The New York Times reports that Apple Computer got a bargain on the flash memory chips that help make its new iPod Nanos so compact. By doing so, Apple has forced up the price of flash memory for other manufacturers, and driven down the price for consumers.
30 Percent Discount for Apple
It's estimated that Apple received about a 30 percent discount on the memory chips from Samsung Electronics in exchange for buying roughly 40 percent of Samsung's total production of the chips this year. That purchase has reduced the supply available for other makers of other MP3 players. As a result, about 200 of these companies in Asia, perhaps half the industry, have gone out of business.
Prices Will Continue to Go Down
Another likely result, since the Nano can be used like a USB flash drive to move files from one computer to another, is that the price of flash drives will drop to compete with the Nano.
Flash memory is being increasingly used for game machines, cell phones, and other devices. Tough competition in the industry means consumers will likely see prices lower, and capacity increase, for some time yet.