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Apple flash demand triggers shortage fears

Posted: 20 Jul 2007 ?? ?Print Version ?Bookmark and Share

Keywords:NAND flash demand? flash shortage? Apple gadgets?

Production glitches in the migration to more advanced NAND flash manufacturing processes have led to a lower-than-expected output, according to a report from DRAMeXchange. In addition, as iPhone and iPod set to consume a significant amount of flash chips, the market has grown concerned that a shortage may occur.

From Q2, NAND flash makers have already started to produce chips based on even thinner circuitry. However, as the technology is not entirely mature yet, the current capacity has not been in line with original production plans.

For the past 3 months, the spot price and contract price of NAND flash have risen rapidly. DRAMeXchange believes the price increases are attributed to problems in the transition to more advanced process technology. The resulting lower yield rates have caused a drop in the production output.

According to DRAMeXchange's figures, in the wake of the expected iPod sales and chip inventory buildup for Q4, the iPhone and iPod will take up roughly 25 percent of worldwide NAND flash production in Q3. As a huge portion of the capacity is being allocated to Apple in meeting the anticipated demand in 2H, many downstream vendors have been unable to secure enough flash chips. The 25 percent allocated for Apple will also leave a tighter market supply that may further drive up prices, the firm said.

Additionally, since many downstream vendors are beginning to stock up on inventory ahead of the Christmas sales, flash chip shortage could be expected in Q3. DRAMeXchange said that it will roughly take two to three quarters before manufacturers can raise their yield rates to a higher level, thus flash prices are projected to continue rising.




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