Apple prepays for a half-billion dollars in flash memory
Apple has continued its significant investment in flash memory, with the Cupertino company announcing Tuesday that it recently prepaid $500 million to Toshiba to secure long-term supply of NAND for its mobile devices.
The half-billion dollar investment came early on in the September quarter, so it was not officially revealed in Tuesday's Q3 results. However, Apple COO Tim Cook and CFO Peter Oppenheimer discussed the purchase during the earnings conference call.
"We view flash as a very key component for us," Cook said, "because as you know we use it so many of our products."
As Cook pointed out during Tuesday's conference call, Apple products make up a significant portion of the flash memory devices on the market today, including the iPhone, iPod touch, iPod nano and iPod shuffle.
In 2005, Apple paid $1.25 billion in advance to Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory. The previous long-term supply agreement runs through 2010.
Details were not made available on Tuesday's conference call as to the terms of the new agreement with Toshiba.
During the earnings call, Cook was asked whether the company would do any other long-term deals with suppliers. The COO said there are currently no plans on the table, but that he wouldn't "close that door."
"We are always open to doing additional deals," he said, "with the right terms and conditions."
The half-billion dollar investment came early on in the September quarter, so it was not officially revealed in Tuesday's Q3 results. However, Apple COO Tim Cook and CFO Peter Oppenheimer discussed the purchase during the earnings conference call.
"We view flash as a very key component for us," Cook said, "because as you know we use it so many of our products."
As Cook pointed out during Tuesday's conference call, Apple products make up a significant portion of the flash memory devices on the market today, including the iPhone, iPod touch, iPod nano and iPod shuffle.
In 2005, Apple paid $1.25 billion in advance to Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory. The previous long-term supply agreement runs through 2010.
Details were not made available on Tuesday's conference call as to the terms of the new agreement with Toshiba.
During the earnings call, Cook was asked whether the company would do any other long-term deals with suppliers. The COO said there are currently no plans on the table, but that he wouldn't "close that door."
"We are always open to doing additional deals," he said, "with the right terms and conditions."
Comments
Now if only other business and individuals could just learn that lesson and not just survive from one loan to the next...
Early termination clause in the contract I'm assuming, in case demand drops.
A lot of companies are so hamstrung with debt and limited access to additional credit that they can barely run their business much less being able to take advantage of opportunities. Apple is pretty much unaffected by the current credit crunch. Their cash hoard is definitely a competitive advantage.
Now if only other business and individuals could just learn that lesson and not just survive from one loan to the next...
AND OUR GOVERNMENT
Hallelujah
It had occurred to me that they might want to make similar strategic purchases of other components, but then I realized that things like, for instance, OLED screens might evolve too quickly for that to make any sense.
That's a lot of money gone......in a flash.
I suppose that flash memory is pretty fully commodified, which is why Apple can make huge buys for goods that won't be put into service for years to come, without fear that the good price and current technology they negotiated in '05 becomes boat anchor of '10.
It had occurred to me that they might want to make similar strategic purchases of other components, but then I realized that things like, for instance, OLED screens might evolve too quickly for that to make any sense.
With new components a large advance-order can kick start the industry, component suppliers can give great deals because (1) their tooling costs are funded and (2) the market for the component gets established as everyone else tries to catch up with Apple. Apple did this in the '90s with CD drives and early this decade with DVD burners when a PowerMac including DVD burner was available for less than the price of a stand alone burner. Think what Apple did with USB, it was an established technology but no one used it until they made it standard.
Intel just announced availability of new 32-nm flash memory... I wonder if they should've dealt with Intel as well...
That would forward thinking on Apple's part. They purchased all of last years Flash memory for the next iPhone.
You have to get it by now. By last years parts but charge a premium for The APPLE LOGO.
The 4th generation should kick ass on 1995 phones. It's All about the Apple Store and not about the Phone. Steve is briliant.
u
Future. iPhone was a big hit, Apple road the wave until it sank. Apple iPod Market is in the dumbster (error in spelling intended).
Apple made money for the shareholders for 1 reason. The iPhone.
Mac sales are crap, ipod sales are crap.
Apple currently has the iPhone and a number of analysts have pointed that out today.
Apple will continue to reduce their Mercedez Profit for Dell profit in the computer arena.
Flash will become Standard on All "non Apple" Smart Phones.
I give it 3 years at the most. Ride the wave while you can because margins are going to be cut and the Apple Store will be (and is) a thing of the past for letting me know what I can have on my Phone.
****
EDIT:Language.
Steve *****. But you are Apple Boys, you ishould be used to it given the path *****.
The interesting part is you keep saying Apple *****. I love you.
Sounds like you need a hug!
EDIT: Please don't quote bad language directly.
im guessing that apple is not buying any flash at the point of sale but it is more like an advance payment on future products, in exchange for a discounted rate from what toshiba would normally charge everyone else. that way apple is not locked into paying current high prices after prices drop.
huh?/
T .
Apple currently has the iPhone and a number of analysts have pointed that out today.
I give it 3 years at the most. Ride the wave while you can because margins are going to be cut and the Apple Store will be (and is) a thing of the past for letting me know what I can have on my Phone.
I hope they ban you for these insane remarks .
Back to topic. Apple not only pays a set percentage below the current quoted worldwide market rate that is traded around the world.
EDIT: Bruce please don't quote that.
Apple has raised the price for everyone else by taking $1/2 billion of memory production off the table .
Apple keeps marching on .
ta da ta da
That's a lot of money gone......in a flash.
Oh lord!
I totally forgot they invested that much, but it makes sense to secure the necessary supplies. I think it helps the bean counters too, so they know the cost of supplies without worrying about how the market for those supplies shift. It probably helps the supplier a lot too to be able to plan at least some of the production ahead of time.
Exactly.
That's a lot of money gone......in a flash.
Cute.
This actually worries me though. On one side, this could be great - Apple could have gotten a great deal in the midst of the recession and be able to pass along a better product for a lesser price as a result.
On the other hand, this could become a combo drive-like thing, where everyone else starts selling cheaper higher capacity players and Apple sticks to the same old sizes for awhile. Now the volume on the iPods is something else, so I feel there is very little chance of this latter scenario playing out.
But I worry about the strangest things sometimes and that combo drive nonsense really bugged me and I really wonder about those DDR2-800 DIMMs used in today's MacBook when the MacBook Pros, heck, every other Mac uses DDR3-1066. Not that I care too much, had I the funding a nice new aluminum MacBook Pro would be my new baby.
Sounds like you need a hug!
EDIT: Please don't quote bad language directly.
Or a punch in the nuts.