Apple sneezes, flash industry gets sick

Demand cuts for NAND-flash memory from Apple Inc have driven down total NAND-market estimates for 2008. Reports from iSuppli Corp's industry sources indicate that the consumer-electronics maker significantly slashed its 2008 NAND-flash orders and has informed suppliers that its demand growth in 2008 will be slower than that of 2007. As a result, iSuppli reduced its outlook for 2008 global NAND-flash revenue growth to the single-digit-percentage range.

Before Apple's warning, iSuppli had predicted the company's NAND-flash purchases would rise by 32.2% this year, helping drive significant market growth. As proof of Apple's considerable impact on the NAND market, iSuppli points out that the company was the world's third-largest OEM buyer of NAND-flash memory in 2007, with purchases of $1.2 billion—13.1% of the global market.

The current economic situation, bearing the influence of the credit crunch and mortgage crisis, has weakened consumer spending. Sales to consumers drive NAND, which finds wide use in consumer-electronics applications, including flash-storage cards, MP3 players, and USB-flash drives.

The research company notes that slower NAND demand will have a major impact on suppliers' financial results. Indeed, capital spending on NAND production should increase by more than 20% this year. Such an increase would guarantee supply of parts and encourage average selling prices to decrease. ISuppli believes that NAND prices now are below suppliers' fully loaded costs.