Apple Orders 50 Million 8 GB NAND Flash Chips

Cupertino (CA) - In a move that is believed to help Apple to secure low NAND flash memory prices as well as create artificial shortages for competitors, Apple has ordered 50 million flash memory chips for its iPhones and iPods from Samsung Electronics.

A Digitimes article posted yesterday suggests that Apple huge order is in place to support an increase in iPhone production. The Cupertino-based company already ordered 25 million 8GB NAND flash chips from Samsung in June.

Analysts believe think that such a huge order not only guarantees a certain supply for Apple, but almost certainly will create a shortage of memory for Apple’s competitors. Digitimes suggests that Samsung already informed its customers it will cut supply to them in July. Apple’s order is also believed to amplify the effects of a reduced production of flash memory during April and May because of an oversupply in the preceding months.

Samsung was estimated to be dedicating more than 40% of its NAND Flash memory output for Apple’s iPod products in November 2005. That year, Apple announced that it had reached a long-term supply agreement with flash memory makers (Hynix, Intel, Micron, Toshiba and Samsung) to secure the supply of NAND flash memory throughout 2010 with a pre-payment of $1.25 billion.

Apple’s order also sparked speculations that the company is readying new iPods for September

Analysts are generally very optimistic the iPhone 3G’s future. FBR Capital Markets analyst Craig Berger, for example, now estimates that Apple may have placed an order of more than 15 million iPhones for the remaining two quarters of this year. RBC Capital Markets’ analyst Mike Abramsky said that Apple’s well-thought market strategy could lead to a "breakout" in iPhone shipments, in a way reminiscent of 2005 when Apple more than doubled its iPod holiday sales.

Abramsky predicts that iPhone shipments will triple during the summer to 5.1 million units. "We believe investors are underestimating the upside to Apple from lower iPhone pricing, 3G speeds and expanded global distribution," Abramsky said. The analyst thinks that 150 million existing iPod owners may add to sales by trading up to iPhone due to its lower price point, instead of replacing their iPods with newer models.

If any of the analysts is close to what will really happen, Apple is set to shoot well past its self-imposed target of moving a total 10 million iPhone units by the end of this year. The 50 million NAND unit order that Apple secured with Samsung certainly reveals that the company remains very confident in achieving and topping its goal.