In a flash, iPod/iPhone demand see flash prices go up

By Alex Zaharov-Reutt
Thursday, 19 July 2007 17:42

Mobility

NAND flash memory, used in mp3 players including the iPod nano and the iPhone, is suffering from heavy Apple demand and lower yields as manufacturers move to new technology, making life difficult and more expensive for anyone that isn’t Apple.

If you’re an mp3 or other digital device manufacturer and you’re looking for NAND flash memory, you likely already know the story: Apple has gobbled up a large chunk of available supply for the iPod, the iPhone, and whatever new iPods Apple has in store for Planet Earth for the Christmas 2007 holiday shopping season.

A report from DRAMeXchange says that over the past three months, the ‘spot price’ for NAND Flash and the contract price have both experienced rapid price increases.

In addition, the changeover to new manufacturing processes has hit a glitch, not yet being fully mature with yields not being as robust as initially expected, causing supply to be even tighter. Some manufacturers, reports DRAMeXchange, have moved from 70nm to 60nm or even 50nm processes, while other manufacturers already at 60nm are moving to 50nm.

DRAMeXchange says that: “Coupled by the fact that a huge portion of the capacity is being allocated for the anticipated demand from Apple’s iPhone and iPod in 2H07, many downstream vendors have been unable to secure a sufficient amount of Flash chips”.

They also believe that “it will take roughly 2 to 3 quarters before manufacturers can enhance the yield rate to a more acceptable level. In other words, a Flash chip shortage will likely occur. In addition, as many downstream vendors begin to stock up on inventory ahead of the year end Christmas sales, the undersupply could grow more serious. In general, the Flash supply in 3Q07 is projected to remain insufficient, while prices are expected to rise further”.

So, the big questions revolve around what new iPods Apple has in store for us, and what price they will retail at. Chances are that Apple has negotiated an excellent price, keeping iPod prices in line with – or even slightly cheaper than – the price points we’re already used to.

But unless you’re a third party manufacturer with your own supply of NAND flash, as Samsung and SanDisk are, for example, it doesn’t look like it’ll be any kind of party for mp3 player competitors to Apple, meaning Christmas 2007 will likely be very kind to Apple – and plenty of happy iPod/iPhone recipients – yet again!