How iPhone Sales May Affect the Asus Eee

Back in March 2007, DRAMeXchange reported that contract prices for 4-, 8-, 16-, and 32-Gb single-level cell NAND Flash chips increased by 4 – 7%, the second such jump for the year. The hike was attributed to a projected lack of supply as most of those vendors readjusted their respective fab capacity after NAND Flash prices plummeted last year.

The problem now was that MP3, cell phone, and SSD manufacturers have been aggressively placing large orders to NAND Flash suppliers in order to stock up on inventory. All of the non-hard-disk based MP3 players and mobile phones including the Apple Shuffle, and nano, and the iPhone use flash memory. In fact, demand had increased much earlier than normal for this year, resulting in an expected continued price increase through the second half as the iPhone and and other competing products hit the market.

Now a new report from the firm confirmed that the trend shows no signs of reversing. In an update, DRAMeXchange said that devices like the iPhone and iPod are on target to consume no less than 25% of the total Q3 NAND flash capacity. And because a huge portion of the chip capacity is being allocated to Apple, many downstream vendors are being left flash-less.

Compounding the shortage are the production snags in the migration to more advanced NAND Flash manufacturing processes that has led to a lower-than-expected output. As with all new technology, the new production process has yet to be streamlined, and current capacity is not meeting the original production plans.

It may take two-to-three quarters before the production kinks are worked out and higher levels of chip production is achieved. Thus DRAMeXchange is predicting that a fairly substantial flash chip shortage will occur sometime during Q3 this year with prices continuing to rise.

As the Asus Eee uses NAND Flash for its storage, production may be affected by the shortage, putting in jeopardy the scheduled August launch.