Apple creates worldwide NAND flash shortage; China Mobile deal

Posted:
in General Discussion edited January 2014
Apple's iPhone and iPods use so much NAND flash memory that there is a worldwide dearth of memory chips; and negotiations with China Mobile for the iPhone are ongoing.



Flash memory supply prioritized for Apple



In a new report from DigiTimes, Taiwanese memory module makers said there have been a "serious shortage" of NAND flash chips, as companies provide more and more of their supply to Apple. Industry sources said memory providers will limit the supply of memory provided to companies other than the Cupertino, Calif., hardware maker.



"Samsung Electronics has informed Taiwan module makers that it will halve its NAND flash memory to them in September, and Micron Technology has also told some of its downstream customers that no NAND flash chips are available, claimed the sources," the report said. "Toshiba and Hynix Semiconductor are also giving priority to Apple, and are offering limited supply to the spot market, the sources added."



The average price for a 16GB chip was $4.48, up 7.2 percent in the first half of September. 32GB also rose 4.3 percent to $6.80.



Last week, Apple unveiled a new 64GB iPod touch for $399, doubling the capacity of its previous highest capacity 32GB model. In addition, this summer the 16GB and 32GB iPhone 3GS models were introduced.



As Apple has continued to double its available capacities on the iPhone and iPod touch every year, competitors have struggled to keep up. This week Microsoft will release its new Zune HD, available with flash memory capacities of 16GB and 32GB.



If true, the latest report from DigiTimes could suggest that competitors, like the Zune HD, have been unable to offer the capacity of the iPod touch because memory suppliers simply will not provide enough product to anyone other than Apple.



Report reaffirms Apple negotiations with China Mobile ongoing



China Mobile, the world's largest wireless provider, remains in negotiations with Apple to bring the iPhone to its network, a new report from The Wall Street Journal states.



The company's chairman said talks are ongoing, confirming previous reports that Apple is looking beyond its deal with China Unicom. Though Apple entered into a three-year deal with China Unicom last month, that agreement was non-exclusive, paving the way for the iPhone to potentially appear on other carriers.



Of China's estimated 700 million mobile subscribers, China Mobile is by far the largest, with more than 475 million customers. China Unicom has an estimated 141 million subscribers. Later this year it will offer a new model of the iPhone that does not have Wi-Fi. The carrier has plans to offer 3G access in 335 cities before 2010.
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Comments

  • Reply 1 of 41
    Wow, just a little over $2.00 difference between flash sizes like that? Yet in the final product, to get the larger storage capacity, the price difference may well be over $50. That's a lot of profit!! :/
  • Reply 2 of 41
    Conspiracy Theory of the day:



    Is Apple purposely buying as much NAND chips to drive up costs for other manufacturers, or to try to make it so it is not possible for others to make their NAND based products? I wouldn't put it past Apple to do this. Really shady in my opinion.
  • Reply 3 of 41
    guarthoguartho Posts: 1,208member
    Definitely a conspiracy theory. There's no way Apple is sinking huge amounts of money in to inventory they have no intention of using. They're just building iPods, iPhones, Airs (and maybe tablets) like mad.
  • Reply 4 of 41
    boogabooga Posts: 1,077member
    I'm sure Microsoft can find enough NAND memory for both of their Zune customers to upgrade.
  • Reply 5 of 41
    Quote:

    Apple's iPhone and iPods use so much NAND flash memory that there is a worldwide dearth of memory chips; and negotiations with China Mobile for the iPhone are ongoing.





    Well I'm sure the purpose of buying so much and using it in Apple created popular devices was to drive down the price through creating a large market and therefore increased suppliers and competition, with the benefits of economies of scale.



    Unfortunately what seemed to occur was innovation, because now San Disk has a SD (SDXC) card coming out with capacities of up to 2 TB with access speeds 2x faster than a 7200 RPM hard drive (speed according to my calculations).



    NAND is looking rather obsolete, fat and expensive in my opinion for Apple's lust for the thinnest gadgets, and because it's soon to be obsolete, there is no reason to invest in it's future, therefore whomever makes it is in it's best interest to milk the cow for all it's worth.



    Also because the new SDXC will be expensive at first as the market for it develops (and the deal wrangling etc) so that's not necessarily a cheap option either.



    So what to do, what to do? Between a rock and a hard place...
  • Reply 6 of 41
    gazoobeegazoobee Posts: 3,754member
    Quote:
    Originally Posted by camroidv27 View Post


    Conspiracy Theory of the day:



    Is Apple purposely buying as much NAND chips to drive up costs for other manufacturers, or to try to make it so it is not possible for others to make their NAND based products? I wouldn't put it past Apple to do this. Really shady in my opinion.



    This is total BS and nonsense.



    In the first place, Apple wouldn't take a hit on inventory and pay more for NAND just to (maybe) "screw" some unknown competitor in some way. They'd have to pay for the NAND and keep it around in warehouses while it depreciated in value. It would cost them to store it and all this just so that some micro supplier in Indonesia or something had a hard time?



    Secondly, the articles musings about whether this would hurt Zune production are probably the weakest point of the whole piece and made rather offhandedly and as a guess. But you turn it into a certain argument based on what? Hatred of Apple? Zune production is very small, as are almost all the other NAND clients relative to the volume Apple uses. It's more valid to speculate that the other customers will have to swallow higher prices and delays than it is to suggest that it will affect production anyway.



    You have an obvious bias here and you're reading stuff in that has no bearing on the facts. Which is what your basic conspiracy theorist does as you say.
  • Reply 7 of 41
    gazoobeegazoobee Posts: 3,754member
    Quote:
    Originally Posted by MacTripper View Post


    Well I'm sure the purpose of buying so much and using it in Apple created popular devices was to drive down the price through creating a large market and therefore increased suppliers and competition, with the benefits of economies of scale. ...



    Actually they pre-bought on a contract so as to get assured supply for an extended period at lower than normal prices so that wasn't Apple's purpose even if it might have been the effect it created.
  • Reply 8 of 41
    MacProMacPro Posts: 18,347member
    Quote:
    Originally Posted by camroidv27 View Post


    Conspiracy Theory of the day:



    Is Apple purposely buying as much NAND chips to drive up costs for other manufacturers, or to try to make it so it is not possible for others to make their NAND based products? I wouldn't put it past Apple to do this. Really shady in my opinion.



    My take is simply; Apple need it and made great deals for all concerned ... no conspiracy involved.
  • Reply 9 of 41
    MacProMacPro Posts: 18,347member
    Quote:
    Originally Posted by Booga View Post


    I'm sure Microsoft can find enough NAND memory for both of their Zune customers to upgrade.



    ROFL



    Maybe Apple will sell them a few for that. plus a few for the M$ iPhone killer they announced that was coming ...
  • Reply 10 of 41
    MacProMacPro Posts: 18,347member
    I know the usual suspects will claim all the Chinese already have grey imported iPhones but I have to think if Apple pull this off AAPL will be assured a steady ascent for some time to come! There can surely be no better product for any country with a complex writing system than the graphical keyboard iPhone and we still have the 'secret' product to come which will surely have the same.
  • Reply 11 of 41
    This kind of stinks for the competition right now, but I think overall Apple's made a very positive effect on the flash memory industry. I'm no tech journalist, but as a consumer I remember what it seemed like for years flash memory always seemed very costly for the size you received and it never seemed to get that much cheaper and bigger as time went on. Ever since the iPods began using large amounts of flash memory it seems like the industry as a whole (or maybe just the consumer) really benefited. You can get an 8GB flash drive for $10 by walking into a Staples, I remember just 4 or 5 years ago you had to shell out a good $50 for a 2GB, and it seemed like it stayed like that for awhile until recently. I think $399 is way out of my price range for an mp3 player with 64GB of flash storage, but Apple doubling the available memory on the iPod Touch every year without increasing the top of the line price I think will really drive the industry to mark down the prices and innovate. Just my $.02.
  • Reply 12 of 41
    MacProMacPro Posts: 18,347member
    Quote:
    Originally Posted by Drow_Swordsman View Post


    This kind of stinks for the competition right now, but I think overall Apple's made a very positive effect on the flash memory industry. I'm no tech journalist, but as a consumer I remember what it seemed like for years flash memory always seemed very costly for the size you received and it never seemed to get that much cheaper and bigger as time went on. Ever since the iPods began using large amounts of flash memory it seems like the industry as a whole (or maybe just the consumer) really benefited. You can get an 8GB flash drive for $10 by walking into a Staples, I remember just 4 or 5 years ago you had to shell out a good $50 for a 2GB, and it seemed like it stayed like that for awhile until recently. I think $399 is way out of my price range for an mp3 player with 64GB of flash storage, but Apple doubling the available memory on the iPod Touch every year without increasing the top of the line price I think will really drive the industry to mark down the prices and innovate. Just my $.02.



    Agreed. It must surely also be making the hard drive companies push innovation boundaries too. I suspect we will see 100 TB drives and beyond soon. They have to keep well ahead of Flash to stay in business now.
  • Reply 13 of 41
    lkrupplkrupp Posts: 7,162member
    Quote:
    Originally Posted by camroidv27 View Post


    Conspiracy Theory of the day:



    Is Apple purposely buying as much NAND chips to drive up costs for other manufacturers, or to try to make it so it is not possible for others to make their NAND based products? I wouldn't put it past Apple to do this. Really shady in my opinion.



    I think maybe your tin foil hat needs adjusting. The Tesla coils the government has installed at the North Pole for mind control may be putting out too much signal and overloading your neurons. Just a thought.
  • Reply 14 of 41
    davegeedavegee Posts: 2,765member
    Quote:
    Originally Posted by digitalclips View Post


    My take is simply; Apple need it and made great deals for all concerned ... no conspiracy involved.



    If I'm not mistaken Apple has been UP FRONTING huge amounts of cash to suppliers to ensure the parts they need will be there. The did in in the past with LCD panel makers and I'm pretty sure they did it (within the last year?) to memory suppliers.



    Anyone who ponies up 10's or 100's(?) of millions of dollars in advance will likely get similar treatment.



    And I wasn't too close with my figures...



    Apple made an investment HALF A BILLION DOLLARS! So people crying that it's not fair to the other manufacturers.. well this is business and if Apple's internal forecasts showed a potential problem with getting parts in the future they reacted accordingly and made and investment that would ensure their supply. Why didn't the other companies or if they couldn't afford that kind of money then they should have seen the writing on the wall and started stockpiling their chips for the rainy day. Well those poor companies better have their umbrellas cause the forecast looks like a wet one.



    And like I said this isn't something new for Apple:



    Quote:

    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.



    http://www.appleinsider.com/articles...sh_memory.html



    Dave
  • Reply 15 of 41
    Quote:
    Originally Posted by Gazoobee View Post


    This is total BS and nonsense.



    In the first place, Apple wouldn't take a hit on inventory and pay more for NAND just to (maybe) "screw" some unknown competitor in some way. They'd have to pay for the NAND and keep it around in warehouses while it depreciated in value. It would cost them to store it and all this just so that some micro supplier in Indonesia or something had a hard time?



    Secondly, the articles musings about whether this would hurt Zune production are probably the weakest point of the whole piece and made rather offhandedly and as a guess. But you turn it into a certain argument based on what? Hatred of Apple? Zune production is very small, as are almost all the other NAND clients relative to the volume Apple uses. It's more valid to speculate that the other customers will have to swallow higher prices and delays than it is to suggest that it will affect production anyway.



    You have an obvious bias here and you're reading stuff in that has no bearing on the facts. Which is what your basic conspiracy theorist does as you say.



    I never said that I believed my own theory. It was just something to throw out there for people to ponder. I'm glad you pondered it, and gave me reasons as to why the idea is false. However, I do not appreciate the attack, regardless of how much I dis-like Apple.
  • Reply 16 of 41
    Quote:
    Originally Posted by DaveGee View Post


    If I'm not mistaken Apple has been UP FRONTING huge amounts of cash to suppliers to ensure the parts they need will be there. The did in in the past with LCD panel makers and I'm pretty sure they did it (within the last year?) to memory suppliers.



    Anyone who ponies up 10's or 100's(?) of millions of dollars in advance will likely get similar treatment.



    Any I wasn't too close with my figures...



    Apple made an investment HALF A BILLION DOLLARS! So people crying that it's not fair to the other manufacturers.. well this is business and if Apple's internal forecasts showed a potential problem with getting parts in the future they reacted accordingly and made and investment that would ensure their supply. Why didn't the other companies or if they couldn't afford that kind of money then they should have seen the writing on the wall and started stockpiling their chips for the rainy day. Well those poor companies better have their umbrellas cause the forecast looks like a wet one.



    And like I said this isn't something new for Apple:







    http://www.appleinsider.com/articles...sh_memory.html



    Dave



    plus the $1.25 billion a few years ago in the same referenced article. When you are spending billions to prepay for supplies, you should get preferential treatment.
  • Reply 17 of 41
    cmf2cmf2 Posts: 1,427member
    Quote:
    Originally Posted by camroidv27 View Post


    I never said that I believed my own theory. It was just something to throw out there for people to ponder. I'm glad you pondered it, and gave me reasons as to why the idea is false. However, I do not appreciate the attack, regardless of how much I dis-like Apple.



    "I wouldn't put it past Apple to do this. Really shady in my opinion."
  • Reply 18 of 41
    melgrossmelgross Posts: 31,777member
    Quote:
    Originally Posted by camroidv27 View Post


    Conspiracy Theory of the day:



    Is Apple purposely buying as much NAND chips to drive up costs for other manufacturers, or to try to make it so it is not possible for others to make their NAND based products? I wouldn't put it past Apple to do this. Really shady in my opinion.



    That would be absurd. Apple would be spending hundreds of millions of dollars buying up chips they can't use.



    The reason for the shortage is simple, and has been reported on a number of times.



    The price for memory, both flash and RAM was dropping like a stone. Remember all the predictions on how cheap SSD's were going to get in 2009 based on what was happening in 2008? Well, it ain't happening.



    Why? With the recession, people are cutting down on what they buy, and what they buy contains a lot of memory. This contributed to even faster price drops as the market had a glut of unsold memory.



    In response, beginning in late 2008, and continuing in 2009, manufacturers have shut down memory manufacturing plants (not the first time they have done this). This has resulted in memory supply beginning to match demand as memory in the market has been bought up. The idea was to cause the price of memory to rise, and this has worked. In the past 7 months, the price of memory, flash and RAM, has risen by more than 150%, in other words, chips now cost 2.5 times what they did early this year.



    This is because of what has now become a slight shortage of memory, which is what the manufactures of memory intended.



    So before blaming Apple for this, look to the rapid memory price drop and the memory glut that caused the cutback to production, and the subsequent price rise and shortage.



    You might also note on OWC's memory pages, that prices have risen dramatically, and are expected to continue to do so. For example, just a bit over two months ago, the price for a 16 GB 2GB chip memory package for the new Mac Pro cost $275, now it costs $416.99.



    Apple certainly has the right to buy as much memory as they need, if they are willing to pay for it in advance. This isn't any different from what is done in any industry with parts whose price may go up, or whose production may be limited.



    To suggest otherwise means that the person saying that is expecting Apple to voluntarily limit it's production of its own devices, and thus limit its own sales and profits. That wouldn't be fair or proper.



    I can assure people that small companies will always get enough parts for their own production, though they may have to pay a bit more in the spot market.



    It's the medium sized companies that will have a problem. Companies such as MS with the Zune. Small enough so that they can't buy into a company's production the way Apple can, but too large to rely on the spot market and its small availability at any given time, as well as its variable pricing.



    Ironically, Sandisk, a maker of memory in their own right, and the second biggest music player manufacturer, will have no problem getting as much memory as it wants.
  • Reply 19 of 41
    Quote:
    Originally Posted by cmf2 View Post


    "I wouldn't put it past Apple to do this. Really shady in my opinion."



    You proved my point.



    I said that I wouldn't put it past them to do it, but I didn't say that I actually think that they are. My "shady" comment was upon speculation if they were, not that they are. Make sense? (I am often accused of using a different dictionary than most people, especially by my fiance.)
  • Reply 20 of 41
    OMG it's the Hubbert Peak of NAND chips!
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