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Flash Memory – Supply and Demand

In recent weeks the cost of flash memory has increased substantially.  The commodity product, is for the most part, a stable consumable with pricing that fluctuations in single digit percentages.  However, lately the prices have increased between 10-30%.  As with any product there are variables which contribute to price and the following information might help explain why flash memory is getting more expensive.

The two largest manufacturers of flash memory (NAND memory) are Samsung and Toshiba.  Together they account for about 70% of the world’s flash.  These companies produce a wide variety of flash memory models and the factories have various levels of quality for the output of their product.

Typically the high performance memory that gets the best test ratings is sold to large consumers like Apple, Nokia and Sony.  As the ratings for the speed of the memory drop, these variants get pushed into the low-end market segments, such as USB drives and inexpensive MP3 players and other promotional gadgets.

In Q3 2012 Toshiba made an announcement they will reduce world wide production by 30%.  Since this time, flash pricing has remained stable and has not decreased in cost.

With the on-going patent battles between Apple and Samsung the Cupertino based company made a decision to partner more closely with Toshiba then Samsung.  This is a huge decision as traditionally Samsung has supplied Apple with all their flash memory product.

This shift in supplier relations has strained Toshiba as their capacity was reduced from their Q3 announcement back in 2012, and now their capacity must increase.  The transition to get production lines up and running takes time and cannot be started immediately.  So until Toshiba begins with more production capacity we will see continued shortages for flash memory products.

These types of major production changes typically happen every 24 months so it’s nothing new, and we’ll see the price go back down, but the time frame in which that happens could be as late as June or July.

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