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Report: Apple accused of NAND price manipulation

Industry insiders tell The Korea Times the company orders more flash memory chips than it eventually buys. But just how uncommon is that practice? It's not, an analyst tells CNET.

Jim Dalrymple Special to CNET News
Jim Dalrymple has followed Apple and the Mac industry for the last 15 years, first as part of MacCentral and then in various positions at Macworld. Jim also writes about the professional audio market, examining the best ways to record music using a Macintosh. He is a member of the CNET Blog Network and is not an employee of CNET. He currently runs The Loop.
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Jim Dalrymple
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Industry insiders are accusing Apple of manipulating the price of NAND flash memory chips used in its popular iPhone and iPod products, according to a report in The Korea Times on Monday.

Citing unnamed sources, the article says Apple asks manufacturers to produce more chips than it eventually buys from Samsung Electronics and Hynix Semiconductor. The sources said Apple waits for the price of the chips to fall before making its purchase.

Apple

The practice of not buying all of the product originally ordered, semiconductor analyst Jim Handy told CNET, is "not uncommon in the industry."

Handy, of market research firm Objective Analysis, explained that these contracts are normally negotiated with a cancellation clause, with provisions to protect the supplier and buyer. He said companies usually work closely with the buyers, so changes to orders are normally small and don't cause many problems.

Supply and demand in the NAND market are currently about even, Handy said, adding that with the popularity of the iPhone and iPod, he's heard estimates that 20 percent to 30 percent of the worldwide NAND flash memory goes to Apple. In its fiscal fourth-quarter results, the company reported selling 10.2 million iPods and 7.4 million iPhones for the three months ended September 26.

Chipmakers Samsung Electronics and Hynix Semiconductor declined to comment for The Korea Times, as did Apple's Korean office. Contacted by CNET, representatives of Apple in the United States also declined to comment for the story.

The iPhone sales numbers continue to increase, as does the number of applications available for the device. Apps are one reason the iPhone has become as popular as it is among so many different categories of users in such a short time on the market.

Apple currently has more than 100,000 apps available for download, with users having downloaded more than 2 billion apps as of November 4.