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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: price cuts
By Aerius on 2/21/2008 8:38:49 PM , Rating: 2
Basically Apple said flat out that they expect 2008 to be mediocre, and then they followed through on the supply side. Of course you know better than Apple.

Clearly Apple is cutting their NAND orders because they created some new super technology that doesn't require it. Steve Jobs was tricking everybody by lowering their sales projections for 2008 as well. He was helping smart people like you by nailing his own stock price so that you could buy in cheaper. Thanks for clearing it up.


RE: price cuts
By xsilver on 2/21/2008 9:03:23 PM , Rating: 2
well for 2006 if you had a nand flash player or better yet a ipod nano, you were uber cool.

In 2007 if you had an ipod nano, you were just one among many.

in 2008 if you had an ipod nano, nobody is going to care.
the ipod nano i believe has its days numbered as it is receiving pressure from smartphones that also play mp3's and have sd slot storage for 4gb+.
The nano is also becoming a commodity item so price rather than "cool" demand is going to drive more sales.


RE: price cuts
By mattclary on 2/22/2008 11:44:28 AM , Rating: 2
Not sure I understand your post. It sounds kind of sarcastic, but you seem to be on a different subject than I am.

I am talking about the Apple "price cuts" on products that they plan to replace in the market with higher capacity products. My point is that announcing "price cuts" on products that are, in effect, on clearance sale, is not really a price cut so much as an inventory reduction sale.

It's like Ford announcing a price reduction on 2007 F150s.


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