Apple accused of NAND price manipulation

According to sources speaking to The Korea Times publication, Apple has been using ethically “questionable” means to obtain lower prices for the NAND flash chips used in its iPhone and iPod products.

According to the report, Apple has been asking for larger orders than it actually intends to purchase. In response to increased projections, manufacturers like Samsung and Hynix have boosted production only to receive a smaller order than promised. Worse, says insiders, is that Apple capitalizes on the resulting excess supply by waiting for the prices to drop before it places its order.

“Apple should certainly be blamed for deteriorating the supply and demand cycle in the global NAND flash market,” a senior industry official told The Korea Times on the condition of anonymity.

“Apple has asked Korean semiconductor makers to produce a certain amount of chips for its digital products, only to actually purchase a smaller volume eventually. The company doesn’t make immediate purchases, but waits until chip prices to fall to the level the company has internally targeted.”

“Samsung and Hynix both provide chips to Apple and have less of an edge in deciding prices and volume. Apple’s strategy could hurt the industry’s health,” another source said, also noting that Apple’s purchasing practices were “absurd.”

While flash makers suffer at the expense of Apple’s thirst for cheaper flash, the tactic does not appear to be illegal, only unethical. Industry observers are concerned that allowing the practice to continue unchecked could lead to further decay of the NAND market which traditionally suffers during the holiday season. For consumers, the biggest worry is the price of NAND-powered devices which could jump if NAND makers, unable to bear the burden of sliding prices, eventually respond with higher pricing.

On the other hand, more conservative analysts note that increasing device density and the rise of Android could lessen the influence of Apple. For now, it appears uncertain what the industry plans to do in response to Apple’s practices.