The Korea Times: Apple ‘bullying’ NAND flash memory makers

Cyber Monday Sale over 400  deals“There are growing complaints in the semiconductor industry that Apple, the ‘smart’ phone maker extraordinaire and major chip buyer, is manipulating NAND flash memory prices through its ‘questionable’ purchasing strategies, industry sources said Sunday,” Kim Yoo-chul reports for The Korea Times.

“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.

35 Comments

  1. 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!

  2. 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.

  3. 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.

  4. 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.

  5. 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?

  6. Purchase agreements are double edged swords. Apple doesn’t take possession of the chips it orders: there’s a penalty for that. The manufacturer doesn’t build as many chips as Apple orders” there’s a chip for that.

    Best pricing in a supply chain (especially a just in time supply chain) demands that everyone know what the other’s requirements will be, then everyone performs.

    IF Apple did as the article claims, manufacturers would get penalty payments, and if the conduct persisted they wouldn’t commit to the quantities Apple wants.

    Chip makers are clamoring for Apple business because nobody purchases the quantities Apple does, and nobody pays as well as Apple does.

    This article is FUD at the LG and Samsung level. They just took a 65% hit on the retail price of their smart phones because of the iPhone, and they’re not happy about it.

  7. Apple is cheap and someday this will have effects on the company. Intel had to stop selling them NAND Flash a few years ago because their price target is so low that Intel pretty much just laughed back at them. They rather get business overseas than help other US NAND Flash companies. Fuc* Apple.

  8. so if i’m reading this right, these supplies are told an expected amount and figure their profit on getting all of them bought and paid for right now. but then Apple buys as they need and the prices go down in the mean time.

    so the solution, if Apple wants a guarantee of quantity they have to buy now, at today’s prices. otherwise they buy what they need right now and come asking for more later.

    but that would lead to Apple finding a supplier that will play by Apple’s rules so of course no one will show those kind of balls. but instead bend over and whine about it

  9. You guys are idiots.

    Stay with the story.

    Apple breaks the contract and then takes advantage of lower NAND prices, which futher drenches their Greedy Corporation in KOrean Money.

    If that isn’t fraud, what is?

    But Samsung and Hynix know this and play along this game. So who is at fault? It would be the Flash memory producer to play along this game.

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