Industry insiders are accusing Apple of manipulating the price of NAND flash memory chips used in its popular iPhone and iPod products, according to a report in The Korea Times on Monday.
Citing unnamed sources, the article says Apple asks manufacturers to produce more chips than it eventually buys from Samsung Electronics and Hynix Semiconductor. The sources said Apple waits for the price of the chips to fall before making its purchase.
(Credit:
Apple)
The practice of not buying all of the product originally ordered, semiconductor analyst Jim Handy told CNET, is "not uncommon in the industry."
Handy, of market research firm Objective Analysis, explained that these contracts are normally negotiated with a cancellation clause, with provisions to protect the supplier and buyer. He said companies usually work closely with the buyers, so changes to orders are normally small and don't cause many problems.
Supply and demand in the NAND market are currently about even, Handy said, adding that with the popularity of the iPhone and iPod, he's heard estimates that 20 percent to 30 percent of the worldwide NAND flash memory goes to Apple. In its fiscal fourth-quarter results, the company reported selling 10.2 million iPods and 7.4 million iPhones for the three months ended September 26.
Chipmakers Samsung Electronics and Hynix Semiconductor declined to comment for The Korea Times, as did Apple's Korean office. Contacted by CNET, representatives of Apple in the United States also declined to comment for the story.
The iPhone sales numbers continue to increase, as does the number of applications available for the device. Apps are one reason the iPhone has become as popular as it is among so many different categories of users in such a short time on the market.
Apple currently has more than 100,000 apps available for download, with users having downloaded more than 2 billion apps as of November 4.
Global semiconductor sales are now expected to fall this year by 11 percent--an improvement over the previous estimate of a 17 percent drop, according to research released Monday by Gartner. And the outlook for 2010 is sunny.
Revenue is projected to drop this year to $226 billion, an 11.4 percent decline from last year's $255 billion. Next year however, it's expected to bounce back by 13 percent from this year's level, hitting the same $255 billion figure it did in 2008.
Personal computers are the largest factor driving semiconductor sales. In another recent report, Gartner said it expects demand for consumer PCs to continue, which will fuel gains in microprocessors and DRAM (dynamic random access memory) chips. But sales may not jump out of the starting gate.
"Both device types experienced lower revenue declines than the industry average, and DRAM began to be profitable for some vendors in the third quarter of 2009 after almost three years of losses," said Bryan Lewis, research vice president at Gartner, in a statement. "While most of the news has been positive to date, recent channel checks in Taiwan indicate there is concern that PC orders are slowing earlier than the seasonal norm and that 2010 may get off to a slow start."
Besides PCs, cell phones have also been a boon for semiconductor sales, noted Gartner, with their need for NAND flash memory.
"The revenue forecast for the commodity memory market -- DRAM and NAND flash -- has improved because of the stronger demand outlook, which means that pricing has strengthened more than previously forecast," said Lewis. "ASSPs [integrated circuits that perform a specific task] and memory, primarily NAND flash, also benefited from an improved outlook for cell phones."
Memory chip makers will offer more sophisticated flash drives for smartphones--technology that will be comparable to the solid-state drives found in laptops today.
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The Palm Pre comes with an 8GB flash memory drive: flash drive makers like Micron Technology will market more sophisticated flash drives for future phones.
(Credit: Palm)Today's flash drives, which typically range up to 32GB in capacity in products like Apple's iPhone, often use relatively unsophisticated techniques for reading and writing data. In general, the technology is not very different from that used in basic cell phones or digital cameras, according to Brian Shirley, vice president of Micron's memory group.
But as smartphones--and possible future tablet devices--become more like personal computing devices and less like basic MP3 players, memory chip makers will begin offering more sophisticated flash memory, said Shirley, in a phone interview.
"In nearly all MP3 players today it's almost exclusively 'raw' NAND. And at some point we anticipate moving more to a managed NAND," Shirley said. NAND is the type of flash memory chip used in all flash cards and solid-state drives.
Managed NAND falls somewhere between very basic flash drives--such as Secure Digital, or SD, cards--and pricey solid-state drives (SSDs) used in laptops and servers. "It's something in between the raw NAND that we've been talking about for cell phones and MP3 players and the full-blown SSD space," Shirley said.
"We believe this will be fairly busy (market) space in 2010," he added.
Solid-state drives used in laptops like the Apple MacBook Air and Dell Adamo get their performance from highly-developed, sophisticated controller chips and firmware, which manage how the data is read and recorded. Though managed NAND wouldn't necessarily reach this level of sophistication, it would begin to approach it.
The iPhone uses raw NAND with a separate controller, according to Gregory Wong, founder and principal analyst at Forward Insights, which does research on flash memory technology.
"They like to have control over the flash and the controller so they can boost performance," he said. "They're very cognizant of differentiating their products. The user experience is what is important to them. Whether it means you can download your music or video very quickly, whether it means you can find the data very quickly--that ties in to how they manage the NAND," he said.
But even Apple is looking for better performance as it looks to continue its very successful strategy of making its products different, according to Wong.
And future Netbooks may also use this kind of flash memory. Netbooks today using Intel Atom processors and the Windows operating system use, almost exclusively, hard disk drives. But a new category of Netbooks dubbed smartbooks--devices that are always on, always connected, and boast all-day battery life--are expected to come to market in 2010 packing flash drives. These small laptops may be candidates for managed NAND.
Apple said Tuesday that it has made a $500 million prepayment to Toshiba for flash memory chips and indicated the market is stabilizing.
Apple COO Tim Cook says the flash memory market is stabilizing.
(Credit: Apple)"The NAND flash market has now begun to stabilize and we expect it to move to a slight demand imbalance," said Apple Chief Operating Officer Tim Cook in Apple's Tuesday earnings conference call. (The call is available as an audio Webcast on Apple's Web site.) The news was reported earlier by Reuters.
"In terms of the Toshiba prebuy, we did a long-term supply agreement with Toshiba, as a part of that, as a part of the terms and conditions, we paid them $500 million," Cook said. "We view flash as a very key component for us because we use it in so many of our products and also we're a reasonable percentage of users of flash on a worldwide basis."
NAND flash is used for data storage in a variety of consumer products including digital media players and smartphones, such as the iPod and iPhone, respectively. For the last two years, flash chipmakers such as Japan-based Toshiba and U.S.-based Micron Technology have been reeling from severely depressed flash memory pricing.
Intel, which makes flash chips jointly with Micron, is also seeing a recovery in pricing. "For the year, it's up over 50 percent," said Troy Winslow, marketing manager for the NAND Products Group at Intel, in a phone interview earlier this week. He was speaking about the recovery in flash memory chip prices in the spot market. "That's been very positive for the industry and obviously we have benefited from that. And our business is going very well," he said.
Even with the better spot market pricing for flash memory--which is a boon for manufacturers--this won't necessarily translate into a jump in prices for consumers, according to Avi Cohen, managing partner at Avian Securities. "If the question is--will components (flash chips) cost 50 percent more than they did three months ago? Absolutely not," he said.
Solid-state drives may see heady growth despite a sliding world economy, according to a report released Tuesday by a market research company. Devices like the Apple iPod and iPhone are expected to drive growth.
Micron Technology along with its partner Intel are challenging SSD market leaders Samsung and Toshiba, In-Stat said
(Credit: Micron)Flash memory revenue in the solid-state drive segment will see compound annual growth rates of over 100 percent through 2012, according to market research firm In-Stat. The type of flash used in solid-state drives is referred to as NAND flash.
"You're starting from quite a small base. Back in 2006, you're in the tens of millions (of dollars) kind of a number. By 2012, you're easily over five billion. So the growth rates do get rather high," said Ian Lao, a senior analyst at Scottsdale, Ariz.-based In-Stat. The market researcher forecasts compound annual growth at 106 percent from 2006 through 2012, Lao said.
In the consumer segment, Lao says he expects to see most of the growth in small devices like portable music players and smart phones. Music players such as the Apple iPod and Microsoft Zune will adopt solid-state drives instead of the tiny 1.8-inch hard disk drives they use now because of better durability and shock resistance. "They suffer the risk of, hey, I just dropped my Zune, it doesn't work anymore," Lao said. SSDs will provide much greater reliability, he said.
And as smart phones become more PC-like, they will graduate from relatively simple flash drives to more sophisticated SSDs with the same Serial ATA (SATA) interfaces used in PCs today, Lao said. An iPhone, for example, with a more computer-like operating system and features would use an SSD, Lao said.
Future ultra-portable laptops, represented today by the MacBook Air and HP Voodoo Envy 133, will also drive SSD growth, as will Netbooks.
Sharp growth will also be seen in the corporate enterprise market. SSDs will, in an increasing number of cases, replace very-high-speed hard disk drives in server environments, Lao said.
Flash drives (non-SSD) will remain widely used in various music players, mobile handsets, after-market cards, and USB flash drives, with a combined market share of more than 80 percent during the next couple of years, according to the report. However, this percentage will drop to about 70 percent by 2012, as SSDs grow in importance, the report said.
Worldwide NAND flash revenues are likely to grow at a compound annual growth rate of 29.7 percent from 2007 to 2012 to reach $61 billion, In-Stat said. Revenues for NOR flash--used, for example, to store program code in cell phones--will increase at a 6 percent compound annual growth rate from 2007 through 2012.
The newest solid-state drives are just starting to hit retail. But would you buy one?
Intel X25-M solid-state drive has received glowing reviews for its performance
(Credit: Intel)Solid-state drives are attractive because they're generally faster than hard-disk drives, particularly at reading data--generally something PC users spend most of their time doing.
But price is still an obstacle, especially to the frugal consumer.
Sunnyvale, Calif.-based OCZ Technology is now offering some of the most competitively priced solid-state drives based the high-speed Serial ATA (SATA) II interface.
OCZ Vertex SSD drives start at $129 for a 30GB SSD. Other capacities include a 120GB drive for $469 and a 250GB SSD for $869. Though $869 may seem pricey compared to a 7200RPM 250GB hard-disk drive that can retail for well under $100, it's relatively cheap for a large-capacity SSD. In the past, SanDisk had sold a 256GB drive through resellers that was priced, almost incredibly, at more than $15,000. Axiom had been selling 256GB solid-state drives priced above $6,000.
OCZ says the Vertex Series of SSDs have a 1.5 million-hour mean time before failure (MTBF), "ensuring peace of mind over the long term." Solid-state drives, since their inception, have been plagued by doubts about write durability. SSD manufacturers such as Intel, Micron Technology, and Samsung say long-term durability is no longer an issue.
The OCZ drives are backed by a two-year warranty.
Intel's X25-M SATA solid-state drive is now widely available at retail. An 80GB X25-M is priced at just more than $500 at most retailers. Reviews of the X25-M's performance have been very positive.
Unfortunately, the only way to get the newest SSDs in some cases is by ordering a laptop. Samsung is now offering its latest-and-greatest 128GB SATA drives in ultraportable laptops such as the MacBook Air and the Dell Latitude E4200 and E4300.
The Latitude E4300 can be configured with a 128GB SSD for $460 more than the standard 160GB 5400RPM hard disk drive.
Intel will target solid-state drives for server computers in a tie up with Hitachi that was announced Monday night.
Intel solid state drive
(Credit: Intel)Intel and Hitachi Global Storage Technologies (Hitachi GST) said they will "jointly develop and deliver" Serial Attached SCSI (SAS) and Fibre Channel (FC) solid-state drives (SSDs) for servers, workstations, and storage systems.
While Hitachi is a large supplier of hard disk drives, Intel manufactures and sells consumer and enterprise-class solid-state drives (and the flash memory chips inside the drives). The enterprise-class X25-E Extreme SSDs that Intel offers now are based on Serial ATA (SATA) technology. As are its consumer-class drives.
Solid-state drives are generally faster than hard-disk drives, particularly at reading data.
"The combination of a leading Enterprise drive supplier with a NAND technology and manufacturing leader will produce world-class solutions in terms of reliability, performance and system compatibility," the companies said in a statement.
The agreement is exclusive to the two companies with the first Serial Attached SCSI and Fibre Channel products expected to be available in early 2010. Both Serial Attached SCSI and Fibre Channel are interfaces typically used in servers.
The companies said the SSDs will not replace hard disk drives but complement them. "The new generation of solid-state drive technology complements existing enterprise-class hard disk drives and is intended for use in storage applications that require extremely high Input/Output Operations Per Second (IOPS) performance and power efficiency," according to the two companies.
Hitachi GST said it will continue to provide its customers with both "traditional" hard-disk drives in addition to the SSDs.
The new SSDs will be "branded and exclusively sold and supported by Hitachi GST" and use Intel NAND flash memory and SSD technology.
Hitachi said it will use its expertise in drive firmware, reliability, qualification and system integration in combination with Intel's technology and manufacturing capabilities.
Micron Technology will bring out a 256GB solid-state drive early next year while it moves, along with Intel, to a new manufacturing process.
Micron SSD
(Credit: Micron)A Micron representative said Monday that the company will start volume production of a 256GB solid-state drive for consumer use in March 2009.
This follows Samsung's announcement last week that it had begun mass-producing 256GB solid-state drives.
The Micron RealSSD C200 will read data at 250MBps (megabytes per second) and write at 100MBps. It is sampling to customers now. Samsung, by comparison, is claiming sequential read rates of 220MBps, with sequential write rates of 200MBps.
The Micron representative said that the company is slightly behind schedule in delivering the 256GB product, as it was originally targeted for the fourth quarter of this year.
Solid-state drives are generally faster than hard-disk drives, particularly at reading data. Computer makers such as Apple, Hewlett-Packard, Dell, and Toshiba all offer laptops with solid-state drives ranging in capacity from 64GB to 128GB.
Intel is due to deliver a 160GB solid-state drive this quarter. The chipmaker is currently shipping 80GB solid-state drives to customers such as Hewlett-Packard, which offers it in its EliteBook 2530p ultraportable.
In related news, as reported back in May, Micron and Intel announced mass production Monday of their jointly developed 34-nanometer, 32-gigabit multilevel cell NAND flash memory device.
The "32Gb monolithic die will give us the ability to cost-effectively produce over 300GB-capacity SSDs in standard 2.5-inch and 1.8-inch form factors," Intel said Monday.
Multilevel cell technology allows makers of solid-state drives to deliver lower-cost devices at higher capacities.
The new Micron 256GB drive will not be based on the 34nm process, however. Drives based on this process will come out later in 2009.
Intel and Micron have a joint NAND flash memory venture, IM Flash Technologies (IMFT), which manufactures the NAND chips. The two companies market the products separately.
The companies "are ahead of schedule with 34nm NAND production" and expect their Lehi facility to have moved more than 50 percent of its capacity to 34nm by year's end, according to a statement.
"The results from IMFT continue to exceed our expectations," Randy Wilhelm, vice president and general manager, Intel NAND Solutions Group, said in a statement.
In October, Intel and Micron said they would discontinue supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approximately 35,000 (200-millimeter) wafers per month, Micron said at the time.
Samsung on Wednesday night said it has begun mass-producing 256GB solid-state drives. This size tops the largest-capacity SSDs found in laptops today.
Samsung currently offers 64GB and 128GB SSDs for laptops.
The new 256GB drives are faster too, the company claims, more than doubling the performance rate of Samsung 64GB and 128GB SSDs.
The drives combine sequential read rates of 220 megabytes per second, with sequential write rates of 200MBps. "This sharply narrows the performance gap between read and write operations to only 10 percent, compared to a read-write speed difference of between 20 (percent) and 70 percent for other SSDs," the company said.
Samsung did not mention random write performance, however. Despite being generally faster than hard-disk drives (particularly at reading data), solid-state drives fall short of hard disks when they randomly write data. Random writes are generally considered to be the Achilles' heel of solid-state drives.
Getting this 256GB SSD in a notebook "is analogous to having a 15,000-(revolutions-per-minute) drive, without all of its size, noise, power, and heating drawbacks," Jim Elliott, vice president of memory marketing at Samsung Semiconductor, said in a statement.
The 256GB SSD boosts data transfer when large multimedia files are simultaneously read and stored. "It can store 25 high-definition movies in just 21 minutes, a significant advancement over a 7,200rpm hard disk drive (HDD), which takes about 70 minutes," the company said in a statement.
The drive's performance is derived from a new single-platform design consisting of a chip controller, NAND flash, and special drive firmware developed by Samsung. "This single platform is designed to easily adapt to Samsung's 40-(nanometer) class NAND flash memory," according to the company.
It consumes 1.1 watts of power, versus 2 or more watts for a comparable HDD. Similar in weight to a 128GB SSD, at 81 grams, the 2.5-inch multilevel cell 256GB SSD has the same 9.5-millimeter drive thickness.
Samsung's 256GB SSD is also available with optional proprietary encryption programming that provides full-disk encryption, a key feature for some corporate users.
Pricing was not immediately available.
After cutting executive pay last week, Micron Technology is now paring staff as it scales back flash memory chip production.
On the heels of reporting a $344 million fourth-quarter loss last week--when Micron said it was cutting executive pay 20 percent--the Boise, Idaho-based memory chip maker said Thursday that it was restructuring its memory operations.
Micron will reduce its global workforce by approximately 15 percent during the next two years. Most of the workforce cuts will occur in Boise.
"The combination of declining customer demand and product oversupply in the marketplace has driven selling prices for NAND flash memory significantly below manufacturing costs," Micron said in a statement.
As a result, IM Flash Technologies (IMFT), a joint venture between Micron and Intel, will discontinue the supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approximately 35,000 (200 millimeter) wafers per month, Micron said.
NAND flash is used in flash drives for digital cameras and digital music players as well as solid-state drives.
Micron and Intel have other facilities that make NAND flash, including one in Lehi, Utah.
"Micron is in a strong position relative to our competitors...but we are not immune to the difficult global market conditions that are affecting us all," said Micron CEO Steve Appleton in a statement.
Cash restructuring and other related expenses are anticipated to be approximately $60 million and "next year's cash operating margin benefit is expected to exceed $175 million," Micron said.
Last week's red ink was Micron's seventh straight quarterly loss--and it reported a net loss for the entire 2008 fiscal year of $1.6 billion.
The memory chip industry overall is caught in a particularly brutal downward price spiral that is threatening the viability of even the largest players, including companies like Hynix.
