Proven coping measures implemented in the past are keeping suppliers upbeat. These include shorter price validity periods and extended lead times.
Projections of a NAND flash memory shortage that could happen in H2 2010 are not causing China's electronic makers to lose sleep. After years of coping with flash memory price and supply fluctuation, many export-oriented suppliers are confident they have seen it all.
High-density memory almost doubled in cost from January to December 2009. Prices are still inching up, although those for 16Gb and lower-capacity units are going down gradually.
The rising demand for smartphones, MP3 players and other electronic devices, including Apple's iPod, iPhone and iPad, is pressuring NAND flash suppliers to boost output. Yet market research institutes such as iSuppli expect that memory makers would not be able to fill the gap between supply and demand, resulting in shortage and price hikes this year.
The bleak projection, especially for H2 2010, is not dampening the overall rosy outlook of many electronic manufacturers in China. These companies are ready to fall back on various coping tactics they have developed over the years in managing the NAND flash supply problem.
For one, many exporters avoid stocking memory parts. Purchases are typically made once product orders have been confirmed. Stocks are kept to a minimum unless a price increase is imminent.
Quoting without the NAND flash cost has become a standard operating procedure for many businesses. The practice is less prevalent in products utilizing smaller parts, such as below 512Mb where prices are not as fickle.
Dongguan Synst Electronics Co. Ltd, a maker of mini-component audio systems, Internet radios and portable CD players, purchases memory components only when there are orders to reduce the potential risk.
For quotes that incorporate the NAND flash cost, the validity period has been shortened from one month to between seven and 14 days.
Shenzhen Weidiye Electronic Co. Ltd integrates 1 to 4GB flash memory in the HDD media players and car multimedia systems it manufactures. "The cost (of flash memory) is always unstable," sales manager Vivi Zhao said. The company immediately adjusts prices to reflect any major change.
Another strategy for avoiding flash memory risk is to remove it altogether. An increasing number of MP3 and portable media players, for instance, feature external storage through a USB port or memory card slot. Internal NAND flash is reduced to the minimum. The bundled memory card can be priced independently or sourced separately by the customer.
Dongguan Synst resorts to external flash memory storage to reduce the impact of price fluctuation and shortage on its production. For most of the company's products, 512MB is sufficient internal memory. It suggests external storage for customers who want larger capacity.
Shenzhen Longzhiyuan Technology Co. Ltd, a maker of eyewear video recorders, MP3 players and cameras, expects high-density flash memory chips to be 5 percent more expensive in the next six months. But there are no projections for either a curtailment in supply or a price hike for low-density chips.
Sales manager Ailin Zhang said delivery lead time would be extended in the event of a cost hike or short fall, but the minimum order requirement will remain the same. In times of severe price fluctuation or inventory deficit, the company builds up a flash memory stock whenever it deems necessary.
About 80 percent of Shenzhen Longzhiyuan's output is embedded with 4GB NAND flash memory, 10 percent incorporates 8GB versions and the rest employs 2 and 1GB models.
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