Apple warns flash memory suppliers of growth slowdown - report

In an early warning sign of consumer weakness, Apple Inc. has reportedly slashed its 2008 NAND flash memory order forecast significantly and informed suppliers that its demand growth will slow in 2008 compared to 2007.

The move will have huge ramifications on the overall NAND market, says market research firm iSuppli, as the iPod maker was the world's third largest OEM buyer of NAND flash memory in 2007, with purchases of $1.2 billion, representing 13.1 percent of the global market.

Much of Apple's order reduction is attributed to weakness in consumer spending spurred by macro-economic concerns including the U.S. subprime mortgage crisis.

"Unless the economy recovers vigorously later this year, last year’s DRAM market disaster could be repeated in NAND this year," said Nam Hyung Kim, director and chief analyst, memory, for iSuppli.

Before word of Apple's warning, iSuppli had predicted the company's NAND flash purchases would rise by 32.2 percent this year, helping drive significant market growth. The Cupertino-based company employs the solid-state memory in its iPhone, nearly all of its iPod models, and most recently began offering it as an option on the MacBook Air sub-notebook.

Despite the softness in demand, capital spending on NAND production will reportedly rise by more than 20 percent this year, ensuring easy availability of parts and causing prices to decrease. iSuppli said these factors are likely to compound problems for NAND suppliers who are already dealing with prices below their fully loaded costs.

"In light of these factors, NAND suppliers are likely to go into the red in the first quarter, and are not likely to recover in the second," Kim said.