Samsung Electronics has been dumping NAND flash with its customers since late February amid competition from SanDisk who this week rolled out several new products in Australia.
The situation is set to intensify as competion hots up in the channel sources have claimed with many saying the big winner will be consumers with lower MP3 device costs.
With weaker-than-expected iPod nano sales this year, Samsung has been trying to maintain control over its inventory levels by dumping excess stock with memory module makers, according to sources at downstream players in the MP3 market. Channel Insiders say that Samsung is pushing its products hardest with companies that it already has close ties with. One of the core problems is that Samsung expected higher sales to Apple which did not eventuate due to a slackening off of Nano sales to vendors such as SanDisk who are delivering a similar product to the Apple Nano with built in FM tuner colour screen a lower retail price and no scratch exterior MP3 coating.
Inventory pressure at Samsung has been further aggravated by price reductions from SanDisk. InSpectrum indicated that in the latter part of February SanDisk was quoting 1GB “finished goods” at US$30 for retailers, with that pricing being well below component costs. Financial services firm WR Hambrect indicated that SanDisk initiated price cuting in January 2006. During a visit to SmartHouse Offices this week Eric Bone the Worldwide Director of Consumer Products for Sandisk said that the NAND memory made up 70% of the cost of an MP3 player and that Sandisk were in a perfect position to compete with both Apple and Samsung.
According to company sources SanDisk distributor Zenitron admitted that it began lowering its prices in January but stressed that pricing was adjusted to reflect market trends. WR Hambrect also stated that Samsung was quoting its 1GB finished compact flash memory card for US$22 earlier this month. NAND flash spot prices have dropped by over 40% since 2006 with the largest drop being 56% for 4Gbit parts, according to InSpectrum. NAND flash contract prices have also dropped by as much as 37% through the first half of March. The downward price trend will persist in late March and the average sequential drop should fall 5-10%, the firm predicted.