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Apple prepays for a half-billion dollars in flash memory

post #1 of 32
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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."
post #2 of 32
That's a lot of money gone......in a flash.
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post #3 of 32
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...
post #4 of 32
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.
post #5 of 32
We can't really speculate too much as to if the flash is for a new product. It makes sense to me that they would pre-pay for the higher capacity flash for devices like the 64Gb iPod Touch and next year's 64Gb iPhone. Maybe the Mac Net(book) too.
post #6 of 32
Wholesale price to boot!

Early termination clause in the contract I'm assuming, in case demand drops.
post #7 of 32
Quote:
Originally Posted by Wiggin View Post

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...

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post #8 of 32
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.
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post #9 of 32
Quote:
Originally Posted by hmurchison View Post

That's a lot of money gone......in a flash.

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post #10 of 32
Intel just announced availability of new 32-nm flash memory... I wonder if they should've dealt with Intel as well...

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post #11 of 32
Quote:
Originally Posted by addabox View Post

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.
post #12 of 32
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.
post #13 of 32
It was in the interest of Toshiba to update its 1.8 Hard drive business that was fading to the Flash business. Toshiba and Apple have memories together.
post #14 of 32
Quote:
Originally Posted by SpamSandwich View Post

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.
post #15 of 32
Quote:
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.
post #16 of 32
Quote:
Originally Posted by cwfrederick View Post

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?/
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post #17 of 32
Quote:
Originally Posted by iPhone1982 View Post

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
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post #18 of 32
Quote:
Originally Posted by hmurchison View Post

That's a lot of money gone......in a flash.

Oh lord!
post #19 of 32
Quote:
Originally Posted by JeffDM View Post

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.
post #20 of 32
Quote:
Originally Posted by hmurchison View Post

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.
post #21 of 32
Quote:
Originally Posted by CAM View Post

Sounds like you need a hug!

EDIT: Please don't quote bad language directly.

Or a punch in the nuts.
post #22 of 32
Quote:
Originally Posted by iPhone1982 View Post

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.

uuuh... lol wut?
post #23 of 32
Quote:
Originally Posted by iReality85 View Post

uuuh... lol wut?

The trolls are like fortune tellers of doom. They've said Apple is doomed for decades and all been wrong so far, no matter, they will predict it again. They are as bad as the stupid TV psychics, if something doesn't work, they'll have a convenient explanation as to why it went wrong without admitting they were wrong.
post #24 of 32
Quote:
Originally Posted by iPhone1982 View Post

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.. ...

Your argument is written like a crazy person and contradict yourself several times here. Mostly, you don't seem to know what you're talking about either. To knock just a few of your "points" down ....

- Despite the size of the buy, they are only really securing next years flash, the intel technology is not going to be in production by then.

- The iPod market is not "in the dumpster" by any means. There is an iPod in every iPhone and the market is doing rather well regardless.

- Apple won't drop it's margins, and the gross margin has stayed the same despite the recent price drops.

- Mac sales are actually *up*

- The Apple store is one of the most profitable retail operations in the history of retail and is nowhere near being "a thing of the past."

Why do you even post here when you obviously don't know anything about Apple, business, product developement, the market in general, etc. etc. ???
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post #25 of 32
This is a smart move. There has been little investment in capacity for advanced flash in the past 18 months, and there is a supply crunch coming, assuming the semiconductor market continues to show signs of picking up.

Apple will be in a good position to capitalise.
post #26 of 32
Quote:
Originally Posted by wraithofwonder View Post

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.

The speed difference between 667 to 800 and 800 to 1066MHz RAM is insignificant. The biggest effect it has is on integrated graphics and that's still only going to be about 5-10%
post #27 of 32
Quote:
Originally Posted by Wiggin View Post

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...

I would like to see the US Federal government learn that lesson.

How about a **real** balanced budget, and only spending what we make?? It is tough to complain about consumers, when the largest consumer in the US, the gov't, is the worst in terms of spending money they (we) don't have.
post #28 of 32
Quote:
Originally Posted by FuturePastNow View Post

The speed difference between 667 to 800 and 800 to 1066MHz RAM is insignificant. The biggest effect it has is on integrated graphics and that's still only going to be about 5-10%

Something I find very interesting. Talking about memory bandwidth and Nehalem.

Previously, the frontside buss was declaimed as having too little memory bandwidth. But now, Nehalem has too much, it appears.

While memory tests show that using three channels and faster RAM make a big difference in memory bandwidth, other teats show that it makes no real difference in program speeds.

While there will be some advantage for servers and many small files, it doesn't seem to matter for most every other program. The mount of memory is more important.

I wondered why Apple limited the Mac Pro to 1066, when Intel's specs for those Xeons said 1333. But it seems that the faster RAM makes no difference. Anandtech did tests on a Nehalem machine using RAM up to 2,000, and found now difference that mattered above 1066. As ECC RAM gets much more expensive above 1066, it was a good idea for Apple to use that. Though, according to the owner of OWC, who told me in a conversation, Apple actually limits the speed of faster modules to that speed, though he said that he couldn't tell me why, he did know.
post #29 of 32
Quote:
Originally Posted by melgross View Post

Something I find very interesting. Talking about memory bandwidth and Nehalem.

Previously, the frontside buss was declaimed as having too little memory bandwidth. But now, Nehalem has too much, it appears.

While memory tests show that using three channels and faster RAM make a big difference in memory bandwidth, other teats show that it makes no real difference in program speeds.

While there will be some advantage for servers and many small files, it doesn't seem to matter for most every other program. The mount of memory is more important.

I wondered why Apple limited the Mac Pro to 1066, when Intel's specs for those Xeons said 1333. But it seems that the faster RAM makes no difference. Anandtech did tests on a Nehalem machine using RAM up to 2,000, and found now difference that mattered above 1066. As ECC RAM gets much more expensive above 1066, it was a good idea for Apple to use that. Though, according to the owner of OWC, who told me in a conversation, Apple actually limits the speed of faster modules to that speed, though he said that he couldn't tell me why, he did know.

Intel's FSB wasn't a serious limitation to 1P and 2P systems, but four processors could saturate it (or even 4+ cores on two processors when Intel was making MCM processors where each die connected to the FSB). Prior to Nehalem, Opteron killed Xeon in quad-socket server sales. The situation hasn't exactly reversed itself but Intel has regained the lead in high-performance computing.

As for Nehalem, I think the memory bandwidth is there, but it's simply not used by any applications. The main reason for giving each processor its own memory controller is to avoid the problems caused by multiple processors fighting over one bus for memory access. So the types of computers Apple sells won't see much benefit faster RAM or an integrated memory controller. Maybe they will when we've got 8 or 16 core processors.

Limiting the Mac Pro to 1066MHz RAM could be a simple EFI setting. Apple might have a good reason for doing so, or they might just want to advertise faster RAM as an update in a future revision of the Mac Pro. Apple has been doing that sort of thing quite a bit recently.
post #30 of 32
Quote:
Originally Posted by FuturePastNow View Post

Intel's FSB wasn't a serious limitation to 1P and 2P systems, but four processors could saturate it (or even 4+ cores on two processors when Intel was making MCM processors where each die connected to the FSB). Prior to Nehalem, Opteron killed Xeon in quad-socket server sales. The situation hasn't exactly reversed itself but Intel has regained the lead in high-performance computing.

As for Nehalem, I think the memory bandwidth is there, but it's simply not used by any applications. The main reason for giving each processor its own memory controller is to avoid the problems caused by multiple processors fighting over one bus for memory access. So the types of computers Apple sells won't see much benefit faster RAM or an integrated memory controller. Maybe they will when we've got 8 or 16 core processors.

I thought it was a little more complicated than that. The previous generation multi-socket systems had one bus per socket, which isn't terribly different in memory bandwidth than having the memory controller on die if you didn't have major device I/O. I think the P4-based Xeons did have all sockets fight for one bus, and it was a slower bus at that. I thought on-die was supposed to reduce latency and give bandwidth back to regular device I/O.
post #31 of 32
Quote:
Originally Posted by JeffDM View Post

I thought it was a little more complicated than that. The previous generation multi-socket systems had one bus per socket, which isn't terribly different in memory bandwidth than having the memory controller on die if you didn't have major device I/O. I think the P4-based Xeons did have all sockets fight for one bus, and it was a slower bus at that. I thought on-die was supposed to reduce latency and give bandwidth back to regular device I/O.

Yes, giving each processor its own FSB and switching to FB-DIMMs were Intel's attempt to mitigate the problem. Sort of a brute-force approach. I don't know if it was ever intended as a permanent solution. It certainly made things more expensive and complex.
post #32 of 32
Quote:
Originally Posted by FuturePastNow View Post

Intel's FSB wasn't a serious limitation to 1P and 2P systems, but four processors could saturate it (or even 4+ cores on two processors when Intel was making MCM processors where each die connected to the FSB). Prior to Nehalem, Opteron killed Xeon in quad-socket server sales. The situation hasn't exactly reversed itself but Intel has regained the lead in high-performance computing.

As for Nehalem, I think the memory bandwidth is there, but it's simply not used by any applications. The main reason for giving each processor its own memory controller is to avoid the problems caused by multiple processors fighting over one bus for memory access. So the types of computers Apple sells won't see much benefit faster RAM or an integrated memory controller. Maybe they will when we've got 8 or 16 core processors.

Limiting the Mac Pro to 1066MHz RAM could be a simple EFI setting. Apple might have a good reason for doing so, or they might just want to advertise faster RAM as an update in a future revision of the Mac Pro. Apple has been doing that sort of thing quite a bit recently.

Yeah, it was more the number of cores per socket that was a problem. With two cores, the FSB didn't always keep up. With four, it was hopeless. That's why so much cache.
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