Report: Apple has cornered the flash memory market
One advantage of selling gazillions of MP3 players — most of them stuffed with flash memory — is that it gives you a lot of leverage in the chip market.
Apple (AAPL) is using that leverage to full advantage as it prepares to launch its next generation iPhone, according to a report published Wednesday in AppleInsider. The company is "inhaling" supplies of memory components, the report says, causing spot shortages and raising the price of flash memory for everyone else.
The assertion that Apple is buying up memory to put in new iPhones is speculative. However, given that sales of iPods have leveled off, it's hard to imagine what else the company would do with all that flash.
Citing a ThinkEquity Partners report on the state of the chip market, AppleInsider's Prince McLean writes that Apple has purchased Samsung's entire available supply of NAND flash memory — the kind used in both newer iPods and iPhones — putting the chipmaker on allocation until April 2009. Samsung is the No. 1 producer of NAND flash, producing more than 40% of the world's supply.
"Apple's position in selling tens of millions of iPods gives it the ability to cherry pick components at prices many competitors can't match," writes McLean. "Apple has specifically noted favorable component pricing as a key factor in the company's profitability over the last several quarters." (link)
This is bad, no where near as bad as them killing off PA Semi, but this will ripple through to everyone trying to build stuff with flash memory. Mil/Aero applications will get the short end of the stick, again.
Don't we ave anti-trust laws to prevent this sort of monopolistic abuse? Not that PC vendors aren't capable of this, but Apple may be guilty of unfair business practices. This isn't a good thing for smaller and mid sized OEM's that also rely on FLASH devices.
LMAO at the comment by Drew from Chicago, IL. Why do we have iPhones? Because they are a productive and innovated device that allows you to do anything and everything you need to do. Well, almost everything. I could almost get ride of my laptop and my internet service at home and just roll with the iPhone, but I need it for work. Well worth the $900/yr $9000/10yrs.
If one had a choice of methods for promoting a company that made flash memory, none would be better than to imply that Apple Computer was cornering the market in flash memory.
I suspect that the "next big thing" will be a major shift away from hard drives altogether. Apple has explored that already with the MacBook.
In the volume occupied by a hard drive, one could easily put in a terabyte of non-degradable memory, especially if it were purpose-built for that.
A hard drive has too many moving parts and, after the keyboard, is currently the 2nd most unreliable part of a PC.
Replacing the drive with non-degradable memory will be a good thing.
John S:
I think the traffic data available pretty clearly indicates iPhone users are surfing the web and otherwise putting their data plans to work heavily.
I can speak for myself … I have a desktop at home, and was going to buy a laptop but the iPhone is covering all my mobile computing needs.
I am sure plenty of people bought an iPhone purely as a status thing, but I think you underestimate how useful it really is.
I think that the SSD option is a likely one.
As mentioned above, it is also good strategy to grab up a bunch of memory cheap, corner the spot market, and run competitor's costs up in a previously soft market. It would catch them unaware.
RAM… Oh good gracious, RAM means that any point in the memory can be accessed randomly rather than sequentially (via a Stream). RAM does not imply volatility. RAM is accessed by address, which is why we have "address space" etc. and limits on the amount of RAM in an operating system.
Therefore that's why we have different types of RAM, some are volatile, some are not. Some are faster, some are slower. NAND is a type of gate. NAND RAM by Samsung is a type of EEPROM, but times change and names change – blame the marketing department, that always works! Hahaha!.
This article is radiculous. Seems to me like some over exicited apple fan would write about in anticipation of 10th version of ipod.
I think Apple just -likes- flash memory. They think it's pretty keen.
Why does there have to be more to it than that?
Seems to me Apple "sucking up" flash memory would be driven by a few factors. Maybe a new handheld device, (iphone, ipod, etc) also possibly a netbook option? But even if Apple isn't using all that flash, buying it up would jack up costs for competing technologies (ipod and iphone "killers" or PC netbooks) So while Apple buys up at their cost, everyone else is left paying top dollar just to compete… makes perfect sense to me.
Speaking of iPhone plans being expensive. I wonder how many who are forced into those data plans actually use them? Just from talking with people over the years I know many who can't even put their phone in quiet mode let alone do anything with a iPhone. You just have so many who just have bought them because its the latest craze. Now we see it dying off.
Cost of owning an iPhone. I always find it humorous when people say that the iPhone is expensive because you have to pay to use it. Don't these people realize that this is true for all cellphones? Does anyone ever complain about how much it costs to operate a Razor? My God! Your Razor costs you over 600 dollars a year! I have an iPhone 3G with a corporate discount and it costs me less than 60 bucks a month. Worth every penny even without the discount.
Well Drew I'm sure you can't understand it given the bogus math you use. I have a first gen iPhone & I've paid the equivalent of $37 more per month (purchase + data) than I paid for a featureless Motorola phone previously. I have NEVER had buyers remorse on my iPhone but I sure did on that Motorola.
I can't understand why people buy iPhones. They cost most folks nearly $900+ per year just to operate, which is $9,000 over just 10 years. Sheesh, you'll hit retirement age and look back at all that money as a waste on technology you never really needed.
"Nothing in the term “Random access memory” refers to the memory’s volatility. Flash memory DOES provide random access. The “ROM” refers to “read only memory”, which definitely does NOT apply."
No, the original poster's statement was much more correct than this. And for the record PROM and ROM are two different things, although closely related and as you stated, not applicable to flash memory.
Random Access Memory is ANY type of volatile memory, that's what makes it RAM. You take away power and it goes poof. Flash memory and RAM are two incompatible terms, as the original poster was saying.
Read Only Memory is just that… READ ONLY. It's usually hardwired on a chip.
Flash memory or solid state memory is just storage. It is not RAM and it's not ROM, it's just memory. granted, the physical properties are similar, but ROM, RAM, and flash do not describe the physical properties of the memory, they describe the operating properties… can it be erased, can it be written, will it retain data with no power… that's what defines the terms.
to suck up "all" of samsung's Flash production for a quarter would take a lot more than a new iphone or more ipods. I would think SSD's, but unless apple is assembling their own SSD's they would just buy samsung's branded SSD's instead of purchasing just the bare flash memory itself, right?
I believe the up surge in memory allocation is based on new SSD consumption and ipod-touches are going to 64GB and 128GB. Iphones will also go to the 32GB if not 64GB. Also, flash is becoming a lower percentage of the ipod BOM. As a result, higher densities are going to be the norm. Higher memory densities works to Apples advantage in selling more content via itunes and app stores.
No one is talking about Apple entering the content origination (producer) in order to bring more revenue from its distribution arm (itunes, app store and mobile me).
I work at a cell phone store. and as far as a watch phone lg just released one this past week at mobile world congress in london. its still under development but its got a micro sd card slot and bluetooth.
You cannot overlook the fact that it's a downturn and Apple has $28 billion in the bank and ZERO debt, which puts it in a position that few other companies enjoy.
They may be building up to a new product release, or they could simply be spending money (when many others cannot afford to) to lower their costs and raise competitors' costs, which would allow them to lower iPod prices if the recession is sustained and deep enough to otherwise drive iPod sales down.
I agree, it could be for a netbook or tablet of some sort, especially since that debuted last year with the macbook air.
And the next iPhone or iPod touch will undoubtedly have even more memory.
Not only are iPod sales still on the increase according to official data (and the estimates are usually wrong) the mix is definitely on the upswing, everyone wants the iPod touch, and a lot of people are replacing older models so they can take advantage of the app store, and it's low low prices for great games and applications.
Apple prepaid $1.25 Billion to five flash manufacturers back in 2005 to give them capital to expand their factories. Apple realized long ago the importance of flash to its future.
Avi, I was expecting Apple to use the next-gen netbook-capable ARM chips enhanced with its PA Semiconductor expertise, to build an iPod touch tablet (or "iPhone" if it includes 3G cell) for Oct 2009 release. These ARM chips allow for 8 hours of battery life, much longer than that of Intel Atom based netbooks. The touch tablet would have a large enough display (5-7" diagonal) for one to be able to edit documents, using a new iPhone-based iWork/Office app that would use new gestures and the on-screen touch keyboard (instead of the Mac's WIMP interface).
The upshot is that AFAIK Windows does not run on ARM, so Apple's "long-life netbook" competition is Linux with its open source apps.
It's possible Apple is working on a much earlier release – its PA semi work and Grand Central/GPU work may allow it to use the newest ARM chips and be powerful enough for the apps they envision. This device may also account for the extra flash Apple is buying up.
What do you think?
Good of you to amend your article.
Still, NPD etc (all the covering analysts) have not been very good at estimating Apple's results.
Last quarter the consensus estimate of Apple's profit was 1.39 per share extrapolating from all this third party 'data' of Apple's sales etc. Apple came in at 1.78!
This not even factoring the delayed accounting method for iPhone sales. I'll take NPD etc data with a pinch of salt.
It might very well be right that iPod sales are down due to the recession, might even grow worse in the coming weeks but then again lots of people seem to be buying the iPod Touch (due to the crazy success of the App store). Point is I don't think we'll really know until Apple announces the quarter's results.
The comment 'given that sales of iPods are falling'.
I keep reading this over and over again in numerous blogs.
Apples last financial report Jan 2009 states that ipod sales have INCREASED by 3% year over year. Macworld: "Apple also sold a record number of iPods, after introducing changes to the line of portable music players in September. For the quarter, Apple sold 22.7 million iPods, up three percent from last year’s record total. "
This is the ONLY official numbers (i.e given by Apple) out there.
So how do you guys get the "given that sales of iPods are falling" statements?
ex ped: They are expected to fall when Apple reports its next quarterly earnings — based on the latest NPD data and ChangeWave survey — but you're right, the only official reports show them still growing, albeit slowly. I'll change the text accordingly.
I've been thinking that it might be possible for Apple to build a slightly larger iPhone with a large screen and or a tablet like screen that you can use with a finger-OR- a stylus. They would need alot of this type memory for these as well as iPhone. The $300 to $500 netbooks other companies sell are clamshells with a fold-up keyboard. Closed, they are like 6-8 X 10 or 11 inches. The iPhone is 2.75"X 4.75" with a thicker case on. Suppose the iPhone (S)uper was 4 X 6" or 4 X 7 not exactly "pocket size" unless you have large pockets like I do. However, the keyboard would be bigger and a bit more useable to the touch-typer, and more useful to people that draw with stylus sensitivity. If it could be packed with RAM and VRAM, could be high-end "Netbook" with GPS and Phone built in, high capacity WIFI and Bluetooth (bluetooth microphones – mice, keyboard, headsets – all universal) Front and back cameras would be separate. Video conferencing camera could be more or less optimized for that, while the rear facing camera could be higher resolution for stills and video. Because it's what people like, they should include at least include one removable memory slot and user interchangeable batteries. The docking connector for the iPhone/iPod line may come into some peril as the EU pushes for one standard charging systems connectors or interconnect for cell phones. While this unit could conceivably be called a iNetbook and not sold primarily as a phone it could have a separate power supply, like current Macbooks. Remember that any laptop can be a phone with Skype and a WIfi connection.
I bet they are locking in low prices. Most of the memory suppliers have seen demand fall off, and they are reducing output. It will then lead to shortages and price increases in the next 6+ months.
I find this particularly interesting, given Steve Jobs usually likes springing new products and services on the market for the 'wow' factor.
Apple's security has been fairly good of late, compared to many companies, in keeping these secrets.
Perhaps what is coming soon is a fast, inexpensive answer to the tablet PC's, an iPhone on steroids.
Not surprising. Apple has been working on a way to corner the flash market since at least 2005, when they tried to secure a JV with Samsung (that deal was killed by anti-trust regulators). About a month after that deal was scuttled, they basically bought flash futures contracts that were to last them through next year (see http://www.theregister.co.uk/2005/11/21/apple_flash_mega_deal/).
Seeing as storage makes up a significant portion of the cost of an MP3 player, this makes sense. While the percentage is less in terms of the overall cost of an iPhone or SSD-equipped MacBook, in raw dollar terms, Apple has to be one of the top purchasers of Flash in the world. They would be foolish not to try to lock in supply relationships and prices.
It seems a given that future iterations of these devices will be only more Flash-hungry – probably one of the few bright spots in the semiconductor industry these days.
Flash can be read but not written in a random access fashion. It is not RAM in the classical sense, and it is not referred to as such in common usage.
I have, however, noticed that the use of this (incorrect) terminology is increasing, along with referring to a memory module as a "chip".
solid state hard drives? They speculate iPhones, but laptop flash drives would also drive additional demand
Nothing in the term "Random access memory" refers to the memory's volatility. Flash memory DOES provide random access. The "ROM" refers to "read only memory", which definitely does NOT apply.
Don't forget Solid State Drives in laptops; this is an option now on high-end Macs. Still expensive in the marketplace, it's a nice feature: dramatically lower power consumption, stability of solid-state. It's as likely that Apple will use more SSDs in laptops and perhaps a tablet going forward, and the lower they can get the price the better.
By convention, flash is not generally referred to as "Random access memory" or "Flash RAM"; RAM is generally used to refer to volatile memory, though there are exceptions. "Flash memory" would be more acceptable usage, or "flash PROM" or even just "flash".
Anyway, I'm somewhat intrigued by the notion that Apple is sucking up supplies for a forthcoming revision. I mean, they're already using bargeloads of flash in current devices that are shipping in high volumes; what could cause a sudden upsurge in usage?
There are sooo many things wrong with that title, where to begin………but here's a couple of reasons the headline is sensationalistic and just scare-mongering……..
1. Apple bought Samsung's excess capacity of flash memory, not all of Samsung's flash memory production. Those manufacturers that use flash memory in their devices, such as phone mfgr's., MP3/MP4 player mfgr's., etc., have long since contracted with their flash memory supplier(s) for XX amount of memory to be delivered this year. Large manufacturers do not just go and buy what bits/components they need on a willy-nilly daily/weekly/monthly basis; instead they want and need a dedicated, steady supply of said component delivered weekly/monthly. Hence, they sign contracts with the makers of said components for delivery during the upcoming year……at least that long. Apple didn't negate the already dedicated and allocated contracts for supply of flash memory to other manufacturers….
2. Samsung is not the only flash memory maker. Samsung is the largest maker, but not the only maker. Samsung has 40% of the flash memory market, leaving about, I don't know, like 60% of the market unaccounted for………….
3. If you really need some flash memory, I'm certain other companies, like maybe Intel, would be more than happy to supply whatever needs you may have. With everyone's production down right now, I'm sure finding someone with excess manufacturing capacity to supply the appropriate flash memory wouldn't be terribly difficult.