (AAPL) was revealed.

The reporters announced that Apple has not yet started making big procurements of NAND flash memory thus far in 2008. With NAND already selling below cost, according to sources at Taiwan memory makers, this lack of demand from a major customer could make a bad situation worse for NAND manufacturers. We have already had an announcement from Intel (INTC) that their margins are being hurt by the persistent pricing problems in NAND flash. It can only be a matter of time before we hear the same tune from SanDisk (SNDK), Micron (MU), Samsung and others.

As for Apple, a number of their new product announcements have involved flash, such as the solid state drive in the MacBook Air. Many existing products are heavily dependent on flash including the iPod and iPhone. Having purchased approximately $1.2 billion worth of flash in 2007, the perceived lack of orders is unnerving to flash vendors. Is bellwether Apple seeing weaker demand?

As for the flash manufacturers, consider this quote from the DigiTimes article: "As memory makers can now hardly tune their capacity mixture with DRAM when the DRAM industry is also experiencing a trough, the downward NAND flash price trend seems to have no catalyst to make prices trend upward in the near term..."

Looks like it could be a tough few quarters for the memory makers and those companies that sell semiconductor manufacturing equipment to them. And maybe Apple, too.

Comments

[reinharden:]

One suspects that with flash prices at all time lows and with overall demand practically non-existent, it might behoove AAPL to continue to buy flash on the spot market at these self-same new-all-time-low-price... every week rather than lock-in longer term, possibly higher prices.

I'm just saying...


And, if AAPL is unsure of their own demand, definitely better to stay on the spot market unless supplies start to look tight.

Perversely, generally speaking, in the current market, the longer AAPL goes without entering into new contracts, the less their supplies will cost.

reinharden

2008 Mar 13 01:33 PM

[Roy Flande...:]

Our prescient "author" has certainly shown great acrobatic skills in making the marvelous (but just a bit fatally off) trapeze "leap" from chip makers and Apple.
Perhaps it might help if he worked it out on paper, with Facts rather than erroneous intuition.

2008 Mar 13 01:43 PM

[User 163394:]

My observation is that Apple's new MacBook Air is not going to be nearly as successful Apple would like. It has 2 serious flaws: It does not have a firewire port nor does it have an ethernet port. Flash drives are great but for this machine to be functional it needs both of those ports.

2008 Mar 13 02:51 PM

[Ames Tiedeman:]

When the sector tuns, big gains will be made in Mr. SNDK.

2008 Mar 13 03:20 PM

[Thoughtful:]

That's funny--I could have sworn that I love my MacBook Air! I guess I just must be imagining that low-cost USB to ethernet adapter I've been using--although I don't need it very much. And, remind me--why is it I'm supposed to miss the firewire port? Everything functions perfectly well wirelessly, including Time Machine backup. The only drawback I see is that I can't get any work done in public places anymore because of the Mac Air groupies that come out of the woodwork who want to see the "defective"(?????) and "dysfunctional"(????) notebook.

I only see the these descriptors applying to the above article.

2008 Mar 13 03:25 PM

[All Day Bre...:]

The "information" in this article has gone around the "Apple buzz" sites several laps already, I'm surprised to see it raise up several days later here. One thing which might be in play which hasn't been mentioned is that Intel is about to come out with its own flash memory and it may be that the reason Apple hasn't been ordering flash mem from its standard suppliers is because its got some sort of agreement with Intel which isn't being factored in.

As for the macbook air, its hard to know what Apple's sales forecasts were so its hard to know whether or not sales are meeting expectations. On the other hand, go look at Amazon's best 100 sellers and you'll see that the "Air" is in place number 26 (up 20 from the week before). Except for the Asus tiny sub-sub-notebook, the Air is the leading sub-notebook even if you generously use 4lbs as the sub-notebook cut off. It's Sony competition is number 66 on the list as I write this.

2008 Mar 14 06:40 AM

[jcrash:]

Bah, when Apple reports $1.25 for the quarter, perhaps everyone will shut their pie-holes.

2008 Mar 14 04:13 PM