“And there is not much that Samsung Electronics, the world’s biggest flash memory maker, and Hynix Semiconductor, the industry’s No. 3 player, can do about Apple’s moves, as the American company increasingly gains leveraging power due to the global popularity of its iPhone handsets and other consumer electronics products,” Yoo-chul reports.
“The summary of the arguments goes as this ― Apple is contributing to the suppression in flash memory prices by ordering more chips from semiconductor makers than the amount it actually buys from them,” Yoo-chul reports. “‘Apple should certainly be blamed for deteriorating the supply and demand cycle in the global NAND flash market,’ a senior industry official told The Korea Times, refusing to be named.”
“‘Apple has asked Korean semiconductor makers to produce a certain amount of chips for its digital products, only to actually purchase a smaller volume eventually. The company doesn’t make immediate purchases, but waits until chip prices to fall to the level the company has internally targeted,'” Yoo-chul reports. “The chip industry had hoped Apple would increase purchases of NAND flash memory chips to boost the output of iPhone and other flagship devices.”
Full article here.
MacDailyNews Take: First of all, without Apple, there is no NAND flash market. Apple created the demand nearly singlehandedly and therefore controls not only a great deal of the supply, but influences prices as well. Welcome to unfettered, unrigged capitalism, Korea. Second of all, this article is nothing more than yet another Korean anti-Apple hit piece. This sort of nonsense has been going on in Korean media as certain Korean smartphone makers get ready to be converted from protected over-charging purveyors of mediocrity and worse into Apple’s roadkill. This is iPod redux (please see related articles below). The entities in question never come out and say who they are, most likely because they also have massive deals in place to supply Apple with components, including the aforementioned flash memory (and LCD panels, among many other things). Our advice to those interests peppering Korea with this poppycock: Shut up, quit whining, take your medicine, and keep looking for another market around which you can institute Korean super-protectionism, so you can ripoff your own countrymen yet again.
Agree with MDN’s take. Apple also provides cash advances to these companies to the iTune of $500 million to ensure supply.
Piss on the crybaby journalist and Korean losers.
You won’t see Samsung of Hynix complaining, as Apple is one of their best customers.
The issue here is Apple Per Purchases huge amounts of NAND at a set price then schedules deliveries based on need. Want is at issue is Apple schedules deliveries are contract commitments with penalties to the supplier who misses a delivery date. So, the NAND Makers have to make more NAND Flash then they want too. The Excess NAND reduces the prices over all. If Samsung as an Apple NAND delivery on Dec. 1, 2009 and Microsoft or any other company ordered NAND for a Dec. 1 2009 delivery Samsung would by contract have to deliver to Apple first. Because Samsung manufactures NAND for Apple and they also manufacture NAND to sell to others. So, Samsung makes about 40% more NAND then they normally sell.
Bullying – There’s a app for that.
Well grill my dog! Talk about biting the hand that feeds you!
Apple keeps them afloat through a global recession and yet they find a reason to complain?
If Apple is over-ordering so they don’t get stuck not being able to fill customer orders. This is especially relevant with small ticket, near-impulse buys items like iPods.
What if suddenly, iPhones and iPods were on backordered because of a NAND shortage? Not a good thing for Apple.
This sounds ridiculous to me. I thought I heard complaints not too long ago that Apple way buying so much flash memory that other companies couldn’t get enough to complete. Now we’re hearing that Apple is requesting they make so much that they drive the price for this down, and then not buying what they request. How come the maker’s aren’t responding to Apple’s request by only making as much as their projections (ostensibly based on recent history and anticipated future demand) predict? How come Apple’s competitor’s aren’t snatching up the excess to better compete against Apple? Or maybe RIM already is, and that’s how they can keep up the BOGO (buy one, get one free)? Either way, it sounds to me as though demand *is* keeping up with supply. I don’t see the true nature of the issue.
Quite a passionate take there from MDN. Wow.
you know what?
I can honestly say, there is almost nothing apple can do to bother me.
why?.. check the history books. This company is full of ‘crazy ones’..
as for the koreans, i think they have a case, but at this point, that’s about all they got, Apple is big big big, and fucking smart. if Korean companies thing they can try and ask the courts for a ‘handicap’ they’re really desperate.
For those of you who didn’t bother to read the article before commenting, Demon has taken the most salient part of the article and added a hundred extra words for your, er, reading enjoyment.
Microsoft has been doing this for years, promise way more than they actually deliver!
Korea, the land where you can buy a pair of Nike shoes for seven bucks and a genuine Rolex for twenty-five from the same street vendor in Osan.
MDN is usually passionate about stuff like this. I wonder why they gave such a “milk toast” response.
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Milque Toast?
In related news McDonalds complained that they made 2 billion burgers on Friday, but customers took all weekend to consume them.
I understood Apple pays $500 million up-front so no wonder they get first dibs.
@G4Dualie,
I *DID* read the article, and Demon’s response. It is still a lot of verbal smoke and no substance. Nothing says the chipmakers HAVE to accept Apple’s terms and make more flash than Apple actually buys. It’s called negotiation. If there are so few chipmakers, it seems to me they have the upper hand. If they tell Apple “No, we’re only going to make the amount you actually contract to buy”, where else is Apple going to go to get their flash memory?
Sorry folks. Based on the information available here, I call BS on this whole issue.
Who’s actually whinging that a 4gb flash drive only costs $8 retail?
Totally in agreement with Kevin.
First there was a chip shortage and no NAND for Apple’s competitors. Apparently Apple was consuming all that it had ordered and more.
Now Apple doesn’t take all that it orders and there is a surplus of NAND. But where now are all those “competitors” that were whining about how there is no NAND supply because of Apple? You would think that they would be snapping up the excess in light of the lower prices!
Whatever, lower NAND prices are better for consumers anyway. I’m not complaining! Thanks Apple!
–mAc
This isn’t abuse. MDN is right–it’s capitalism.
It’s only against the rules if Apple tries to forbid them from making product for their competitors, but that isn’t the case here.
In many ways it’s similar to what is done to control prices in the diamond market.
Wow, all these posts and no mention of the real issue that makes the article particularly offensive–the fact that apple was long the victim of ram antitrust abuses by these manufacturers that had apple (and thererefor us) overpaying for ram for years.
After getting screwed on ram pricing for a decade or more doesn’t it make perfect sense for apple to protect itself when marketing severly ram dependent products?
I don’t see the NAND producers complaining about Apple’s up front payment or refusing to take Apple’s business.
Yes, Apple may be playing some games with ordering and fulfillment, but it also could be said that Apple is securing its pricing and allotment based on projections with some additional leeway in the event sales exceed expectations and production needs to be increased. Apple wouldn’t/couldn’t increase production if additional NAND would cost three times as much as previously priced.
And have no doubt, the NAND producers would be very happy to significantly increase the price if Apple came to them with last-minute needs for more memory.
The real problem is that the rest of the NAND market hasn’t developed, primarily because no other company seems capable of producing a true iPod or iPhone competitor. Put another player in the field, and NAND memory sales will increase.
With about $40 billion or so in the bank, Apple could buy a NAND chip maker. Then these babies would really have a problem and would loose their biggest customer.
If they doing like the terms than why did they agree to them? Idiots!
This has more to do with the iPhone about to break into the formerly protected Korean market. Many Koreans make purchasing decisions based on nationalistic sentiments. The local cell makers make HUGE profits by over-chargng in their home market. Now that the Korean government is allowing in the iPhone, these guys are trying to stoke anti-Apple sentiment among the buying public. This was planted after news leaked that there are massive Apple pre-orders; the other manufacturers are panicking.
So a chipmaker has an ethical problems with the terms but has no problem accepting those terms because the business is more valuable…
If The Chipmaker doesn’t agree to the terms Apple asks for… then don’t sign on the bottom line. Apple will simply go to the next supplier.
If the terms are really that bad, then they wouldn’t find any suppliers… but the suppliers know that the Apple contract is valuable and so one will end up accepting the terms despite the conditions.
Since when does “Hey guys, I think you should make X million 8GB flash memory chips” constitute an order? That’s a notification of max anticipated demand.
I don’t think it’s an order until Apple & the chipmakers sign legally enforceable agreements for Apple to buy Y million 8GB flash memory chips for $Z dollars. If Y < X, it seems Apple’s competitors don’t have much difficulty picking up the slack.
If they sign contracts with non-binding quantities ordered, they have no right to whine. If the contracts are binding on quantity, sue? What’s their problem? They got too greedy in the pre-signing stage and apple took advantage of that?