Apple Signs Long-Term Pact with Toshiba for Flash Chips

 
 
By Chris Preimesberger  |  Posted 2009-07-22 Email Print this article Print
 
 
 
 
 
 
 

UPDATED: Apple's new contract with Toshiba, the world's second-largest supplier of NAND flash processors, should serve as a major boost for the Japanese chip and device manufacturer. Toshiba has been hit hard in its flash business by financial losses in the last two years due to cutthroat price competition with Samsung, the No. 1 flash supplier.

Apple, maker of the iPods and iPhones that are sucking up large quantities of NAND flash chips practically by the minute, announced July 22 that it has entered a long-term agreement with Toshiba for Toshiba to keep supplying even more of those chips.

Computer and mobile device maker Apple obtains its NAND flash chips from a number of different sources. The new agreement with Toshiba, the length of which was not disclosed July 22, will augment Apple's already high intake of the solid-state processors.

Apple reported July 21 that it has sold 5.2 million iPhones, which use solid-state flash disks for storage and computation, during the last three months. Sales of iPods were down slightly, but still substantial at 10.2 million units sold.

The popularity of both devices is quickly helping to clear warehouses-some of those belonging to Toshiba-of an oversupply of NAND flash memory that has had the industry in red ink for about a year.

Apple's contract with Toshiba, the world's second-largest supplier of NAND flash processors, should serve as a major boost for the Japanese chip and device manufacturer. The company has been hit hard in its flash business by financial losses in the last two years due to cutthroat price competition with the No. 1 supplier, Samsung.

Toshiba may have seen this deal coming as early as 2008, expecting a production ramp-up. Longtime partners Toshiba and SanDisk announced an agreement Oct. 20 that turned over 30 percent of SanDisk's flash production to Toshiba in exchange for $1 billion.

$500 million down payment

According to a transcript of Apple's quarterly results conference call with analysts on July 21, Apple made a $500 million advance payment to Toshiba to get the new deal rolling.

"The market for DRAM [dynamic RAM] and the market for large-size LCDs has shifted to a constrained environment, and the pricing has moved accordingly," Apple Chief Operating Officer Tim Cook said on the conference call. "The NAND market has now begun to stabilize, and we expect it to move towards a supply/demand balance."

"This is probably a good indication of what Apple thinks is happening in the NAND market," solid-state disk market analyst Jim Handy of Objective Analysis told eWEEK. "NAND prices are about double what they were in January; they were essentially selling below cost back then. Now they are selling at a price that probably matches cost for your average player.

"Apple is locking down the price before it goes up again. They might be a little bit late, but that's what it looks like they're trying to do."

Toshiba itself is ramping up its use of SSD flash chips. On May 14, the Japanese chip and device maker unveiled the industry's first flash-powered half-terabyte laptop, the Portege R600-ST4203, which features a second-generation 512GB eSATA SSD from Toshiba's own fabrication plant.

Editor's note: This story was updated to include additional analysis.

 
 
 
 
Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz
 
 
 
 
 
 
 

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