“iPhone 3G S” Launch will Help Stabilize the NAND Flash Price in Slow Season; 1HJune Mainstream MLC Contract Price Dropped 1% to 6% 

NAND Flash contract price showed up and down in 1HJune, while the contract price for mainstream high-density MLC chips slightly declined 1% to 6% due to the slow season and quarter-end effects.  

Period of May-July is traditionally regarded as the slow reason for NAND Flash related products such as memory card and UFD. Therefore, the market demand is comparably weak. Given the over one month inventory level along with the quarter-end effects, memory card makers show less incentive in NAND Flash re-stocking. On the other hand, NAND Flash suppliers offered price discount to customers during Computex Taipei Show in early June. It’ll help downstream clients to engage in sales promotion in slow season. Therefore, it resulted in the slightly price decline trend in mainstream MLC contract price.

Currently NAND Flash suppliers still will try to stabilize price during NAND Flash slow season in order to improve their profitability. However, price is expected to be influenced by the quarter-end effect and weaker demand in slow season. Apple officially introduced new iPhone 3GS on June 8 and new iPhone will hit the American market on June 19 and gradually deliver to other countries in the near future. The pricing for 16GB model is US$ 199, US$ 299 for 32GB model and US$ 99 for 8GB iPhone 3G. The launch effect is expected to have positive impact on NAND Flash market despite of about 5% consumption of total NAND Flash demand in 2H09. Given these positive & negative factors to NAND Flash market, NAND Flash contract price is likely to slightly soften or stay stable in the short term. The contract price is expected to stabilize and gradually rise when the re-stock demand can gradually recover in the traditional hot season.  

How will New Apple iPhone Impact the NAND Flash Market 

iPhone has been the spotlight since Apple Inc. introduced the product in 2007. The functionality, spectrum development and update have always drawn market attention. In 2008, Apple upgraded its communication standard from 2.5G to 3G and extended embedded NAND Flash from 4GB/8GB to 8GB/16GB. On June 8th, Apple announced to launch new iPhone model “iPhone 3G S” at WWDC (Worldwide Developer Conference) in San Francisco, California. The “iPhone 3G S” is expected to outperform “iPhone 3G” in terms of functionality and operation speed. Not only NAND Flash content is extended to 16G/32G, 3.0 megapixels digital camera, 7.2 Mbps HSDPA and double execution speed in software application are also equipped in “iPhone 3G S”. The marketing campaign remains the same, that is, “Advanced spectrum with same old price” still applies to this new generation iPhone. 32GB “iPhone 3G S” is pricing at US$ 299, US$ 199 for 16GB one and US$ 99 for old 8GB iPhone 3G. Two years cellular contract with AT&T is needed to get the good price listed above. iPhone 3G S is expected to launch in July in over eighty countries and Apple does not provide any detail if they will apply the same marketing strategy in other global markets.

It will be more determined how new iPhone impact on NAND Flash market in 2H09 until the sales figures are published since iPhone 3G S will hit the market on June 19th. Nevertheless, we can still forecast on new iPhone based on the sales figures of old iPhone 3G in the past three quarters and current Smartphone market. iPhone 3G was launched in 3Q08 in 22 countries and all-time-high 6.9 million shipment was recorded in 3Q08. The shipments in 4Q08 and 1Q09 have down to 4.36 million and 3.79 million respectively due to the global economic slump. The Top 5 cellular phone giants such as Nokia, Samsung, Sony Ericsson and LG have introduced various smartphone with touch screen function during the past years. Original smartphone companies RIM, Palm and HTC also fight back with Black Berry Storm, Palm Pre and HTC Touch Pro2. iPhone does trigger the smartphone evolution and every cellular firms are watching Apple carefully.

The first quarter sales of “iPhone 3G S” is unlikely to surpass the around 7-million-sales scale of “iPhone 3G” if the launch timing and competitive smartphone market have been taken into consideration. We forecast the shipment will be above 9 millions for 2H09 but the achievement is deeply relied on the consequence of cooperation deal between Apple and international operators. New iPhone NAND Flash consumption will be 162 million GB based on the assumption of 16GB to 20GB average content and 9 million shipments in 2H09. The launch of “iPhone 3G S” will have some positive impact on NAND Flash market even though the consumption merely accounts for 4.7% of total out in 2H09.