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Tuesday, March 11, 2008

Flash memory prices pressure chip manufacturers

In an article presented today at DigiTimes, there was more bad news for manufacturers of NAND flash memory. And perhaps another negative for Apple (AAPL) was revealed.

The reporters announced that Apple has not yet started making big procurements of NAND flash memory thus far in 2008. With NAND already selling below cost, according to sources at Taiwan memory makers, this lack of demand from a major customer could make a bad situation worse for NAND manufacturers. We have already had an announcement from Intel (INTC) that their margins are being hurt by the persistent pricing problems in NAND flash. It can only be a matter of time before we hear the same tune from SanDisk (SNDK), Micron (MU), Samsung and others.

As for Apple, a number of their new product announcements have involved flash, such as the solid state drive in the MacBook Air. Many existing products are heavily dependent on flash including the iPod and iPhone. Having purchased approximately $1.2 billion worth of flash in 2007, the perceived lack of orders is unnerving to flash vendors. Is bellwether Apple seeing weaker demand?

As for the flash manufacturers, consider this quote from the DigiTimes article: "As memory makers can now hardly tune their capacity mixture with DRAM when the DRAM industry is also experiencing a trough, the downward NAND flash price trend seems to have no catalyst to make prices trend upward in the near term..."

Looks like it could be a tough few quarters for the memory makers and those companies that sell semiconductor manufacturing equipment to them. And maybe Apple, too.

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