Drop in Apple spend to hit struggling NAND market

Apple has cut its 2008 flash memory orders by US$200 million, according to market intelligence firm iSuppli, setting up a down year for flash vendors.

In February, iSuppli reported that Apple was slashing its orders of flash memory amid a weakening economy, but couldn't say exactly how far the cuts would go.

After crunching the numbers, iSuppli now expects Apple to spend US$1.4 billion on flash this year for iPods and iPhones, up 12 percent from US$1.2 billion last year. But the analyst firm, and the flash memory industry, had been expecting much more purchasing out of Apple: at least US$1.6 billion.

According to iSuppli in February, Apple's smaller spend will have a huge impact on the NAND market. In 2007, Apple with its flash-memory based iPods was the world's third largest OEM buyer of NAND flash memory iSuppli said, with its purchases totalling US$1.2 billion, or 13.1 percent of the global market.

On the supplier side, capital spending on NAND production is tipped to rise by 20 percent this year, according to iSuppli, which will lead to easy availability of parts and a resulting drop in prices. NAND prices already are below suppliers' fully loaded costs, according to the research firm.

iSuppli projects that the entire market will grow just nine percent this year to US$13.9 billion, down from previous expectations of 27 percent growth to US$17.9 billion.