Apple flash order reduction hurts NAND outlook, iSuppli reports
Despite doubling the memory in its NAND-based iPod touch and iPhone lines recently, iSuppli Corp today said that, based on reports from the market researcher’s sources, Apple Inc has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007.
Any action from Apple has a considerable impact on the NAND market. According to iSuppli, the company was the world's third largest OEM buyer of NAND flash memory in 2007, with purchases of $1.2 billion making up 13.1% of the global market.
Apple could not be reached by Electronic News for confirmation of the order reduction. However, such an action would not be unwarranted. As has been stated by many semiconductor market watchers and chip makers, the current economic situation, influenced by the credit crunch and mortgage crisis, has weakened consumer spending. NAND is used heavily in consumer-electronics applications, including flash storage cards, MP3 players and USB flash drives, which are driven by sales to consumers.
Before word of Apple's warning, iSuppli had predicted the company's NAND flash purchases would rise by 32.2% this year, helping drive significant market growth. Now, however, the research company is cutting its outlook for global NAND flash revenue growth in 2008 to the single-digit percentage range, down from its previous outlook of a 27% rise.
“Unless the economy recovers vigorously later this year, last year’s DRAM market disaster could be repeated in NAND this year,” said Nam Hyung Kim, director and chief analyst for memory at iSuppli, in a statement.
On the supply side, Kim noted that slower NAND demand will have a major impact on suppliers’ financial results. Indeed, capital spending on NAND production is expected to increase by more than 20% this year, as evidenced by plans for added NAND capacity from Toshiba and SanDisk this week. Such a spending increase would ensure supply of parts and encourage average selling prices (ASP) to decrease. ISuppli, which warned of such an oversupply-ASP memory situation in December, said it believes that NAND prices already are below suppliers’ fully loaded costs.
“In light of these factors, NAND suppliers are likely to go into the red in the first quarter, and are not likely to recover in the second,” Kim warned.
In fact, as 2008 shapes up to be a poor year for NAND, suppliers are likely to look back at 2007 with nostalgia, iSuppli said, noting that NAND revenue grew by 12.5% to reach $13.9 billion in 2007.
NAND looks to drowning DRAM for life preserver
ISuppli pointed out that the NAND suppliers could be buoyed by growth in DRAM, as many companies including Samsung, Hynix, and Micron are capable of shifting production to DRAM when NAND conditions worsen. However, DRAM is also on the rocks, with iSuppli predicting a shallow 4% revenue increase from 2007 to 2008.
The company said earlier this month that it expects DRAM to see at least two more quarters of losses before approaching a pricing recovery. IC Insights has also reported the negative impact of falling ASPs on the DRAM market and has estimated a second half recovery.
“The only hope for the NAND industry is a quick recovery in pricing of DRAM. ISuppli doesn’t foresee this occurring within the next few months,” the company concluded.