NAND flash chips are indispensable to electronic gadgets. Samsung Electronics and Hynix are key suppliers ― flexone chips by Samsung at left and a Hynix chip at right ― which are asked by Apple to supply for i-Pods and i-Phones. |
 By Kim Yoo-chul
Staff Reporter
Apple asked Samsung Electronics and Hynix Semiconductor to supply a combined 70 million NAND flash chips for its flagship models ― the iPhone and iPod.
"Samsung Electronics was asked to supply 50 million 8Gb NAND flash chips to Apple, while Hynix was set to supply 20 million," a high-ranking industry source told The Korea Times by Monday.
"Specifically, Hynix had been considering boosting its NAND flash chip capacity to fill more of such orders from Apple, but plans to put more focus on DRAM chips," according to the official.
"The NAND flash chips from Samsung and Hynix are made from a highly-advanced 40-nanometer processing technology," the source added.
Another high-ranking industry source confirmed Samsung Electronics has been shifting its DRAM memory chip lines to NAND flash lines for "various reasons."
Samsung is the industry leader in the flash memory segment, with a global share of 42.1 percent, while Hynix is a runner-up to No. 2 Toshiba capturing 12.3 percent over the same period, according to data from iSuppli ― a market research firm.
NAND flash memory chips are widely used in digital music players including iPod and mobile phones, while DRAM chips go into traditional personal computers.
Shares of Samsung Electronics declined 3.32 percent to end at 583,000 won on the nation's main bourse, while Hynix lost 0.74 percent to close at 13,400 won, according to the Korea Exchange (KRX).
The order volume is an increase of 80 percent from that ordered by Apple last year, according to executives directly involved in the process.
Samsung and Hynix refused to confirm the remarks. Apple is one of the biggest clients both for Samsung and Hynix.
Mixed Responses
Apple's plan to buy up large quantities of flash memories will lift the balance sheets of the South Korean chipmakers, while helping the global memory chip industry to turnaround sooner than expected, analysts said.
They said steady capacity cuts by NAND flash memory makers have boosted chip prices and a possible sale to Apple is giving observers more assurance about the market's long-term stability.
"The prices of NAND flash chips will steadily rise. Short-term possibilities over tight supply in the chips have risen," TongYang Securities, a local brokerage, said.
"But the recent surge in prices for NAND memory chips has more to do with much-needed capacity cuts from chipmakers," the brokerage house added.
"Apple buying is nice," said Gartner, another research firm.
According to DRAMeXchange, a market research firm tracking the memory chip market, benchmark NAND prices rose 16 percent in April.
Sources have said Apple's next-generation iPhone could be getting a storage increase of up to 32Gb later this year.
In signs of an inventory clearance, Apple plans to introduce a new iPhone during this year's "Worldwide Developers Conference" in June.
"iPhone sales are slowly tapering off, as many fans have already purchased the hardware and are under a two-year contract," an official from Samsung Electronics said.
"Additionally, Apple is seeing increased competition as rivals roll out their own 'Apple stores,' and Palm is creating a buzz with it newest gadgets," the official said.
But some analysts still maintain a "cautious outlook" for the NAND flash sector despite a series of good signs, claiming that any supply tightness could be "short-lived."
Makers of NAND flash chips have suffered massive losses over the past few quarters, resulting from weak demand for consumer electronics gadgets amid the global recession.
In a move to tackle the market downturn, leading chipmakers have cut their factory output and slashed investments.
"NAND flash memory will see less growth," Hynix CEO Kim Jong-kap recently said.
Samsung and Hynix will release their first quarter earning reports in April 24.
yckim@koreatimes.co.kr
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