Apple Buying All the NAND Chips It Can Get

Apple has already established a pattern of buying large quantities of NAND flash chips, which often at the time seem absurdly large, and just managing to meet demand. Their latest deal takes this approach to a whole new level.

According to Hynix Semiconductor, Apple Computer Inc. has agreed to purchase at least 20 percent of the South Korean chipmaker's flash memory, until the year 2010.

Apple uses the NAND chips in the iPod, and it seems they just can't get enough of them. According to the Ichon-based company's annual report submitted to regulators, Apple agreed, in December, to buy 40 million gigabytes of NAND memory, and Apple has agreed to increase orders by at least 180 percent every year until the end of the decade. Every quarter, Apple will by at least 20 Hynix's NAND chip production, or match orders from the preceding three month period, whichever is larger. The chips will be sold at a price that does not exceed what was specified in the December agreement, but the exact figure was not specified.

Furthermore, these chips are in addition to the ones from IM Flash Technologies LLC, a joint venture formed by Intel Corp., the world's largest semiconductor maker, and Micron Technology Inc., with which Apple has a $500-million for NAND flash chips.

As Apple has committed to either match their previous order or buy at least 20 percent of Hynix's production, whichever is larger, it is obvious that Apple is not at all concerned by how many chips Hynix can actually produce. Apple expects to sell enough units of whatever the chips will be used in to buy at least 20 percent of the production, and this in addition to other commitments, regardless of how much Hynix can actually increase production. The year 2010 is a long way away, and Hynix has plenty of time to ramp up production, significantly.

Is all this memory for iPods? Does Apple expect such a steady growth of iPod sales over such a long period of time? Or are they to be used in some other Apple branded device?