Apple Accused of Manipulating Flash Memory Prices

MacRumors

macrumors bot
Original poster
Apr 12, 2001
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The Korea Times reports on growing complaints within the flash memory industry that Apple, which holds a dominant position due to its extensive use of flash in the iPhone and iPods, is using its increasing leverage to inappropriately manipulate the market to its advantage.
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.
Apple's strategy reportedly involves requesting that memory manufacturers produce a certain amount of flash memory, but ultimately purchases a lesser amount than that requested. The reduction in purchase amount relative to industry projections based on Apple's supply requests creates an oversupply of the flash chips, driving prices down and allowing Apple to lock in its orders at a lower price as suppliers compete to unload their chips.
"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."
The report notes that there is little that leading flash memory manufacturers Samsung and Hynix, who provide the chips to Apple, can directly do for the moment to combat Apple's strategy. Apple's tactics, however, are likely to erode relationships with the third-party suppliers it relies on for its devices, suggesting that it may not be a viable long-term strategy and may be an attempt by Apple to boost its ability to offer price-competitive devices in the short-term ahead of continued expansion of offerings from other platforms such as Android.

Article Link: Apple Accused of Manipulating Flash Memory Prices
 

unity

macrumors 6502a
Sep 30, 2005
926
0
Green Bay, WI
Either they are right and Apple is doing what they say. Or one manufacturer could not meet Apple's demand, so Apple shortens the order and gets the rest form elsewhere. That manufacturer gets upset and make false accusations.

Need more conclusive sources and numbers.
 

dejo

Moderator
Staff member
Sep 2, 2004
15,981
450
The Centennial State
The report notes that there is little that leading flash memory manufacturers Samsung and Hynix, who provide the chips to Apple, can directly do for the moment to combat Apple's strategy.
Maybe I'm missing some intricacy of this situation but why couldn't they just produce the number of chips that are actually ordered rather than based on what was requested? :confused:
 

Sun Baked

macrumors G5
May 19, 2002
14,874
57
CUPERTINO, California—November 21, 2005—Apple® today announced that it has reached long-term supply agreements with Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010. As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months.
So Apple paid the 4 years ago for flash memory, and they didn't use up their entire order recently.

Apple also payed Toshiba another $500 million pre-payment for future memory in July.

They had all this money to play with, and they are complaining that Apple is destroying them ... what do they want, Apple to stop paying them years ahead and pay them 90 days late like everyone else.

Of course I can see why Apple went with Toshiba for continuing this future chip ordering and development with Samsung and Hynix complaining.
 

JeffDM

macrumors 6502a
Sep 16, 2006
708
8
Maybe I'm missing some intricacy of this situation but why couldn't they just produce the number of chips that are actually ordered rather than based on what was requested? :confused:
It may be that production is planned out months in advance of delivery. I don't know. But I thought that Apple generally prepays on production, I recall that Apple was going to buy enough up front for Samsung to start building a new fab. They both backed out when there were public and political objections to the plan, Samsung was regarded as the sellout to a foreign competitor, even though Samsung sells both components (chips) and finished products (consumer electronics).

This may well be some sour grapes, the mole spreading the rumor might well be leaving out important information as others noted, such as production delays or substandard product that required switching suppliers.
 

SydneyDev

macrumors 6502
Sep 15, 2008
346
0
What does "deteriorating the supply and demand cycle" mean exactly? They are trying to make their company problems sound like a larger economic problem, possibly to get their government involved.
 

Byrnes3969

macrumors member
Jan 23, 2009
64
0
Not surprised

Apple's business and legal departments cast an ugly image on the company that sells friendliest computers.
 

nkawtg72

macrumors 6502
Aug 16, 2007
308
0
Apple's business and legal departments cast an ugly image on the company that sells friendliest computers.
don't think for one minute that this is unique to Apple. that's the norm for many a company. legal departments are suppose to look out for the well being of the company. why do you think no one likes lawyers?

not sure i can comment on your "business department" reference, too general. not sure to what you are referring exactly
 

freediverdude

macrumors 6502a
Dec 26, 2006
573
0
I don't get it. When Apple orders the flash memory, there's always news stories about the world flash supply being constrained and other companies having trouble getting their orders filled. So how is this decreasing the price of flash memory? This sounds like BS.
 

NewMacbookPlz

macrumors 68040
Sep 28, 2008
3,266
0
The NAND manufacturers are just pissed because they can't fix the prices sky high like they used to a few years back :rolleyes::rolleyes:
 

KaneBaker

macrumors member
Oct 15, 2009
80
0
Apple's business and legal departments cast an ugly image on the company that sells friendliest computers.
The computer may be friendlier, the company is as nasty as they come though. This accusation is actually worse than a lot of the stuff MS has been accused of.

Seems like a lot of people don't get the original post, this is not about supply and demand due to apple buying a lot.

The analogy is more like:

Call a pizza place and order 30 pizzas.
Go pick them up but say you actually only want 5.
Now the pizza maker is stuck with 25 pizzas, you know they will have to get rid of it now so you offer them a buck each. Something being better than nothing you accept. Repeat next week.
 

dscottbuch

macrumors member
Mar 13, 2002
83
6
Retaliation for iPhone in Korea

All reports of the iPhone introduction in Korea indicate that Apple is (finally) driving down prices for smart phones in the Korean market. Despite a very good reception by consumers, the Korean press has tried to take the iPhone to task, but failed wrt to actual sales. The Korean market is typically quite insular and Apple is breaking through one part of that. These 'reports' are simple PR maneuvering by Samsung and Co. to protect what value added they can for a commodity product (Flash) and a retaliatory for the iPhone success and impact on prices.
 

KaneBaker

macrumors member
Oct 15, 2009
80
0
don't think for one minute that this is unique to Apple. that's the norm for many a company. legal departments are suppose to look out for the well being of the company. why do you think no one likes lawyers?

not sure i can comment on your "business department" reference, too general. not sure to what you are referring exactly
I'll agree with you there. I expect that others do it to. I think people expect apple to "Think Different" thats the issue here. You gotta realize it's a corporation that as soulless as the rest of them, they just make 'standard business evil' look really good.
 

leskchan

macrumors newbie
Jul 2, 2009
2
0
This is not Apple's problem. I want to pay less at a store. I either negotiate or buy from a different store with a lower price. Apple is doing the same. It's a free market.

If the Korean manufacturers don't like it, then stand up and say, "Apple, we don't want to sell to you."
 

agbot

macrumors regular
Jun 11, 2007
143
0
Silicon Valley
This happens all day long in business. The game is to negotiate the best volume discount you can, promising some pie-in-the-sky number of units you'll need. Vendors know this is how it works, and should be smart enough to write in minimum purchase requirements. Of course, Apple is in a unique position and probably does have the power to "suggest" that if a vendor insists on writing in minimum purchase requirements they will go shopping elsewhere.
 

leskchan

macrumors newbie
Jul 2, 2009
2
0
Really getting tired of Apple growing into a greedy company...
It's a free market. You yourself want the most money for your job, don't you? If another company offers you twice as much to jump ship, you would do it without skipping a heartbeat.

Better yet, how about Apple offers you 3 times of what you are getting to work for them. Will Apple still be a greedy company then?
 
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