Apple 2.0

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Report: Apple has cornered the flash memory market

February 19, 2009: 9:32 AM ET

Samsung 8gb flash RAMOne 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)

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Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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