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NAND flash prices drop 20% following lackluster demand from Apple, others

post #1 of 79
Thread Starter 
Contract prices for NAND flash -- the solid-state memory found in devices like the iPhone and iPad -- is said to have fallen "rapidly" in May following lackluster demand from major purchasers like Apple.

Chip prices for NAND declined more than 15 percent, and about 20 percent in the spot market, in May following "lackluster demand," according to Taiwanese industry publication DigiTimes. Apple remains the largest buyer of NAND flash, but demand did not pick up "as aggressively as usual in the second quarter," the report said.

In addition to Apple, other vendors are also said to be slowing orders for NAND flash. Sales of USB drives and memory cards were reportedly "stagnant" in the month of May.

The average price for a 32 gigabit multi-level cell NAND chip was down 15.8 percent in May to $4.85. A 16 gigabit cell dropped 11.4 percent to $3.12, while 64 gigabit parts are $9.39.

The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected.

The iPad 2 features the same capacity levels as the first-generation model introduced in 2010, maxing out at 64GB of solid-state memory. Apple has not increased the storage offered in its iOS products for a few years, leaving the iPhone at a maximum of 32GB. The high-end MacBook Air, released late last year, features 256GB of flash memory.



NAND flash memory has become an important component of Apple's best-selling mobile products, making Apple the world's largest consumer of solid-state memory from providers like Samsung. In fact, Apple has, on a number of occasions, caused a worldwide shortage of flash storage.

Last month it was reported that makers of NAND flash memory are working to transition their manufacturing processes to below 30nm, but such changes must still be granted certification by Apple in a validation process that now takes about nine months. Smaller manufacturing processes increase the density of memory in NAND flash, allowing for higher capacities, faster speeds, and lower manufacturing costs.
post #2 of 79
I thought that Apple almost never bought on the spot market. Their NAND supplies come almost entirely from direct, long-term contracts, and thus would have no impact whatsoever on the price of NAND in the spot market. Can someone with more knowledge of this issue clarify this point, please?
post #3 of 79
Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!

That's not taking into account the savings Apple makes by pre-buying in bulk.

I love Apple's products but disgraces like this do leave a bad taste in the mouth.
post #4 of 79
This is because next week, Apple will introduce quantumstorage. Don't ask me how it works, but it will be fu**ing awesome! 15 TB on a fingernail. All you'll ever need on every device.
post #5 of 79
"The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected."

Oh, it's VERY clear: the drop in demand has nothing to do with Apple and is due entirely to reduced PC desktop and portables sales and a total failure of non-iOS tablets to gain any traction in the market.
post #6 of 79
Quote:
Originally Posted by cws View Post

I thought that Apple almost never bought on the spot market. Their NAND supplies come almost entirely from direct, long-term contracts, and thus would have no impact whatsoever on the price of NAND in the spot market. Can someone with more knowledge of this issue clarify this point, please?

Apple's long-term contracts will have an effect on the market as those contracts have to be met by the manufacturers, tying up capacity and maintaining an increased price for other buyers for the duration of Apple's contracts.

Whether Apple cares what the current price of NAND flash is from day to day is less clear because they seem to have pre-paid for theirs as you say. Other factors impacting the price will be of concern to Apple as they may still be present when Apple's contracts come up for renewal/renegotiation.
post #7 of 79
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module cost the consumer $200.00 more!?!

That's not taking into account the savings Apple makes by pre-buying in bulk.

I love Apple's products but disgraces like this do leave a bad taste in the mouth.

I have to agree with you on this. Hopefully on Monday with the announcement of iCloud they give up a cheaper, more viable option to having large amounts of storage with us at all times.

Like SJ said when revealing ATV2, "people don't want to manage their libraries/Hard-drives"

I am really looking forward to a slick solution, because currently there is not a great option for actually owning itunes movies and bringing them with me.
post #8 of 79
Quote:
Originally Posted by Ryszard View Post

"The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected."

Oh, it's VERY clear: the drop in demand has nothing to do with Apple and is due entirely to reduced PC desktop and portables sales and a total failure of non-iOS tablets to gain any traction in the market.

Quite right.
As in "JP Morgan: Apple's iPad rivals reduce build plans after 'early dose of reality'" article from yesterday.
post #9 of 79
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module cost the consumer $200.00 more!?!

That's not taking into account the savings Apple makes by pre-buying in bulk.

I love Apple's products but disgraces like this do leave a bad taste in the mouth.

Its called capitalism. If you as the consumer think the benefits of the additional memory is worth paying $200 for, it doesn't matter how much it cost Apple. You either don't buy the more expensive model, or you buy a competitor's product.

E.g., Compare them to MS. The many different versions of Windows cost them exactly the same to produce (the fixed costs are the same, and the recurring costs are largely the cost of printing the CD). Windows Pro costs them exactly the same as Windows Home. However, there is still a much larger differential in consumer pricing, because the features they charge for Professional, are valued at that much, or more by a sufficient number of users.
post #10 of 79
Quote:
Originally Posted by bcahill009 View Post

I am really looking forward to a slick solution, because currently there is not a great option for actually owning itunes movies and bringing them with me.

You're right. I've always found it incongruous that SJ talks about iTunes movies etc. and how great it is to be able to watch them anywhere and then charges the earth for the flash memory in iOS devices. As you quote, he says people don't want to manage their storage. In that case, don't make 16Gb of storage the only option the majority of your customers can afford thereby forcing them to constantly manage their storage!
post #11 of 79
How does the statement:

Quote:
Originally Posted by AppleInsider View Post

Apple ... demand did not pick up "as aggressively as usual in the second quarter," the report said.

Translate into a headline saying:

Quote:
...lackluster demand from Apple...

So Apple demand picked up, just not as aggressively as some people thought it would. That is "lackluster" how, exactly?

Oh yes, not as many of us would have clicked on the headline if it hadn't been misleading.

post #12 of 79
Quote:
Originally Posted by Ryszard View Post

"The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected."

Oh, it's VERY clear: the drop in demand has nothing to do with Apple and is due entirely to reduced PC desktop and portables sales and a total failure of non-iOS tablets to gain any traction in the market.

Well, I think its also possible that NAND makers were expecting a huge ramp up, based on the June iPhone delivery schedule. However, now thats been delayed, they got caught flatfooted?
post #13 of 79
Because it should be Gb not GB. That is b for bits and B for Bytes. That is 8 times different.

@ AI : This is not the first time you got it wrong.

There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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post #14 of 79
Quote:
Originally Posted by Jonamac View Post

You're right. I've always found it incongruous that SJ talks about iTunes movies etc. and how great it is to be able to watch them anywhere and then charges the earth for the flash memory in iOS devices. As you quote, he says people don't want to manage their storage. In that case, don't make 16Gb of storage the only option the majority of your customers can afford thereby forcing them to constantly manage their storage!

If Apple was not differentiating based on Memory, you wouldn't have a $500 iPad.

The $500 iPad ONLY exists because Apple can makeup the loss of margins by making much larger margins on higher priced products.

This is VERY STANDARD practice across EVERY industry. Its just that you guys don't follow other industries/companies as closely as you do Apple (also, Apple is unique in being a complete class apart from every competitor, reducing competitive pressure).
post #15 of 79
Quote:
Originally Posted by Wiggin View Post

How does the statement:



Translate into a headline saying:



So Apple demand picked up, just not as aggressively as some people thought it would. That is "lackluster" how, exactly?

Oh yes, not as many of us would have clicked on the headline if it hadn't been misleading.


I read this to mean that, typically, Apple has started ordering in advance of an iPhone refresh by now.
The delay of the launch until September has probably meant excess capacity for the quarter.
post #16 of 79
Quote:
Originally Posted by bcahill009 View Post

Like SJ said when revealing ATV2, "people don't want to manage their libraries/Hard-drives"

I don't want to manage my library either, but I'd prefer the solution was higher capacity flash in Apple's devices. The only reason I have to manage my library now is because Apple hasn't increased the storage in any of their devices for a long time now. It's fine for the AppleTv to stream from my own computer. My home network is far faster and far more reliable than any consumer ISP or cell carrier can provide me.

But for my mobile devices, the cloud is going to come crashing down if/when everyone starts streaming all of their content. You think the carriers are struggling with capacity now, just what do you think is going to happen? Here's a hint: tiered data plans with higher prices. I think it would be cheaper in the long run to pay for higher capacity in my device than to pay the extra bandwidth charges which are inevitably coming soon.
post #17 of 79
Quote:
Originally Posted by addicted44 View Post

Its called capitalism. If you as the consumer think the benefits of the additional memory is worth paying $200 for, it doesn't matter how much it cost Apple. You either don't buy the more expensive model, or you buy a competitor's product.

E.g., Compare them to MS. The many different versions of Windows cost them exactly the same to produce (the fixed costs are the same, and the recurring costs are largely the cost of printing the CD). Windows Pro costs them exactly the same as Windows Home. However, there is still a much larger differential in consumer pricing, because the features they charge for Professional, are valued at that much, or more by a sufficient number of users.

It's called greed and make no mistake. A 3090% markup speaks for itself.

You can't compare this to Windows. This is a simple transaction. They buy for x and sell for y. We have no idea what MS' costs are and the Pro versions of Windows are not generally bought by consumers.
post #18 of 79
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!

That's not taking into account the savings Apple makes by pre-buying in bulk.

I love Apple's products but disgraces like this do leave a bad taste in the mouth.

To try and put it as simply as possible, you are looking at it as if the lowest tiered product is an ideally priced to meet Apple'd profit margin. If you consider it's an introductory price to hopefully upsell you to a higher capacity that balances out the loss in aveage profit

You mention Apple buying in bulk but prices are static. If they buy comsiderably more of the lower priced NAND they likely get even better pricing.

There are other factors besides those. Do anyone sell you and 48GB more for an extra $6?
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post #19 of 79
Quote:
Originally Posted by addicted44 View Post

E.g., Compare them to MS. The many different versions of Windows cost them exactly the same to produce (the fixed costs are the same, and the recurring costs are largely the cost of printing the CD). Windows Pro costs them exactly the same as Windows Home. However, there is still a much larger differential in consumer pricing, because the features they charge for Professional, are valued at that much, or more by a sufficient number of users.

That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.
post #20 of 79
Quote:
Originally Posted by ksec View Post

Because it should be Gb not GB. That is b for bits and B for Bytes. That is 8 times different.

@ AI : This is not the first time you got it wrong.

Exactly what I was going to say... Right down to admonishing AI for botching it again.

While I won't expect a 512GB SSD for $80 next week, lol, I do hope this price drop trickles into the SSD market quickly.
post #21 of 79
Quote:
Originally Posted by addicted44 View Post

If Apple was not differentiating based on Memory, you wouldn't have a $500 iPad.

The $500 iPad ONLY exists because Apple can makeup the loss of margins by making much larger margins on higher priced products.

This is VERY STANDARD practice across EVERY industry. Its just that you guys don't follow other industries/companies as closely as you do Apple (also, Apple is unique in being a complete class apart from every competitor, reducing competitive pressure).

You make that sound reasonable but one glance at rival tablets shows this up as false.

The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.

I don't want the Xoom - I think it's grotesque - but it shows my point.
post #22 of 79
Quote:
Originally Posted by ksec View Post

Because it should be Gb not GB. That is b for bits and B for Bytes. That is 8 times different.

@ AI : This is not the first time you got it wrong.

I wondered about that since we're talking about components.

Either way it doesnt change Jonamac's argument as it's now 8x$6.27 and charging $200.
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post #23 of 79
Quote:
Originally Posted by solipsism View Post

To try and put it as simply as possible, you are looking at it as if the lowest tiered product is an ideally priced to meet Apple'd profit margin. If you consider it's an introductory price to hopefully upsell you to a higher capacity that balances out the loss in aveage profit

You mention Apple buying in bulk but prices are static. If they buy comsiderably more of the lower priced NAND they likely get even better pricing.

There are other factors besides those. Do anyone sell you and 48GB more for an extra $6?

I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.
post #24 of 79
Quote:
Originally Posted by Senchou View Post

That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.

Precisely.
post #25 of 79
Quote:
Originally Posted by Jonamac View Post

You make that sound reasonable but one glance at rival tablets shows this up as false.

The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.

I don't want the Xoom - I think it's grotesque - but it shows my point.

You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.
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post #26 of 79
Quote:
Originally Posted by solipsism View Post

You're making a comparison on one component affecting the entire price. You also need to look at how the Xoom entered the market higher than the iPad, it's low sales, how thy affected the price to compete better with the iPad and what it's profit margin is.

I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.
post #27 of 79
Quote:
Originally Posted by Jonamac View Post

I understand the principle but let's not hide behind it. The Xoom has twice the memory for $15 more. Yes it's a piece of crap, but that didn't make it's memory cost any less.

You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?

Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.
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post #28 of 79
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!

That's not taking into account the savings Apple makes by pre-buying in bulk.

I love Apple's products but disgraces like this do leave a bad taste in the mouth.

buy some Apple stock and your views will change
post #29 of 79
Quote:
Originally Posted by Jonamac View Post

I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.

How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.
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post #30 of 79
Quote:
Originally Posted by solipsism View Post

You're reasoning is hiding behind it. I've seen this before and I think because Apple's primary differntiation of a product is capacity that there is an assumption the all such devices are equal in cost. As you stated the Xoom is a piece of crap so why assume it costs just as much?

Why assume they are even making a profit? For all you we know they are selling at a lose just to lessen the financial hit or to get some foothold they can hopefully later exploit. Amazon did this last week with a 99¢ digital Lady Gaga album to promote their new locker service.

All iPads are equal in cost. The ONLY difference between a 16GB iPad and a 64GB one is the cost of the NAND flash inside it.

I don't assume the Xoom costs as much, but its memory is bought from the same place Apple buys theirs. So are its other components. Apple brags about the price point it can reach and understandably so, but if a competitor can offer twice the memory in a device that at least on paper is comparable and only costs $15 more, it suggests the memory is the not the reason Apple hits the lower price point. It's moot anyway as we can all see the costs of the memory.
post #31 of 79
Quote:
Originally Posted by OriginalG View Post

buy some Apple stock and your views will change

Haha I'm sure they would!!
post #32 of 79
Quote:
Originally Posted by AppleInsider View Post

Contract prices for NAND flash -- the solid-state memory found in devices like the iPhone and iPad -- is said to have fallen "rapidly" in May following lackluster demand from major purchasers like Apple.

Chip prices for NAND declined more than 15 percent, and about 20 percent in the spot market, in May following "lackluster demand," according to Taiwanese industry publication DigiTimes. Apple remains the largest buyer of NAND flash, but demand did not pick up "as aggressively as usual in the second quarter," the report said.

...

The news of fewer orders for NAND flash comes as iPhone sales are said to remain strong, and demand for the new iPad 2 is also significant, making it unclear why orders are less than expected.

It seems pretty obvious to me.

The normal surge of NAND purchasing in May did not happen because Apple has delayed the launch of its next iPhone by a few months. Thus, there is no manufacturing ramp in May for a June/early July iPhone launch.

When the NAND industry sees a surge in sales, it will be indicative of the imminent launch of a new iPhone.
post #33 of 79
Quote:
Originally Posted by solipsism View Post

How about $50? Now what if to maintain their margins and maximize their profits their beancounters said the price of 16GB iPad is $599, 32GB iPad is $649, and 64GB is $699? It's not looking so hot now.

It's a good point. You may be right but I think the truth lies somewhere in between. Are there really so many people buying the 64GB model to offset the millions buying the 16GB one? It's an enormous premium and I can't help feel Apple sets it to put people off the higher storage to conserve their supplies of the memory. Perhaps that's understandable.
post #34 of 79
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!

As you were told, the cost for 64 GB is 8 times that number - about $50.

PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.

Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.

Quote:
Originally Posted by Jonamac View Post

That's not taking into account the savings Apple makes by pre-buying in bulk.

And your evidence for that is....?

In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.
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post #35 of 79
Quote:
Originally Posted by Jonamac View Post

You make that sound reasonable but one glance at rival tablets shows this up as false.

The Motorola Xoom costs $15 more than the 16GB iPad and comes with 32GB of memory standard.

I don't want the Xoom - I think it's grotesque - but it shows my point.

How does that show your point? There are many other differences between the 2 devices that could account for that.

What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.
post #36 of 79
Quote:
Originally Posted by Jonamac View Post

I know the comparison isn't perfect but it shows that higher memory can be incorporated without the galactic price tag. I see your points, and I expect a premium for higher capacities, but $200 is utterly indefensible. They are basically saying don't bother unless you have more money than sense.

How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.
post #37 of 79
Quote:
Originally Posted by Senchou View Post

That's a bad analogy. There is an incurred R&D cost associated with creating the additional features that you get with the more expensive versions of windows. The cost of switching out standardized components is pretty much nil aside from the cost of the component itself.

Maybe the analogy isn't correct.

But the point is that Apple prices their products to earn a certain margin. The Apple strategy is to usually price the cheapest products below that margin, and earn a higher margin on the more expensive products, so that the weighted margin of the mix bought by consumers will meet that target.

The correct way to look at this is that Apple is giving you a steep discount if you buy the $500 iPad.

Now, someone mentioned "greed", and I really don't know how to respond to that since capitalism is fundamentally based on "greed". If people weren't greedy, then communism would be perfect.
post #38 of 79
[QUOTE=jragosta;1874149]
Quote:
Originally Posted by Jonamac View Post

Can someone explain to me how a 64Gb module that costs Apple just $6.27 more than the 16Gb module costs the consumer $200.00 more!?!/QUOTE]

As you were told, the cost for 64 GB is 8 times that number - about $50.

PLUS, you have shipping costs, assembly costs, the cost of testing, cost of refurbishing or rejecting systems that fail due to bad memory, etc.

Most importantly, you're missing the entire point of a free market. The MARKET has determined that 64 GB of RAM is $200, not Apple. If Apple prices it far above what the market perceives as the value, then it won't sell. If Apple prices it below the market value, few people would be buying the 16 GB model. The fact that sales are roughly distributed between the three iPad memory configurations suggests that Apple is doing a good job of determining the market value.



And your evidence for that is....?

In electronics purchases, the contract price is often close to (or sometimes even higher than) the spot price. Companies sometimes agree to the contract to ensure supply rather than to get a better price. With NAND availability being so volatile, there's some logic to that.

I'm going to be kind and assume English isn't your first language as you're misread some of the comments here. Nobody said the 64GB module costs 8 times more than the 16GB module. That comment was not aimed at me, it was pointing out that some of us had been writing Gb instead of GB and a byte is 8 times greater than a bit. It has nothing to do with this argument. In truth, the 64GB modules costs $9.39, about 3 times the $3.12 of the 16GB module. This was clearly stated in the article.

You may be right that Apple didn't make a saving in the deal itself, but they didn't do the deal to lose money did they? They did it because they knew in the long term it would make them money to not be hit by the shortages that hit their competitors and drive their prices up. Ultimately they make more money for having done these deals, so in the bigger picture they effectively make a saving.

EDIT: My apologies, it appears I misread the article originally or it has since been updated. You are quite correct.
post #39 of 79
Quote:
Originally Posted by addicted44 View Post

How does that show your point? There are many other differences between the 2 devices that could account for that.

What is actually a better comparison is the ~$200 difference between the WiFi and 3G versions of the Xoom, when the additional chip needed costs in the single digits.

Fair point.

My point was just that Motorola have released their base model with 32GB at nearly the same price point.
post #40 of 79
Quote:
Originally Posted by ggf View Post

How much does the shirt you buy in a department store cost to buy from the chinese manufacturer? I would expect the markup is way more that 400%. Apples margins are not extraordinary.

400%? We're talking about 3090% here. Not extraordinary?

EDIT: Apologies, I read the article before it had been made clearer that the units were Gigabits not Gigabytes.
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