NAND chip prices decline

Failure of Samsung-SanDisk deal a factor

When Samsung Electronics offered to buy SanDisk for US$5.85 billion (NZ$8.48 billion) earlier this month, some in the industry hoped news of the possible takeover might stem a long-running decline in NAND flash memory chip prices.

That hasn't happened.

Instead, the price of NAND flash memory, which stores songs, photos and other data on iPods, iPhones and many other gadgets, has continued to fall.

NAND flash memory prices dropped an average of 1.3% near the middle of this month to end at US$1.33 per gigabyte, according to Joseph Unsworth, memory chip analyst at Gartner.

The problem is sluggish global demand for the chips, Unsworth says.

NAND flash memory has been in a steep downturn since the beginning of this year because the companies that make the chips built too many factories to compete with each other, and because of a slowdown in demand, according to market researcher iSuppli.

Normally, signs of industry consolidation such as Samsung's bid for SanDisk can help prop up chip prices because the chips trade based on expectations for future pricing, not necessarily on today's industry situation.

The fact that NAND flash memory prices haven't increased indicates many chip traders don't believe a deal will go through for the two companies.

Indeed, earlier this month analysts said the deal would face a tough time being accepted by regulators, particularly the US Justice Department. A deal by Samsung for SanDisk would create a company controlling more than half the global output of NAND flash memory and, probably, an increase in NAND flash memory prices.

Higher NAND flash prices would be bad news for anyone planning to buy a device with internal flash memory, or flash memory cards to use with a digital camera, digital music player or mobile phone.

Apple, for example, is one of the world's largest NAND flash memory chip buyers, using the chips in its iPods and iPhones.

It will purchase around US$1.37 billion worth of NAND flash memory this year, according to market researcher iSuppli, the same amount as Sony.

Samsung is the world's largest NAND flash supplier, with a 42.3% share of global revenue in the second quarter, iSuppli says. Toshiba is the second biggest supplier, with a 27.5% share.

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