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Did Apple overbook its NAND flash inventory?

post #1 of 9
Thread Starter 
Several large buyers, including Apple Computer, may have overbooked on NAND flash memory during the fourth quarter of last year, causing a NAND flash memory glut in early 2006, according to iSuppli Corp.

Slower seasonal demand, combined with overbooking and inventory adjustments, has caused the NAND flash memory market to enter a temporary lull, the research firm said on Wednesday. "In the first quarter, sales have decelerated for key consumer-electronics products that incorporate NAND flash, such as Apple Computer Inc.s iPod music player."

While such slowdowns are typical in the first quarter following the holiday season, iSuppli believes this phenomenon is leading to an acute oversupply situation in the NAND market in early 2006.

Furthermore, the firm said that Apple and many other major buyers overbooked NAND flash during the fourth quarter of last year due to concerns over short supplies. "This led to swelling inventories of NAND parts," iSuppli said. Buyers are now reported to be reducing their inventories to deal with slower sales, causing NAND availability to rise and prices to fall.

"iSuppli expected that the NAND market would enter a state of oversupply in the first quarter," said Nam Hyung Kim, director and principal analyst with iSuppli. "Therefore, we dont believe that the current glut represents a fundamental, long-term worsening in market conditions."

In contrast to NAND, the DRAM market is experiencing improved conditions and has been in a state of recovery since January, iSuppli said. The firm reports that DRAM suppliers have been successful in raising OEM contract prices during the first half of this month and are expected to increase prices again in the second half.

This past November, Apple announced that it had 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 prepaid a total of $1.25 billion for flash memory components in the three months that followed -- $250 million to each corporation.
post #2 of 9
I am a bit confused on this. In this case, is overbooking basically ordering a lot more than you need in the hopes of getting allocated the amount you need? Is there a penalty for a company that doesn't buy all that they ordered?
post #3 of 9
Quote:
Originally posted by JeffDM
I am a bit confused on this. In this case, is overbooking basically ordering a lot more than you need in the hopes of getting allocated the amount you need? Is there a penalty for a company that doesn't buying all that ordered?

yes... no manufacturing company wants to hold a bloated inventory... it's just cash tied up. the majic goal is to have zero inventory and only provide as needed. the above story reads off as the perfect definition for the bull-whip effect.
post #4 of 9
You'd think that if Apple over-ordered, it would be Apple who had to pay for storage of the excess.

But even if so, the manufacturer still faces a big demand drop as Apple uses up the oversupply.
post #5 of 9
Price fall? Ace - come on Samsung, I want a hard drive for my old PB 12" based on these chips! Don't fail me now.
post #6 of 9
A NAND based hard ("soft?") drive would be good, but some people don't know that NAND is actually quite slower than magnetic media.

Perhaps because it's sometime thought of as RAM which of course is very much faster than hard drives. But NAND is different. It's relatively slow. The main advantage would be lower power consumption.
post #7 of 9
Quote:
Originally posted by michaelb
A NAND based hard ("soft?") drive would be good, but some people don't know that NAND is actually quite slower than magnetic media.

Perhaps because it's sometime thought of as RAM which of course is very much faster than hard drives. But NAND is different. It's relatively slow. The main advantage would be lower power consumption.

NAND has instant seek times. (Well, it's probably "virtually" instant, but we'll just stick with instant.) So, if you're only reading a 10 MB file, Flash memory it's much, much quicker than magnetic media. But if you're reading a 100 MB, magnetic media will probably be quicker.
post #8 of 9
Maybe the original order wasn't just for iPods.

A tablet would be better without moving parts, we'll have to see what the Special Event brings
Why does somebody ask me a question, I can never understand, I can never provide the answer, but believe I can.
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Why does somebody ask me a question, I can never understand, I can never provide the answer, but believe I can.
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post #9 of 9
Quote:
Originally posted by McDave
Maybe the original order wasn't just for iPods.

A tablet would be better without moving parts, we'll have to see what the Special Event brings

Then it would have to be a glorified PDA rather than anything resembling the current laptop with OS X. Most flash memory is too slow and all flash memory is still too expensive even if you assume it costs $10 a gig (probably well below market, fabbed at a loss), that's still 5-10x more expensive than laptop drive storage.
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