Archive notice: This article was originally published on February 22, 2008. Links and embedded videos are preserved as part of the historical record.
This is the conclusion of a current analysis by market researcher iSuppli, according to which demand for memory components is still expected to rise in 2008, but less strongly than previously expected. Instead of Apple’s expected 32 percent increase in flash orders for 2008, only 27 percent more orders than in the previous year are now expected, also in view of Americans’ restrained willingness to buy.
“There are already initial signs that the iPhone is not selling outside the USA to the same extent as in its home market. I also consider it possible that the MacBook Air, which was presented only recently, will appeal to many customers only with a traditional hard drive. Together with weakened consumer willingness to buy as a result of the financial crisis in the USA, the NAND flash market could come under increased price pressure during 2008,” says UniCredit analyst Günther Hollfelder.
Against the background of the slight NAND oversupply in the market and economic deterioration caused by the US subprime mortgage crisis, iSuppli expects prices for NAND memory chips to fall even faster, also because of lower demand from Apple. According to experts, Apple became the third-largest OEM buyer of NAND flash chips in 2007 because of its popular iPods and paid around 1.2 billion dollars for them. This corresponds to around 13.1 percent of the world market, which totalled 13.9 billion dollars in the past calendar year according to preliminary iSuppli figures. The negative trend in the memory business is therefore likely to continue, since six of the eight largest NAND flash producers recorded revenue declines in the fourth quarter of 2007 compared with the previous quarter.
If Apple coughs as it reduces its orders, this is an indication that the entire flash-memory industry could become ill, industry portal Cnet reports. Despite positive financial results in January 2008, iPod sales figures for the fourth quarter of 2007 nevertheless fell short of analysts’ expectations. The company attributes the fall in demand to the fact that high-priced products such as the iPod Touch in particular drove up revenue. This market shift therefore came at the expense of “tarditional iPods”, the report says. Nevertheless, Apple is notorious for formulating its own financial results and the associated quarterly forecasts rather cautiously.
The price slide is hitting the entire NAND flash industry hard because of weak demand. Samsung, Toshiba and STMicroelectronics each took in around two percent less than in the third quarter of 2007, while Hynix recorded as much as 5.6 percent less. The downturn is clearly visible at Renesas, at minus 39.8 percent, and at Infineon subsidiary Qimonda (50 percent revenue decline). Industry giants such as Intel or Micron, by contrast, were among the winners in the NAND flash market in 2007. In view of the production expansion still planned, however, analysts fear that a similar scenario threatens in 2008.
