Katie MarsalAccording to The Korea Times, Apple has leveraged its power against major companies like Samsung and Hynix Semiconductor through the popularity of the iPhone and its line of iPods. The company has been accused of suppressing flash memory prices by ordering more chips from semiconductor makers than it actually buys.
Quoting a nameless "senior industry official," the report stated that Apple has asked Korean semiconductor companies to make a certain amount of chips. But the Cupertino, Calif., company allegedly does not purchase the volume it requests.
Instead, sources said, Apple simply waits until chip prices fall to levels the company finds acceptable. Then it purchases its allotment at a price that meets its internal expectations.
Another official called Apple's tactics "absurd," and suggested that the strategy will hurt the health of the NAND flash industry. Prices of flash memory chips are said to have dropped 4 percent this month.
Twice recently, Apple was accused of causing a worldwide NAND flash shortage. Demand for flash memory was said to have been outstripped by supply for major manufacturers as the iPod and iPhone continue to sell millions of units. Demand in the third quarter of 2009 was said to have exceeded supply by 1.3 percent.
The capacity of memory in Apple's flash memory devices has grown exponentially over the years. In September, the company unveiled its largest-ever 64GB iPod touch for $399, doubling the previous largest 32GB offering.
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60 Comments
I have heard of a limited number of sellers controlling a market, but a buyer controlling a market... that's ridiculous.
I have heard of a limited number of sellers controlling a market, but a buyer controlling a market... that's ridiculous.
This is hilarious - Samsung complaining of a buyer using bullying tactics.
Samsung buy from the company I work for, and bully all of their suppliers relentlessly.
In theory its not ridiculous. A single super powerful buyer could essentially dictate their terms and control the market. However, the bigger problem is that the flash makers can't have it both ways. Apple has been accused of causing a worldwide flash shortage and apple is accused of not buying enough Flash memory. Those can't both be true. Either Apple is "forcing" makers to make more than they want, and there is a surplus of flash, or they are buying more than the market can make and there is a shortage. Which is it?
Apple may be powerful, but it can't beat the basic logic of supply and demand.
Two problems with this claim:
1) If demand is outstripping supply, then it's quite irrelevant that Apple may (or may not) actually buy as much as they ordered. Either way the suppliers are failing to keep up with demand. What would they do if Apple actually did buy as much as they ordered? They can't hardly deliver chips they haven't made!
2) I thought in previous articles on the topic of Apple "cornering" the market for flash that the prices were set at the time of the order? If that is true, then the theory that Apple waits until prices drop (presumably due to the oversupply of chips because Apple over-ordered) doesn't hold up either. Apple would still be paying the previously agreed to price.