Samsung to deliver only 85% of promised NAND flash to "its major customers"

Remember that Seoul power outage which took down six chip production lines for the world's largest flash memory producer, Samsung? Well, those predictions of NAND flash memory shortages appear to be ringing true. If statements from PQI's general manager, Jance Lu are to be believed, then Samsung will be fulfilling only 85% of their promised NAND flash deliveries to "its major customers" in the second half of August -- i.e., now. It goes without saying then that the estimated 3% shortage in global NAND supply will be followed by a sharp increase in NAND prices due to the unquenchable demand. With modern manufacturers relying on "just in time" inventory fulfillment to keep storage and holding costs to a minimum, you'd better hold tight for possible flash-heavy, product shortages-to-come this holiday season. Egads, if true, we're looking at possible shortages in cellphones, GPS devices, handhelds, DAPs and PMPs including, of course, iPods and iPhones which source much of their memory from Samsung.

[michas_pi @ Aug 17th 2007 7:13AM]

I bet that that 15% includes all those Chinese companies making iPhone, iPod, and PSP knockoffs.

[Tiago @ Aug 17th 2007 7:29AM]

This doesn´t seem right.. How can one day of power shortages affect the production by 15%?? This is a chip factory, not a steel mill that would loose maybe a week to restore production. It seems to me they are using this to bump flash memory prices up. We all know memory makers are losing money since the vista flop.

[Zach Mauch @ Aug 17th 2007 8:47AM]

15% of the second half of august. So one day out of two weeks. That number makes sense when you think of it that way. Downtime plus some time to get things rolling again.

[Mario @ Aug 17th 2007 10:04AM]

The article just says that Samsung isn't going to be able to supply all the memory it had promised it's customers. So at the beginning of the year they said they would deliver 100 units of memory to apple, but apple will only get 85. Samsung overpromised. The article says the power failure only dropped overall production of nand chips by 3%, not 15%.

[Kenban @ Aug 17th 2007 10:30AM]

When a fab looses power you have to destroy all the in production chips. That would be several days of work. Next you have to get the labs back to being a clean room environment. Every single machine has to be cleaned and many parts will be replaced which they will often not have enough on hand at once. If I remember right it was estimated to take a month to get back to full production and over a week of chips were lost.

Its not easy or fast to get a fab back online after power is lost.

[CobraRob @ Aug 17th 2007 1:01PM]

Most of the tools just came back up this week. Outside of the insain number of wetcleans that had to be performed without the needed number of swap kits and consumables on hand.. there was also alot of tools with particle problems after the restart in addition to other mechanical failures.

These tools are not happy when they lose power and its a long expensive process to restart.

In addition most of the WIP was either scrapped or reworked greatly slowing production.

[JP @ Aug 17th 2007 8:15AM]

I wonder if Samsung's insurance covers all of the lawsuits which might start flying accusing them of breach of contract.

[Stylze @ Aug 17th 2007 12:12PM]

BTW Samsung's insurance company is Samsung Insurance. I don't know how this would benefit them or otherwise... I'm just saying (I thought it was kinda funny)

[guysmiley @ Aug 17th 2007 8:25AM]

What a stupid statement.. 15% of second half august deliveries. hmm last 2 weeks of august so 2weeks/52weeks * 15% = 0.57% of total annual contracted supply. 0.57% of 365 days of just in time inventory = 2 days product production down time before overtime... assuming the nand fab can't run over 100% capacity for a few days to catch up...

time to go back to business 101 kiddies......

[GuppyFish @ Aug 17th 2007 9:50AM]

Well, let's think about this for a second. Fabbing chips isn't a one day process, it can take from six to eight weeks requiring multiple photolithography and chemical etching steps. So, there would have been a lot of product in various stages of readiness when the power went down. My guess is that a significant portion of eight weeks of product were spoiled...not two days. Moreover, these fabs can't just be cleaned up and then restarted at full speed. Once stopped they'll have to build back up to speed, which in turn leads to greater productivity losses.

Wikipedia has a summary of chip fabrication that's probably worth the time to read.

http://en.wikipedia.org/wiki/Semiconductor_device_fabrication

[Zach Mauch @ Aug 17th 2007 8:47AM]

With the profit margin of the iPhone they better not up the price. iPods might be a different story, but if they up the price on the iPhone it's a crock. They are making a killing on it already.

[Aman Patel @ Aug 17th 2007 4:19PM]

I believe that Apple signs long term agreements with their NAND suppliers, so Apple's costs shouldn't increase.

[HineyWipe @ Aug 17th 2007 11:14AM]

"Ah, we created our own supply & demand. Reduce the supply, increase the demand, increase the price, profit!"

[Stylze @ Aug 17th 2007 12:37PM]

They need to work on their manufacturing methods. "Just in Time" for a rich company should mean that there are several factories producing the same exact thing in different areas. Meaning, if a factory shuts down in a certain area, the other factory in a different area or a different country still keeps moving. Obviously, if they are both utilizing 100% of their factory capacity they are screwed anyway. If you look at Toyota, they don't actually utilize 100% output for their factories in case of issues like this (obviously there are other reasons like, they just don't need to produce that much). Believe me, Samsung is rich enough to make multiple factories and control output quality. They are also obligated to do so (IMO) because they control this industry.

[Mikey @ Aug 19th 2007 3:10PM]

Gee... y'all may have to keep using your current "old" electronic toys. Poor babies!!