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Stop the Noiz

The World Is Not Enough for Apple

Frank Fox - 2009.08.18 - Tip Jar

Popularity: LEMLEMLEM

Tweet this article. Short link: http://bit.ly/2lF90D

It sounds like a James Bond plot. There is an egomaniac running a large multinational company. His only goal is world domination.

The World Is Not Enough
The World Is Not Enough for Apple

He starts by buying up one of the world's precious resource to be used exclusively in his sinister device. After the first round of success, he continues to use more and more of this resource, barring all others cheap entry.

Can total world domination be far from his grasp?

Let's go back to 2005: Apple has a hit with the iPod. You remember those - they were fancy music players that used miniature hard drives, and they were around before the iPhone. Apple decided to start using flash memory for some smaller iPods and diversify the product line. They announce a long-term supply agreement with Hynix, Intel, Micron, Samsung Electronics, and Toshiba to secure a supply of NAND flash memory through 2010. Steve Jobs is quoted as saying, "We want to be able to produce as many of our wildly popular iPods as the market demands."

The world is excited by the announcement that Apple is ready to sell lots of iPods. Then, as happens in these stories, they forget, and the evil genius is allowed to continue building his army of devices.

The reports continue to come in regarding Apple. In 2008, iSuppli Corp. reported that Apple was spending $1.2 billion on flash memory and using up 13.1% of the global market. Could supply keep up with Apple's voracious demands?

Fast forward to 2009. Our hoarding company is at it again. Apple is caught buying up all the available supply from Samsung. Samsung is reported to make over 40% of the world's supply of NAND flash RAM. That is a big jump from the 13.1% percent Apple was gobbling up just two years earlier.

Sorry to the rest of the world, but Apple needs it more.

Where is Apple using all this flash memory? In the iPhone. First it was 4 GB or 8 GB, then it doubled to 8 GB or 16 GB, now it has doubled again to 16 GB or 32 GB. How can supply ever get ahead of Apple when it is quadrupling its usage per device in less than two years? Add to this the iPod touch, which also swallows 16 GB and 32 GB flash memory like it's going out of style.

Consumer demand for these devices will further exaggerate Apple's consumption of flash memory. At the rate that Apple continues to double its usage, the world's supply may not be large enough. Apple will then be able to raise prices to whatever it wants and take over the entire world.

All because a fart app on the iPhone is much more fun than on the Palm Pre.

That's right, there are other victims of this abuse. Other smartphone manufacturers have pathetically low amounts of flash memory. The newly release Palm Pre has 8 GB. The old dodger Android has only 1 GB on a SD Card. BlackBerry's iPhone killer, the Storm, has 1 GB. Nokia phones rely mainly on SD Cards for memory. These have either 4 GB or 8 GB SD cards that are sold with the phone.

Let's put this in perspective. Last quarter, 40 million smartphones were sold. Of these, Apple sold around 5 million for third place behind Nokia and RIM. This gave Apple 13% of the smartphone market.

This means that everyone else sold around 35 million smartphones, each with between 1 GB and 8 GB of flash memory. If we assume 4 GB as the average, that is about 140 million GB of memory.

Compare this to Apple, which sold just 5 million iPhones, each with between 8 GB and 32 GB. If we assume 24 GB memory on average, Apple used 120 million GB of memory. The number three company, with only 13% market share, used almost as much flash memory as all the other brands combined.

This has got have an impact on other suppliers. Why aren't they selling their smartphones with as much memory as Apple? How will they compete as Apple continues to sell more and more iPhones and iTouches? Will the flash memory supply be able to keep up with the rapid growth of the iPhone market?

(Cue James Bond music)

Picture James Bond hanging from the side of Apple headquarters. He's just broken in and has been caught by Steve Jobs. Jobs chases him through the building and over the edge of the roof.

Jobs is monologging like a villain from Pixar's The Incredibles. He tells Bond that he is going to continue to buy more and more memory until no one else can make a smartphone. And there is nothing Bond or anyone else can do about it. Ha, Ha, Ha, as he slowly walks back to his office.

How will Bond get out of this impending doom and save the other gadget makers from Apple? LEM

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