On Monday, Apple, in a move to preempt any threat to its supply of flash memory used in its iPod, has decided to pay in advance $1.25 billion to its suppliers amid growing demands for chips.
The payments will be made over a period of three months to some of the leading suppliers of NAND flash memory which will ensure a trouble free supply till 2010, the suppliers include, Hynix Semiconductor Inc., Intel Corp., Micron Technology Inc., Samsung Electronics Co. Ltd. and Toshiba Corp.
Commenting on the new development John Lau, analyst at Jefferies & Co. said, “It’s critical that (Apple) tie up capacity. They need to secure a reliable source to fund their continued expansion into this area.”
On the heels of its ill-fated talks with Samsung the number 1 manufacturer in flash memory last year, apple has in recent weeks have tried to build a reliable supply chain in its drive to move forward.
The NAND chips apart from being used by apple in its line of iPod products, is also used in digital cameras and camera phones because of its ability to retain data even when they are switched off.
The demand for NAND chips can be judged from the fact that on Monday Intel and Micron announced the forming of a new company to manufacture NAND chips, with an initial investment of $1.2 billion each.
Apple is one of the largest users of NAND memory with about one-quarter of total NAND supply now under production being used by it, and is expected to be the largest customer of the newly formed company, also apple will pay $250 to each company for buying a large quantity of its NAND flash memory.
Speaking on the occasion Steve Jobs, Apple’s chief executive said “We want to be able to produce as many of our wildly popular iPods as the market demands.”
Some analysts are also speculating that apple is building an apple iPod mobile phone using flash memory, but no definite statement came forward from the Apple spokesman as they always decline to comment on future products.