Rotten Economy Promises Rough Year For Apple, NAND and DRAM
February 21, 2008 1:16 PM
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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
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?
2/22/2008 3:13:05 PM
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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