By Kim Yoo-chul
Samsung Electronics is challenging Toshiba to supply of flash memory chips for Apple's next iPhones ― tentatively named the iPhone 6S and iPhone 6 Plus ― as Apple moves to increase the storage capacity of its flagship products.
"As Apple plans to increase its shipments of the mid-range iPhone models with larger capacities amid growing consumer demand for data-intensive features, including cloud services, Samsung Electronics is in talks to sell more of its flash chips for the next models," a source close to the deal told The Korea Times, Sunday.
He said no agreement had yet been made because negotiations over pricing and guaranteed shipments were still underway.
In digital devices, NAND flash memory chips are considered critical as they have been used to reduce the cost per bit and boost maximum chip capacity so as to compete with magnetic storage devices. This chip also is suitable for mass-storage devices.
Apple is expected to release two new iPhone versions in September.
Samsung's chip factory in Xian, China, is testing the stability and durability of its latest NAND chips before initial shipment, another source said.
"Samsung intends to increase the sale of 64-gigabyte (GB) NAND chips as Apple, which has three storage models ― 16GB, 64GB and 128GB ― is impressed with the healthy sales of its iPhones with 64GB storage capacity in its target markets such as China and Europe," the source said.
Samsung's move comes as its semiconductor business is on a bullish track in terms of profit increases in DRAM and NAND memory chips. Samsung is doing well in DRAMs to help smartphones improve writing and data-processing speeds.
But Samsung's business with Apple in NAND chips has not been strong because Apple's iPhone 6 model used 64GB NAND chips supplied by Toshiba, SanDisk and SK hynix, according to a report by Credit Suisse.
SK hynix handled NAND chips with 16GB capacity for the iPhone 6, while Toshiba of Japan supplied the Apple device with the largest capacity, 128GB.
The main reason Samsung lost Apple in NAND chips for the iPhone 6 was over price.
"For the current iPhone 6 models, Toshiba, SK hynix and SanDisk are the top three suppliers, with the portion of 50 percent, 30 percent and 20 percent. But Samsung is trying to get a share," the source said.
Samsung expects, given the choice between the larger screen iPhone or a 64GB iPhone, the suggested retail price would have minor differences, meaning the resumption of Samsung's NAND business with Apple "does make sense."
Experts said Apple's strategy was to push iPhone users to its iCloud service when they needed more storage.
"The belief is more and more as we use iCloud services for documents and our photos and videos and music, that perhaps the most price-conscious customers are able to live in an environment where they don't need lots of local storage because these services are lightening the load," Apple Senior Vice President of Marketing Phil Schiller said recently in a podcast hosted by Daring Fireball's John Gruber.
Sean Yang, assistant vice president of DRAMeXchange, a leading tracker of DRAM and NAND memory markets, said recently: "Supply of NAND flash will exceed demand throughout the first half of the year. The situation will get better for manufacturers of memory chips in the second half, when Apple introduces its next-generation smartphones and tablets."