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Tuesday, March 16, 2010, 04:55 am PT (07:55 am ET)

High prices make Apple reluctant to strike longterm NAND flash deals

Apple, which takes up the the lion's share of global NAND flash memory supply, has been reluctant to negotiate with suppliers in 2010 due to high prices.

According to DigiTimes, though demand for NAND memory in devices such as memory cards and flash drives has been soft, it has not significantly pushed down chip prices. Major chip suppliers like Samsung have given priority to profitable partnerships over shipment volume, which doesn't work to the advantage of major buyers like Apple.

In addition to slower demand, the situation has become even more volatile because tight foundry capacity is expected to disrupt shipments and have an effect on NAND flash pricing, industry sources reportedly said.

"Some NAND flash controller suppliers," the report said, "have indicated that their supply may not be able to satisfy customer demand in the second quarter if their foundry partners continue to see tight capacity, the sources said. This supply disruption is likely to impact NAND flash prices for the quarter."

Industry sources expect the situation to improve in the second quarter of 2010, when they believe Apple may start negotiating long-term supply contracts for NAND flash. The report noted that Apple's consumption of flash memory will "continue to play a significant role" in the industry this year.

Earlier this month, another report alleged that success for Apple's forthcoming iPad tablet computer could increase prices of solid state drives. Apple consumes nearly one-third of total NAND flash memory supplies, and its share is expected to grow even more with the launch of the iPad on April 3.

It was noted multiple times in 2009 that Apple had created a flash shortage, with its iPod and iPhone line of products consuming the largest share of NAND flash. Industry sources expect the price of NAND flash to continue to rise in 2010.

In addition to most of the iPod lineup and the iPhone, in early 2008, Apple embraced the solid state drive by offering it as an option in its MacBook Air, with a premium price.