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Tue, March 28, 2023 | 12:03
Tech
Apple, Chip Bully?
Posted : 2009-11-29 17:12
Updated : 2009-11-29 17:12
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Chipmakers Claim iPhone Maker Disrupts Flash Market

By Kim Yoo-chul
Staff Reporter

There are growing complaints in the semiconductor industry that Apple, the "smart" phone maker extraordinaire and major chip buyer, is manipulating NAND flash memory prices through its "questionable" purchasing strategies, industry sources said Sunday.

And there is not much that Samsung Electronics, the world's biggest flash memory maker, and Hynix Semiconductor, the industry's No. 3 player, can do about Apple's moves, as the American company increasingly gains leveraging power due to the global popularity of its iPhone handsets and other consumer electronics products.

The summary of the arguments goes as this ― Apple is contributing to the suppression in flash memory prices by ordering more chips from semiconductor makers than the amount it actually buys from them.

"Apple should certainly be blamed for deteriorating the supply and demand cycle in the global NAND flash market," a senior industry official told The Korea Times, refusing to be named.

"Apple has asked Korean semiconductor makers to produce a certain amount of chips for its digital products, only to actually purchase a smaller volume eventually. The company doesn't make immediate purchases, but waits until chip prices to fall to the level the company has internally targeted."

The chip industry had hoped Apple would increase purchases of NAND flash memory chips to boost the output of iPhone and other flagship devices.

The global iPhone craze currently has Apple drenched in robust earnings.

NAND flash memory chips are primarily used in memory cards and storage drives in mobile devices, computers and other consumer electronics products.

Another industry official, also reluctant to be identified, used the words "absurd" to describe Apple's purchasing strategies.

"Samsung and Hynix both provide chips to Apple and have less of an edge in deciding prices and volume. Apple's strategy could hurt the industry's health," he said.

Both Samsung and Hynix refused to officially comment, as did officials from Apple's Korean office.

"We already knew about this," an industry source said, without elaborating further.

According to data from DRAMeXchange, a market research firm, the contract prices for multi-level cell (MLC) NAND flash memory chips, the sectors' mainstream product, declined 4 percent during the later part of this month.

"Major chip suppliers are expected to ramp high-density chips using 30 nanometer-level technology in December. With supply likely to grow, NAND flash price corrections may continue in the contract market through the end of 2009," DRAMeXchange said.

"A seasonal demand drop and the stoppage of inventory restocking efforts by chip producers for the year-end season could be other reasons for price corrections. But those aren't all," according to the official.

Android Fears?

Some industry watchers say that Apple's purchasing strategies are linked with its efforts to boost iPhone sales at a time before rival handsets, powered by the Google-backed Android operating system, generate further buzz in global markets.

Gartner, another market researcher, predicts that Android-powered handsets will slightly edge iPhone in total sales by 2012, with a growing number of handset vendors and mobile-phone carriers believing Android to be their best bet to compete against Apple's iconic device.

"From 2012, Apple may pay more to Korean companies to buy chips and other key components for its mobile devices," said an analyst from at Prudential Investment.

Apple sold 5.2 million iPhone 3G and 3GS models through June, although the sales figures have been underwhelming in China.

Korean mobile operator, KT, has recently released the iPhone here, but industry watchers have mixed predictions on Apple's level of success. KT is expecting iPhone sales to reach around 500,000.

Cost, lack of features, and competition from other handsets have forced a slow start to the iPhone's launch in China, where Apple managed to sell only 5,000 of the smart phone since last month's release.

And the iPhone craze seems relatively quiet in Japan when compared to other markets.

"There is the possibility that Apple could eventually end up a niche player in the Korean handset market. Just as with the Mac laptops, Apple maintains tight control over iPhones' hardware and software, contrasting with its rivals that are more open," said another industry official.

"If it is true that Apple gets NAND flash memories at lower prices from top chip vendors, it is questionable how long they can maintain this strategy," the official said.

The first iPhone handset, released in 2007, used a 4-gigabyte NAND flash memory. The latest iPhone 3GS models use 16-gigabyte and 32-gigabyte NAND flash memories.

The rising sales of smart phones and the increasing NAND density in the devices, is expected to generate new demand for the chip industry.

iSuppli, a tech market researcher, predicts that the average amount of NAND flash memories in all mobile phones shipped worldwide will rise to a density of 5.8-gigabyte per handset in 2013, up from less than 1-gigabyte in 2008.

yckim@koreatimes.co.kr
 
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