Disappointing flash memory revenues could point to drop in iPod sales

Posted by Wolfgang Gruener

El Segundo (CA) - NAND Flash memory suppliers were able to post a modest 4.2% year-over-year revenue gain, according to a report published today by iSuppli. The market research firm mentioned that the market environment could worsen in Q4, as MP3 player sales - a driving factor behind NAND flash shipments - may not reach their goals.

Global NAND flash sales came in at $3.06 billion, which represents a sequential increase of 11.8% from Q2, but only 4.2% from the third quarter of last year. The number may not sound dramatic, but virtually every member of the top-10 supplier list felt a significant impact during the quarter. On the upside, Hynix (ranked in #3) was able to increase its sales by 44.5% year-over-year, and Toshiba (#2) by 25.6%. On the other end, Qimonda (#10) lost 58%, ST Microelectronics 25.9%, Renesas 25.4% and segment leader Samsung 11.5%. Micron (#5), which has launched a NAND flash joint venture with Intel, gave up 8% year-over-year, while Intel is listed on #6 as a new competitor in the list.

Samsung still leads the ranking with 43.1% market share, followed by Toshiba (27.8%), Hynix (18.5) and Renesas (4.4%). The combined production of Micron and Intel arrived in fifth place (4.3%).

iSuppli analyst Nam Kim said that the outlook for NAND flash suppliers may worsen and that the firm may trim its sales forecast in the near future. While Kim was careful to point to a source for declining growth in the NAND flash market, the analyst mentioned that sales of MP3 players "appear to be falling short of expectations."

There may or may not be a direct connection to the sales of Apple's iPod, Kim told TG Daily. However, the market dominating iPod receives a substantial portion of its memory from Samsung, which struggled during Q3 and is unlikely to quickly and fully recover in Q4. Kim was not ready to confirm that the drop in NAND flash sales growth would impact iPod sales but mentioned that flash suppliers aren't that happy with Apple's product line: While it was expected that the company would drop its lower end 2 GB version after the introduction of the 8 GB model, Apple somewhat unexpectedly kept it alive and dropped its price instead - resulting in more pricing pressure and less than expected demand for higher end models.

Apple said that it sold 8.73 million iPods during the third quarter (fiscal Q4) of this year, representing a 35% year-over-year growth.