Apple to prepay $1.25B for iPod flash memory

Apple on Monday announced that it has reached long-term supply agreements with Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010.

As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months, the company said in a statement.

"We want to be able to produce as many of our wildly popular iPods as the market demands," said Steve Jobs, Apple's CEO.

The iPod is the world's most popular digital music player and recently surpassed sales of 30 million, Apple also announced on Monday.

Along with Apple's announcement, Intel and Micron announced they would form a new company to manufacture NAND flash memory for "consumer electronics, removable data storage and handheld communications devices."

Each company will contribute about $1.2 billion in cash, notes and other assets to form the company, called IM Flash Technologies LLC, according to Reuters. Intel and Micron also plan to pay an additional $1.4 billion each into the company over the next three years.

The two companies said they would supply Apple with a "significant portion" of their shares of IM Flash Technologies' NAND flash memory output. In return, Apple will reportedly prepay $250 million each to Intel and Micron, the companies said. It's believed that Apple will also pay the same sum to Samsung, Toshiba and Hynix for its agreements with those companies.

It had been reported that Apple recently held discussions with both Hynix and Samsung in an effort to secure itself an ample supply of the flash memory used inside popular versions of the iPod like the Shuffle and Nano.

In the past Apple relied primarily on just two suppliers of flash memory, namely Samsung and Toshiba.