 Waiting for the Apple effect
Traditionally, the 3Q and it's price adjustments are looked upon as a indicator of how the 4Q, and with it eventually also the end-of-the-year seasonal sales is going to turn out. What we are waiting for is the so-called "Apple effect", when Apple starts to fix contractual purchase volumes of flash memory for new products such as e.g the iPhone, new iPods or this year's MacBook Air, and thereby dominate production capacities of some of the major flash memory producers such as Hynix or Samsung.
This has greatly effected spot market prices for NAND flash memory in previous years, but for this year the outcome is uncertain and mixed reports can be read around the internet and in the media.
Over at EEtimes they report "No 'Apple effect' seen for NAND market" during 2008, and quote a newly released report from Semico Research Corp., stating that mainly raising oil prices and lowered consumer confidence due to also the US real-estate crisis are factors to dampen consumer spending behavior, affecting also overall consumer demand for NAND flash memory.
Our friends from CyberMedia India Online (CIOL) over on Taiwan give a more balanced outlook but quote also DRAMeXchange with a rather pessimistic analysis of a general decline in consumer spending in the electronic consumer markets.
Focusing most of our attention on the usage of NAND flash memory for promotional USB flash drives and customized USB memory sticks, we here at MemoTrek are certainly facing quite a different situation from that of the "Big Five" main players of the semiconductor industry: Hynix, Samsung, Intel, Toshiba and Micron.
Not merely a NAND flash memory supplier doing wholesale volumes, but moreover also providing extended services such as logo printing, data replication and pre-loads, USB shell assembly and tooling, molding and casting of customized USB models we at MemoTrek need to furthermore include also the recent developments in China in order to make a relatively reliable prognosis of USB flash drive prices and USB flash price trends and developments over the next few months.
While the flash memory itself is certainly the variable and open factor leading to fluctuation and volatile pricing, the over-all situation in China, especially also the upcoming Olympics in tandem with the general inflation, raising prices for imports of raw-materials, higher minimum wages and currency devaluation of the RMB has lead to a situation where it's increasingly difficult for suppliers to keep in business while still providing good quality on time.
Currently it is mainly the 1GB and the 2GB capacities that are subject to minor jumps, and a slight increase of the both was noted during the middle/end of the last business week. This including also the domestic factors starting to play a role here in China as the Summer Olympics are rapidly closing up, leads us to the assumption that prices will continue to remain relatively stable, even a slight upwards of 0.05 - 0.10 USD for the 1GB and/or 2GB capacity might be possible.
Also it remains open to see how Apples new 3G iPhone will bundle with worldwide network carriers. We might very well see the situation that Apple is creating more affordable bundles and solutions that have greater appeal to the main masses of consumers - just remember what happened to the iPod after the first wave of early-adaption was over. Also, Apple is famous for its notorious conservative sales forecasts, so we might actually see a new wave of iPhones sales for the 3G model that affects also spot-market NAND flash prices.
Over at at SeekingAlpha we can read about this more optimistic approach the prognosis of a new iPhone boom that will shorten supply of NAND flash memory chip to downstream vendors and thereby lead to an increase also of USB flash prices.
This, in combination with an increase of NAND flash usage for low end notebooks, might lead to a stronger demand and contractual purchase commitment from Apple than expected and thus pushing up also the prices for spot-market NAND flash as the semiconductor industry turn their production capacities towards their contractual obligations and reduce output for the spot-market.
Thus, even though the market prognosis from most of the lead voices of the industry predict falling NAND flash prices due to weakened demand and over-supply also in 3Q of 2008, we're still stocking up on flash chips for some of our major high-volume orders just to make sure we do not experience any surprises should the "Apple effect" in combination with China's domestic issues turn out to show a price hike instead of general price decline as forecasted by the main-stream media of the industry.
The time around the 20th July is being mentioned by several sources as the point where some crucial information about the expected volumes of contractual NAND flash purchase can be expected to be released.
It is also going to be exiting to see what will happen during August. As always: you can expect us here at MemoTrek to keep you updated with the newest market trends and NAND flash price tendencies directly from Hong Kong - the center of the action!
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