Samsung power outage exposes memory chips supply vulnerability

Stan Beer
Sunday, 05 August 2007 14:00

Opinion and Analysis

A power outage shuts down a flash memory chip plant for less than 24 hours. As a result shares in a leading computer and consumer electronics firm dive and analysts predict NAND flash chips will cost more for the near term. Such is the IT and electronics markets' vulnerability to the supply of memory.

Samsung electronics is by far the world's largest maker of NAND flash chips with well over 40% market share. However, it's a sobering thought to think that the world's supply of flash memory is so dependent on the output of one plant.

The consumer electronics and IT industries have become increasingly dependent on the use of NAND flash for a wide range of devices, ranging from mobile phones to cameras to memory sticks. If, as some analysts predict, the price of flash chips rises as a result of this incident then the entire hardware technology industry is affected.

If a single power outage in Seoul can cause Apple shares to drop by more than 3% because iPods and iPhones rely on flash, what would happen if a major disaster hit?

With this in mind, heavy users of DRAM and flash memory supplied by Samsung would probably do well to diversify their supplier base. They would also be well within their rights to suggest that Samsung should consider dispersing its chip manufacturing operations geographically.