Did Apple really ‘slash’ their NAND flash orders?

Earlier this week, iSuppli issued a report that described Apple’s NAND flash orders as being “slashed.” Here’s an excerpt:

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

Philip Elmer-DeWitt blogs for Fortune, “Sounds pretty ominous, and the paragraph may have played a role in shaving a couple points off Apple’s share price on Thursday.”

“But several commentators have taken issue with the use of the word ‘slash’ to describe Apple’s order forecast. As Tom Krazit at CNET points out, Apple’s demand for flash is still growing rapidly, despite the broader slowdown in consumer spending. In fact, by his calculation, Apple is still planning to purchase 27 percent more flash memory this year than last year — just not the 32 percent iSuppli had expected,” Elmer-DeWitt reports.

“Moreover, what’s bad for memory makers may actually be good for Apple. Chip prices were already plummeting (4GB flash memory fell more than 73 percent since last August, according to IDG), and a memory glut could drive them even lower,” Elmer-DeWitt reports. “As Richard Hyde writes in Seeking Alpha:”

Here is where the story gets interesting for Apple. Not only do they reap the benefit of huge decreased pricing, the difference between the 8GB and 16GB modules is only $11, even though the iPhone models differ by $100. Similar savings are seen in the 16GB and 32GB iPod touch.

Elmer-DeWitt reports, “No wonder Apple can afford to cut the price of the iPod shuffle from $79 to $49. If it wanted to drive up demand, it could probably afford to cut prices all across the iPod and iPhone product lines.”

Full article, with charts and links, here.

[Thanks to MacDailyNews Reader “Judge Bork” for the heads up.]

32 Comments

  1. It’s laughable really. A company comes up with some totally speculative numbers, then decides based on their subsequent checks that Apple isn’t going to grow as much but will still be growing their order. They then report this with wording to the effect that Apple is reducing their orders.

    It should be criminal, it it isn’t already.

    Exactly what credibility to iSuppli have? Everything they say seems to be nonsense.

  2. There’s been some misinterpretation of the iSuppli press release regarding its revised NAND flash memory forecast.
    iSuppli did not write in the release that Apple had reduced its expected NAND orders from 32 to 27 percent.
    Nor at any time did iSuppli state that Apple was reducing the level of its orders from existing levels—but rater stated that Apple’s demand growth will slow in 2008 compared to 2007.
    This is a major event for the NAND flash market considering Apple’s large-scale NAND flash purchasing.
    This was only one of the factors mentioned in the iSuppli release that are impacting the NAND flash market.
    iSuppli affirms the accuracy of the release and would be pleased to answer inquiries on the topic.
    Please see the text of the release below for your reference.

    iSuppli Warns of NAND Flash Slowdown in 2008

    El Segundo, Calif., Feb. 20, 2008—Amid troubling signs of order reductions and weakness in consumer spending, iSuppli Corp. is cutting its outlook for global NAND flash revenue growth in 2008 to the single digit percentage range, down from our previous outlook of a 27 percent rise.

    Global NAND flash revenue is set to rise marginally in 2008, up from $13.9 billion in 2007.

    NAND flash is used heavily in consumer-electronics applications—including flash storage cards, MP3 players and USB flash drives— that are driven by retail sales to consumers. With consumer confidence taking a dive due to the U.S. subprime mortgage crisis, the NAND market outlook has diminished considerably in 2008.

    “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.

    In an early warning sign of consumer weakness, Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007, according to iSuppli sources. This is expected to have a huge impact on the NAND market. With its extremely popular flash-memory based iPods, Apple 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, according to iSuppli’s OEM Semiconductor Spend Analysis tool. 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.

    On the supply side, slower NAND demand will have a major impact on suppliers’ financial results. Capital spending on NAND production will rise by more than 20 percent this year, ensuring easy availability of parts. This will cause prices to decrease.

    iSuppli believes that NAND prices already are below suppliers’ 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 warned.

  3. @ Phil McCracken

    I was just about to post the same thing! My point exactly. Many libral Mac fans are now caught in a conundrum. Did Bush “cut/slash” social program budgets, or did Apple “cut/slash” thier NAND orders? ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

  4. Personally, I think the U.S. news industry is critically infected with a virus that results in a steady flow of hyperbole (not to mention downright lies) on almost any popular topic. Hence any drop in the size of an Apple order becomes “order slashed,” which is just plain ridiculous.

    Are we so jaded that journalists must use gross exaggeration just to get our attention, or have the journalists simply gone stark raving mad?

  5. @Jonathan Cassell,
    You wrote:
    “There’s been some misinterpretation of the iSuppli press release regarding its revised NAND flash memory forecast.
    iSuppli did not write in the release that Apple had reduced its expected NAND orders from 32 to 27 percent.
    Nor at any time did iSuppli state that Apple was reducing the level of its orders from existing levels—but rater stated that Apple’s demand growth will slow in 2008 compared to 2007.”

    Okay, so “demand growth will slow”, but then you cite your original article, where you state:
    “Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007, according to iSuppli sources”

    Uhm, you do realize what you said in the first part of the above sentence might mislead some people, before they even get to the second part of the sentence, and if Apple order GROWTH is slowing, then why characterize it as “slashed….significantly”?!? Isn’t that over-egging the pudding?

    I hardly see how your explanation helps the situation one bit.

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