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Apple Slashes Order Forecast For iPod Memory

Apple spent $1.2 billion on flash memory for its consumer electronics devices last year, representing 13.1% of the global market, according to iSuppli.
Apple has slashed its 2008 order forecast for the NAND flash memory used in the iPod and iPhone, prompting iSuppli to dramatically cut its 2008 global revenue forecast for the component found in many consumer electronics gadgets.

ISuppli on Wednesday said Apple's move would have a "huge impact" on the NAND market, given that the company was the third largest buyer of flash memory last year. Apple spent $1.2 billion on memory for its consumer electronics devices, representing 13.1% of the global market, according to iSuppli.

"Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007," iSuppli said, quoting sources. Before the warning, iSuppli had predicted Apple's NAND flash purchases would rise by 32.2% this year, helping drive significant market growth.

The report is a possible indicator that sales of iPods and iPhones may be slower this year. ISuppli didn't address that issue, but said Apple's warning is an early sign that consumer confidence in the economy has been shaken by the U.S. sub-prime mortgage crisis.

As a result, iSuppli dramatically cut its 2008 global revenue forecast for NAND flash to a "single-digit percentage" over last year, versus iSuppli's earlier prediction of a 27% rise. Global revenues, therefore, will only increase "marginally" this year over last year's $13.9 billion, the researcher said.

On the supply side, capital spending on NAND production this year will increase by more than 20%, which will cause a drop in prices, iSuppi said. As a result, suppliers are likely to go into the red in the first quarter of this year and are unlikely to recover in the second quarter.

Signs of market troubles were evident in the fourth quarter of last year, as global NAND revenue declined 2.4% from the third quarter to $4.1 billion. Of the top-eight NAND suppliers, six suffered sequential declines in revenues.

For all of 2007, NAND flash memory revenue grew by 12.5% to $13.9 billion. Six of the top-eight suppliers achieved revenue growth for the year.

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Sara Peters, Editor-in-Chief, InformationWeek / Network Computing