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Apple to prepay $1.25B for iPod flash memory

post #1 of 33
Thread Starter 
Apple on Monday announced that it has reached long-term supply agreements with Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010.

As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months, the company said in a statement.

"We want to be able to produce as many of our wildly popular iPods as the market demands," said Steve Jobs, Apple's CEO.

The iPod is the world's most popular digital music player and recently surpassed sales of 30 million, Apple also announced on Monday.

Along with Apple's announcement, Intel and Micron announced they would form a new company to manufacture NAND flash memory for "consumer electronics, removable data storage and handheld communications devices."

Each company will contribute about $1.2 billion in cash, notes and other assets to form the company, called IM Flash Technologies LLC, according to Reuters. Intel and Micron also plan to pay an additional $1.4 billion each into the company over the next three years.

The two companies said they would supply Apple with a "significant portion" of their shares of IM Flash Technologies' NAND flash memory output. In return, Apple will reportedly prepay $250 million each to Intel and Micron, the companies said. It's believed that Apple will also pay the same sum to Samsung, Toshiba and Hynix for its agreements with those companies.

It had been reported that Apple recently held discussions with both Hynix and Samsung in an effort to secure itself an ample supply of the flash memory used inside popular versions of the iPod like the Shuffle and Nano.

In the past Apple relied primarily on just two suppliers of flash memory, namely Samsung and Toshiba.
post #2 of 33
So how much do they have left in the bank now?
Living life in glorious 4G HD (with a 2GB data cap).
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Living life in glorious 4G HD (with a 2GB data cap).
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post #3 of 33
Intel NAND and Intel CPU for a superslim sub-notebook? I'll pre-order!
post #4 of 33
Quote:
Originally posted by fuyutsuki
Intel NAND and Intel CPU for a superslim sub-notebook? I'll pre-order!

Me three! Give me the smallest device you can that runs OS X. Flash storage and the ability to plug into a full-size screen and keyboard when I get where I'm going. My money is ready
post #5 of 33
Yeah, this is definitely about the 'SlimBook'.... Jan 2007?
post #6 of 33
Quote:
Originally posted by CosmoNut
So how much do they have left in the bank now?

Sufficient.
post #7 of 33
Quote:
Originally posted by CosmoNut
So how much do they have left in the bank now?

Somewhere between $6 - $8 Billion.
post #8 of 33
I guess Apple figured out something to do with that mountain of cash they have: use it to secure supply guarantees.

Apple: We'd like to buy LOTS of flash memory over the next few years.

Supplier: Wow. That's a lot. I don't think we can guarantee that supply.

Apple: For this mountain of cash will you put us first in line ahead of any other customers.

Supplier: Yes.

Apple wags tail like Dogbert.

Let the whining begin from the other MP3 makers and flash memory users about Apple being a monopoly and using unfair tactics to corner the market on flash memory.

- Jasen.
post #9 of 33
Quote:
Originally posted by mdriftmeyer
Somewhere between $6 - $8 Billion.

Plus a bit under the mattress...
post #10 of 33
Quote:
Originally posted by jasenj1
Let the whining begin from the other MP3 makers and flash memory users about Apple being a monopoly and using unfair tactics to corner the market on flash memory.

Those aren't legitimate concerns?
post #11 of 33
Quote:
Originally posted by ShawnJ
Those aren't legitimate concerns?

They are, but we're clearly mostly on Apple's side here because they're a nice cuddly company...
post #12 of 33
Quote:
Originally posted by ShawnJ
Those aren't legitimate concerns?

I wouldn't exactly call preordering supplies a monopolistic tactic.
post #13 of 33
Quote:
Originally posted by gregmightdothat
I wouldn't exactly call preordering supplies a monopolistic tactic.

It isn't, that's why.
post #14 of 33
We seem to have had this discussion regarding Samsung.

It's normal practice. Nothing wrong with it. Any other manufacturer who whines about it would be doing the same thing if they sold as many units as Apple does.
post #15 of 33
Companys that wanna whine need to wake up and start Innovating... Like
Like Sony launching a cd/drm scam against their customers and then blaming apple........ you guys heard about that right?

at least some companys have figured out that "HDTV" for example needs to be a Progressive format as well as an Interlaced format, if people are going to pay the Somewhat still high prices for those TVs and get them into home theaters everywhere for real this time. "Its one example" of some things changing.

perhaps the more apple keeps setting Grade A standards it will finally encourage some companys to stop living in the past and whining "for once"

End rant
post #16 of 33
Quote:
Originally posted by Catman4d2
Companys that wanna whine need to wake up and start Innovating... Like
Like Sony launching a cd/drm scam against their customers and then blaming apple........ you guys heard about that right?

at least some companys have figured out that "HDTV" for example needs to be a Progressive format as well as an Interlaced format, if people are going to pay the Somewhat still high prices for those TVs and get them into home theaters everywhere for real this time. "Its one example" of some things changing.

perhaps the more apple keeps setting Grade A standards it will finally encourage some companys to stop living in the past and whining "for once"

End rant

Are you drunk?
post #17 of 33
I do hope that this news will get other ram producers excited and make them expand the production greatly. That would let the price on flash go through the floor, making Apples deal bite them in the ass.
"I reject your reality and substitute it with my own" - President Bush
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post #18 of 33
Quote:
Originally posted by Anders
I do hope that this news will get other ram producers excited and make them expand the production greatly. That would let the price on flash go through the floor, making Apples deal bite them in the ass.

And the point to that would be?
post #19 of 33
Quote:
Originally posted by Anders
I do hope that this news will get other ram producers excited and make them expand the production greatly. That would let the price on flash go through the floor, making Apples deal bite them in the ass.

That's making assumptions about the terms of the contract. For deals so far in the future, I would bet the deals are based against the commodity prices of the parts in question at the time of delivery, so if the market price changes, the price to Apple changes.

I really don't see a problem with Apple agreeing to pre-pay to ensure adequate supply, from the fab's point of view, it likely beats having to finance expansions and upgrades through loans or bonds.

I doubt Apple is cornering the market for flash memory, Apple's current deal with Samsung was rumored to be only 40% of their production capacity and there are a lot of flash memory makers. I think deals like this would encourage more production. It might move ahead the viability of large flash drives for laptops, but I think that's still a few years away as costs of flash memory has to go down to more than 1/50th of its current costs to be price competitive.
post #20 of 33
Quote:
Originally posted by Anders
I do hope that this news will get other ram producers excited and make them expand the production greatly. That would let the price on flash go through the floor, making Apples deal bite them in the ass.

Why do you dislike Apple so much. It's totally irrational. Why the fuck are you here?
post #21 of 33
Quote:
Originally posted by vinney57
Why do you dislike Apple so much. It's totally irrational. Why the fuck are you here?



Please point to the bullet in the posting guidelines that I have to not dislike Apple to be here. Besides my post did not have any expression of general dislike of Apple in it.

I just don´t belong to the church of "Apple can´t do anything wrong" or "Whats good for Apple is all that matters"

If Apple monopolise a certain vital component for MP3 players other producers will have a hard time coming up with new and better products. They will either have to use (now regarded as inferiour) HDs or more expensive flash memory. That means less products will come to marked and less competition fo Apple. Less choice for us and ultimately less pressure on Apple to develop even more kick ass iPods. I do hope such strategies bite them in the ass.
"I reject your reality and substitute it with my own" - President Bush
Reply
"I reject your reality and substitute it with my own" - President Bush
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post #22 of 33
Quote:
Originally posted by Anders


Please point to the bullet in the posting guidelines that I have to not dislike Apple to be here. Besides my post did not have any expression of general dislike of Apple in it.

I just don´t belong to the church of "Apple can´t do anything wrong" or "Whats good for Apple is all that matters"

If Apple monopolise a certain vital component for MP3 players other producers will have a hard time coming up with new and better products. They will either have to use (now regarded as inferiour) HDs or more expensive flash memory. That means less products will come to marked and less competition fo Apple. Less choice for us and ultimately less pressure on Apple to develop even more kick ass iPods. I do hope such strategies bite them in the ass.

Producers of flash memory will produce as much flash memory as the market will allow them to sell. The only limiting factor is the number of consumers who are willing to buy a flash-based product, whether its Apple branded or not. There's not going to be a magical boom in the flash-based product market because Apple doesn't buy this. We are currently in a ramp-up period where the growth of the iPod has consumed most flash memory. This situation will resolve itself in time.

The UN should probably regulate the percentage of flash memory that a company can buy to make the market a more even playing field, because this would defiantly cause mediocrity. Like a distribution of flash system
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post #23 of 33
No monopolistic practice here. What is to stop Sony or Creative or whoever to sign a similar deal with the NAND producers to prepay or preorder NAND chips?

Pre-paying is a form of insurance against a price rise or chip shortage due to unforseen circumstances. Remember the factory fire in a major RAM producer 10 years or so ago that forced RAM prices up, cost was $150 for 32MB or so, really expensive, almost as expensive as the CPU in an average PC configuration.
post #24 of 33
Quote:
Originally posted by Anders


Please point to the bullet in the posting guidelines that I have to not dislike Apple to be here. Besides my post did not have any expression of general dislike of Apple in it.

I just don´t belong to the church of "Apple can´t do anything wrong" or "Whats good for Apple is all that matters"

If Apple monopolise a certain vital component for MP3 players other producers will have a hard time coming up with new and better products. They will either have to use (now regarded as inferiour) HDs or more expensive flash memory. That means less products will come to marked and less competition fo Apple. Less choice for us and ultimately less pressure on Apple to develop even more kick ass iPods. I do hope such strategies bite them in the ass.

Well, Mr. globally Feared and Biased Moderator, you should know that it's the way of the world.

Apple gains an advantage. If their products stop selling, they lose a lot of money as well.

Apple didn't start out with 75% market share, so perhaps they should get an advantage here. They've earned it through good ideas and marketing.
post #25 of 33
holy fuck , forget me, all *you* guys are the total masters of derailing threads..! in just 20 posts you all have turned this thread into apple-is-or-is-not-a-monopoly debate!! along with questioning the legitamacy of our moderators WTF? good news though overall re: this deal. now apple needs to spend another few billion to buy some media companies
post #26 of 33
heh.while we're off topic anyway, good on intel, and good on iSteve, a nice big SCREW YOU to moto/freescale and IBM. this is how you roll doin' business with apple intel just set up a nice market in on the iPod deal. what executive wouldn't want that? unlike our friend ed zander's "what the hell does the nano do?" comment............ in any case personally i'd like to see amd and kingston involved with apple further down the line, but i suspect these high level alliances/ partnerships really have to do with top execs of the companies getting along with the iLord, and "getting" what apple is about.
post #27 of 33
Quote:
Originally posted by Catman4d2
Companys that wanna whine need to wake up and start Innovating... Like
Like Sony launching a cd/drm scam against their customers and then blaming apple........ you guys heard about that right?

at least some companys have figured out that "HDTV" for example needs to be a Progressive format as well as an Interlaced format, if people are going to pay the Somewhat still high prices for those TVs and get them into home theaters everywhere for real this time. "Its one example" of some things changing.

perhaps the more apple keeps setting Grade A standards it will finally encourage some companys to stop living in the past and whining "for once"

End rant


heh. the sony drm fiasco shows how you can so totally screw up despite having all that wonderful content and wonderful technology. sony is pretty much now the poster boy of how NOT to do convergence.
post #28 of 33
Quote:
Originally posted by sunilraman
along with questioning the legitamacy of our moderators WTF?

I merely pointed out how his name (given to him by himself) agreed with his comments there.
post #29 of 33
heh. globally feared and biased moderator
post #30 of 33
Quote:
Originally posted by melgross
Well, Mr. globally Feared and Biased Moderator, you should know that it's the way of the world.

Apple gains an advantage. If their products stop selling, they lose a lot of money as well.

Apple didn't start out with 75% market share, so perhaps they should get an advantage here. They've earned it through good ideas and marketing.

Apple have every right to do it and I have every right to point out that I hope their policy bite them in the ass. Its not like I called your mother ugly or anythink...
"I reject your reality and substitute it with my own" - President Bush
Reply
"I reject your reality and substitute it with my own" - President Bush
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post #31 of 33
Quote:
Originally posted by Anders
Apple have every right to do it and I have every right to point out that I hope their policy bite them in the ass. Its not like I called your mother ugly or anythink...

ALLRrrrighty then... Well, back on topic.
I hope this is a good move for apple and they use the profits to expand there computer market share.
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post #32 of 33
well, that's 1.25billion less to buy iBooks for kids dying of aids in the '2nd tier' countries...!!!!
okay okay, back on topic now.........
post #33 of 33
What was the topic?
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