[Ed] Apple's iPod strategy spot on


DigiTimes reports that NAND Flash memory, the type used in Apple's iPod shuffle, supply has tightened considerably since the beginning of the year. Although this hasn't yet led to a general rise in prices, it does reduce buyers' ability to cut their costs let alone retail prices, which are under pressure.

NAND-flash supply has been tight since the beginning of 2005. Seeing strong demand for iPod Shuffles and memory cards for mobile phones with card slots, most people originally expected prices for NAND flash to rise. However, prices for the segment dropped this week, with the exception of 128Mbit NAND flash, due to a lack of confidence in a price increase. Demand for high-density chips at 2Gbit and above remains mainstream, but prices for the segment lowered by about 1-2% this week to US$18.06, US$32.38 and US$61.64, for 2Gbit, 4Gbit and 8Gbit respectively.

The shuffle has completely shaken up the Flash-based player market, as well as the component supply chain. This puts Apple's competitors in the uncomfortable position of facing stagnant or, perhaps, rising parts costs and downward pressure selling prices at the same time.

The mothership's superior market and pricing power puts it in the driver's seat.

With shuffle sales exceeding plan, this pundit expects Apple will be named the new sales leader in this segment as analysts begin announcing early results within the next few weeks.

Further, if Apple does indeed lower pricing on its industry-leading hard-disk-based iPod line, as is widely expected, the company's struggling rivals will be pressured on two fronts simultaneously--both their high-volume and high-margin product lines will be under assault.

Sim Wong Who?

Lastly, isn't it pleasing, in a very guttural sense, to see the arrogance of Creative's CEO, Sim Wong Hoo, punished so brutally by the market? So much for his widely-publicized "$100-million war" on the iPod.

To date, it would appear Apple is doing just about everything right. Further, I expect that the arrival of QuickTime 7, and its powerful new codecs and features, will further strengthen the company's stranglehold on the market.

What's your take?