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Apple Accused of Manipulating Flash Memory Prices

KaneBaker said:
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.
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Except they pay $500 million cash upfront just to submit the order with the vendor being fully aware that Apple is under no obligation to actually purchase the full order.

If the vendor is truly getting screwed in the deal next time they will change the terms of the agreement.
 
not surprised about this in the slightest if there is any below board action on apples part, what did people expect? i also don't think they are the only one trying to get a leg up, its just some folks don't want to see them in a certain light like all big corporations, so this might offend them.
 
KaneBaker's analogy hits the nail on the head, but the last sentence is wrong. If you ring up and order 30 pizzas next week, the pizza place will not make 30, it might make 5, it might not make you any.

It strikes me that even if Apple's behaviour is in question here, it's a one-off.
 
freediverdude said:
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.
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+1
NewMacbookPlz said:
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:
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+1

People criticizing Apple on this need to pause and think first. How can Apple, Inc. be responsible for both a shortage and a surplus?? Unless of course all the complaining comes at the convenience of the chip manufacturers who have their own axe to grind. "Wah, wah, we can't keep up with Apple's demand! Wait, we have too many? Wah, wah, Apple made us make too many!"

-K
 
Doesn't this work both ways? If Apple is ordering way more than it actually buys, doesn't this open the door for competing companies to pick up the surplus at lower cost, thus producing more competition for Apple?

The pizza analogy is good, but isn't quite complete because it doesn't factor in that you're not ordering the pizza for your own consumption, but for resale. So wouldn't it be more like:

Grocery store A orders 30 pizzas.
Grocery store A only picks up 5, leaving 25 unsold pizzas.
Pizza place sells them at a discount to grocery stores B and C.
Grocery stores B and C now have a big sale on pizza thanks to their low purchase price.
 
notjustjay said:
Doesn't this work both ways? If Apple is ordering way more than it actually buys, doesn't this open the door for competing companies to pick up the surplus at lower cost, thus producing more competition for Apple?

The pizza analogy is good, but isn't quite complete because it doesn't factor in that you're not ordering the pizza for your own consumption, but for resale. So wouldn't it be more like:

Grocery store A orders 30 pizzas.
Grocery store A only picks up 5, leaving 25 unsold pizzas.
Pizza place sells them at a discount to grocery stores B and C.
Grocery stores B and C now have a big sale on pizza thanks to their low purchase price.
Click to expand...

The flash company is the one who is complaining about the lower cost, not other manufactuers of devices which use flash memory.
 
leskchan said:
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."
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Not quite, as far as I can tell. Your example is uses a before order negotiation, the accusation is that Apple making a deal and then reneging on it. To make it comparable, you would special order 10 items, then when you pick it up, you say that you only want 5 now. There's a reason why some shops require a deposit or prepayment for special orders.

But it's an accusation. I would hope that the supplier had a contract, otherwise, probably tough cookies, unless there is a law that covers purchase orders made in good faith.
 
reading the various articles it sounds like the suppliers are setting their prices based on Apple's statement of estimated need and not taking into account that needs change. but they don't want to look like the fools so they blame Apple. Rather than making new rules like a contract that says that Apple has to pre-order and buy the number of chips they 'need' and no more of this best guess/reality game. or set the prices according to a minimum buy so if they buy fewer they pay more. lots of companies do this to consumers all the time. why not push it up the food chain.
 
Highly unlikely.

What business produce / sell things without a contract?

The memory products are worth hundreds of millions of dollars, maybe billions of dollars. Sure, a company will produce that without a contract. Jeez.

Who made up this story? An elementary school kid who don't know how business works?
 
KaneBaker said:
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.
Click to expand...

No, it's more like the shop owner asking Apple how many pizzas will you order next year?

Apppe says 30, so he ramps up to produce 30.

Apple buy's 5, and when the owners of the shops start worrying about getting stuck lower prices buys more.

The chip manufacturers need to increase capacity based on their forecast, not that of customers. They should realize that sales may not materialize and plan for that; not whine when projected sales fail to turn out to be accurate.
 
That's an interesting article but completely off the mark. The fact is, Flash memory prices have more than tripled in the past 12 months. Largely due to the fact that supply was severely affected when Qimonda shut its doors. Every flash memory maker is making quite a bit of margin now.

I'm sure Apple doesn't pay anywhere near what the "spot" or "contract" price is quoted to be. I'm also sure that they are required to provide forecasts and when it comes time to order they review their order carefully. No one knows for sure which direction the economy is going these days so it is not surprising that Apple's actual orders would be below their forecast.

Notwithstanding, Flash memory vendors are better of now than they were 12 months ago and they haven't been spending on capital to expand capacity. High flash memory prices are going to be with us for a while still.
 
I'm bawling for the NAND memory suppliers. Really, I am. It's always such an intense human tragedy when an industry is forced to stop price gouging.
 
Soon the whole world will hate Apple

So, the list of Apple enemies is growing every day: first it was PC manufactures and Microsoft, then Google, then Verizon and Motorola and now chip manufacturers are joining in. Do you think it's a good strategy on the part of Apple? How about being a "good citizen"?
 
Apple Accused of Manipulating Flash Memory Prices

So, Apple should underestimate their needs, then stop shipping product when they can't get enough? Good Grief! Too bad the suppliers don't appreciate what they have.
 
KaneBaker said:
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.
Click to expand...


Repeat next week?
If someone orders 30 pizzas and doesn't take them, I'll either sue the hell out of them (I'd usually record the phone orders) or eat the slices myself and never deliver to the douche again.
I highly doubt it's as easy as that.

We don't have even remotely enough information, other than some hazy report in some newspaper whose credibility we can't judge. So don't jump to conclusions.

bbplayer5 said:
Really getting tired of Apple growing into a greedy company...
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Apple has always been a greedy company. All companies are greedy. They have to be by law.
 
Could this possibly have something to do with Apple's own sales forecasts deteriorating month by month due to the recession (yes, I know their sales are growing, but probably not nearly as much as they thought before last September)? Hence, they produce fewer iPhones than forecast, and buy fewer NAND chips than forecast....

In any case, you want Apple to buy all the NAND chips it thinks it will eventually need? Make them sign a contract to that effect.

Why would Apple bother forcing its suppliers to operate at a larger than necessary scale, possibly increasing their costs, just so it can give its competitors a flood of cheap chips?
 
jav6454 said:
Apple will not use OLED screens. Have you seen how poor OLED does against the sun?
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Apple only cares about how the product functions at the time of purchase, i.e. in the store. Just like the glossy screens, if OLED looks better in the store, I'm sure they'll make the switch, then later charge us $50 more for the option to get an LCD screen.
 
how stupid can you be

I'm in sales.
When someone requests large quantities, you quote them. Quotes are not valid unless all are purchased. They need to sign contracts here! Don't just assume that people in business are nice. I'm not saying that the memory manufacturers deserve it, but they need to be watching their own backs. :eek:
 
It's probably not that simple

PruneTracy said:
I'm in sales.
When someone requests large quantities, you quote them. Quotes are not valid unless all are purchased. They need to sign contracts here! Don't just assume that people in business are nice. I'm not saying that the memory manufacturers deserve it, but they need to be watching their own backs. :eek:
Click to expand...

Do you manufacture the stuff you sell? They do. Also, imagine that the mis-behaving customer accounts for, say, 70% of your sales. Are you going to screw him? Besides, we are talking about very special contracts here - more like a mutual understanding of long term cooperation.
 
so whoever has the most leverage will always get the better deal, really? this is huge news..I don't get it, are we supposed to feel bad for the flash makers for allowing this to happen to themselves? good job apple, keep making money! hopefully oneday you will have enough to build a spaceship and save humanity...
 
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