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After a rough fourth quarter, NAND manufacturers hoped to get a break and instead they got slammed by more bad news, this time from Apple

Apple Inc. last year spent $1.2B USD on NAND flash memory for its consumer electronics devices.  Most of Apple's wildly popular iPod family sports the memory -- the iPod Shuffle, the iPod Nano, and the iPod Touches all use it for storage.  The iPhone also uses NAND, further increasing Apple's already sizable NAND appetite.  Thus Apple's decision hold a significant sway on NAND's fate.

Perhaps predicting slow iPod/iPhone growth, Apple dramatically scaled back its NAND predictions for 2008, sending NAND manufacturers into a panic.  The news, which also may signal bad news for Apple, may be a reflection of the sagging of the U.S. economy, burdened by the U.S. sub-prime mortgage crisis, which has led many analysts to predict a rather dire consumer market for the year.  Apple continues to cut prices in hopes of keeping sales alive, but the outlook is still far from rosy.

iSuppli announced the shifting estimate from Apple on Wednesday, stating, "Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007."

Before iSuppli had predicted a 32% increase in NAND orders for 2008 from Apple.  The change caused iSuppli to drop its estimate for global NAND growth from 27 percent to "single digit" percentage growth from last year's $13.9B USD market.  According to iSuppli in Q1 '08 NAND manufacturers will also invest a 20 percent increase in capital spending, which will increase capacity and lower prices for the consumer, but add further to the suppliers financial woes. 

The year of 2007 held mixed results for NAND suppliers, but still may be looked back fondly upon in comparison to 2008.  In 2007 NAND overall saw 12.5 percent growth.  However in Q3 and Q4 of 2007, six of the top eight NAND producers saw sequential declines in revenue.  Only Micron and Intel escaped this trend.  Samsung and Toshiba, who hold the number one and two spots respectively, were among the losers, but remain on top of the struggling market.

Some top tier NAND suppliers vested in DRAM production as well will get doubly hit, as DRAM is supposed to have an extremely poor year as well, experiencing poor growth of only 4 percent.  While single digit growth may seem acceptable to some, the constant demands for increased capacity at lower prices means that single digit growth typically equates to significant revenue losses.

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RE: Rotten ecomomy?
By stonemetal on 2/21/2008 4:08:48 PM , Rating: 2
no thanks I will take my economic punditry from someone who knows the difference between shell and shill. The thing with the sub prime market is just that the sub prime market. They didn't have any money to spend any way that is why they were sub prime to begin with. All those defaulted properties still have value so the lenders aren't out much except the loss in property value from trying to move so much property at once. What is killing us right now is the appearance of weakness not actual weakness.

RE: Rotten ecomomy?
By callmeroy on 2/22/2008 10:21:50 AM , Rating: 2
The thing with the sub prime market is just that the sub prime market. They didn't have any money to spend any way that is why they were sub prime to begin with. All those defaulted properties still have value so the lenders aren't out much except the loss in property value from trying to move so much property at once.

You know I never do just assume people on the 'net know what they are talking about but its a strange feeling when you actually catch someone saying something that you know for FACT is wrong.

The mortgage industry is in dire straits indeed and to say the lenders aren't out much is silly indeed. Historic losses have been taken in the mortage industry as of late, historic.

Hundreds of independent mortgage firms across the country have folded completely. One of the behemoths of the industry, Countrywide (which btw was THE largest ) had to rely on BoA to bail them out. Over 100k jobs in the industry have been lost up to now, with more losses predicted before the next quarter, let alone the year is done.

If you don't think the mortgage market crisis is a big deal or not much of a loss - you really don't understand either the true condition of the market right now nor the importance the mortgage industry has on the national economy as a whole.

The biggest purchase and greatest material asset one can make/own is your home. It doesn't take an economics major to figure out how a major industry, a major economic engine to a country's economy has rippling affects into other industries.

I wish some of the information our company passes around internally could be posted here, but I could get in trouble if I did that.

Btw, I work for a mortgage company (well for now - its getting pretty scary).

RE: Rotten ecomomy?
By gramboh on 2/22/2008 3:13:05 PM , Rating: 2
Excellent points, to downplay it as minimal loses is insane. Two other things:

1) The sub-prime issue is not just with the intial lenders, but the fact that these rotten mortgages were packaged into deals sold on a secondary market is screwing over other institutional investors (who some would argue were mislead over risk). Also, there is a huge impact on overall market confidence. This hit our markets in Canada as well due to our trade relations.

2) My current fear is a coming consumer credit crisis. I don't have the actual stats handy, but the average amount of American consumer credit card debt is frightening. A slight downturn in the economy where jobs are lost or wages do not grow or housing devaluation could cause a nasty cascade if all these bozos who have $30k of CC debt on useless consumer goods start defaulting.

"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer

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