Apple cuts $500 million flash memory deal

Company says it has made a $500 million prepayment to Toshiba for flash memory chips and indicates that the market is stabilizing.

Apple said Tuesday that it has made a $500 million prepayment to Toshiba for flash memory chips and indicated the market is stabilizing.

Apple COO Tim Cook said flash memory market is stabilizing
Apple COO Tim Cook says the flash memory market is stabilizing. Apple

"The NAND flash market has now begun to stabilize and we expect it to move to a slight demand imbalance," said Apple Chief Operating Officer Tim Cook in Apple's Tuesday earnings conference call. (The call is available as an audio Webcast on Apple's Web site.) The news was reported earlier by Reuters.

"In terms of the Toshiba prebuy, we did a long-term supply agreement with Toshiba, as a part of that, as a part of the terms and conditions, we paid them $500 million," Cook said. "We view flash as a very key component for us because we use it in so many of our products and also we're a reasonable percentage of users of flash on a worldwide basis."

NAND flash is used for data storage in a variety of consumer products including digital media players and smartphones, such as the iPod and iPhone, respectively. For the last two years, flash chipmakers such as Japan-based Toshiba and U.S.-based Micron Technology have been reeling from severely depressed flash memory pricing.

Intel, which makes flash chips jointly with Micron, is also seeing a recovery in pricing. "For the year, it's up over 50 percent," said Troy Winslow, marketing manager for the NAND Products Group at Intel, in a phone interview earlier this week. He was speaking about the recovery in flash memory chip prices in the spot market. "That's been very positive for the industry and obviously we have benefited from that. And our business is going very well," he said.

Even with the better spot market pricing for flash memory--which is a boon for manufacturers--this won't necessarily translate into a jump in prices for consumers, according to Avi Cohen, managing partner at Avian Securities. "If the question is--will components (flash chips) cost 50 percent more than they did three months ago? Absolutely not," he said.

Featured Video
6
This content is rated TV-MA, and is for viewers 18 years or older. Are you of age?
Sorry, you are not old enough to view this content.

NYC taxis to compete with Uber

NYC taxis set to launch an app of their own, one billion people visit Facebook in a day, Chrome sets end date for Flash support and HTC's Vive VR headset gets delayed.

by Jeff Bakalar