Apple to prepay $1.25B for iPod flash memory

Posted:
in iPod + iTunes + AppleTV edited January 2014
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.
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Comments

  • Reply 1 of 32
    cosmonutcosmonut Posts: 4,872member
    So how much do they have left in the bank now?
  • Reply 2 of 32
    Intel NAND and Intel CPU for a superslim sub-notebook? I'll pre-order!
  • Reply 3 of 32
    nagrommenagromme Posts: 2,834member
    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
  • Reply 4 of 32
    vinney57vinney57 Posts: 1,162member
    Yeah, this is definitely about the 'SlimBook'.... Jan 2007?
  • Reply 5 of 32
    vinney57vinney57 Posts: 1,162member
    Quote:

    Originally posted by CosmoNut

    So how much do they have left in the bank now?



    Sufficient.
  • Reply 6 of 32
    Quote:

    Originally posted by CosmoNut

    So how much do they have left in the bank now?



    Somewhere between $6 - $8 Billion.
  • Reply 7 of 32
    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.
  • Reply 8 of 32
    eaieai Posts: 417member
    Quote:

    Originally posted by mdriftmeyer

    Somewhere between $6 - $8 Billion.



    Plus a bit under the mattress...
  • Reply 9 of 32
    shawnjshawnj Posts: 6,656member
    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?
  • Reply 10 of 32
    eaieai Posts: 417member
    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...
  • Reply 11 of 32
    Quote:

    Originally posted by ShawnJ

    Those aren't legitimate concerns?



    I wouldn't exactly call preordering supplies a monopolistic tactic.
  • Reply 12 of 32
    Quote:

    Originally posted by gregmightdothat

    I wouldn't exactly call preordering supplies a monopolistic tactic.



    It isn't, that's why.
  • Reply 13 of 32
    melgrossmelgross Posts: 31,875member
    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.
  • Reply 14 of 32
    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
  • Reply 15 of 32
    vinney57vinney57 Posts: 1,162member
    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?
  • Reply 16 of 32
    andersanders Posts: 6,523member
    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.
  • Reply 17 of 32
    melgrossmelgross Posts: 31,875member
    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?
  • Reply 18 of 32
    jeffdmjeffdm Posts: 12,949member
    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.
  • Reply 19 of 32
    vinney57vinney57 Posts: 1,162member
    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?
  • Reply 20 of 32
    andersanders Posts: 6,523member
    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.
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