Apple giveth, but iCloud taketh away from NAND flash market, says IHS

Apple in recent years has played a key role in expanding the market for NAND flash, but the company's newly-launched iCloud storage service could cause demand for the memory to weaken in the future, according to IHS iSuppli.

Driven by best-selling products like the iPad and iPhone, Apple is expected to remain the world's largest buyer of NAND flash memory in 2011 accounting for nearly 30% of global demand. Shipments of NAND flash memory for various Apple products are anticipated to reach 5.2 billion GB-equivalent units in 2011, out of a total global market of 18.5 billion GB-equivalent units. Apple's share of 28.3% represents the single largest block of NAND flash consumption by one company, IHS indicated.

Apple's portion will continue to climb during the following years, holding at 29% for the next two years, IHS said. Its share then will slide somewhat by 2015 but still will account for 23.9 billion GB-equivalent units, or one-quarter of overall industry NAND demand.

"Apple has contributed greatly to the growth of the NAND business in recent years," said Dee Nguyen, memory analyst at IHS. "However, the company's adoption of cloud storage could have significant implications because the fastest-growing segment of the NAND flash market lies in the storage component of convergent mobile devices like smartphones and tablets. And with Apple products like the iPhone and iPad accounting for a disproportionate share of NAND flash demand, any move among Apple users to offload storage to the company's iCloud service could mean a corresponding decrease in demand for physical NAND flash memory in the future."

For example, free storage of songs on iCloud theoretically would decrease the need for local storage on a PC, smartphone or tablet. If storage consumption decreased by 100GB per user – calculated at a rate of 4MB per song at Apple's stated cap of 25,000 songs of free storage – the combined effect from Apple's huge database of users could make a serious dent on NAND flash demand throughout the industry, IHS believes.

For the near and immediate term, however, the threat level to the NAND flash industry from cloud storage remains low, according to IHS. The most likely scenario for the time being is an increase in overall demand for NAND storage – cloud or local – with users continuing to utilize the physical storage on their personal devices.

A number of reasons support this view. For one, access to iCloud is currently available only through Wi-Fi, and with Wi-Fi not obtainable in all locations, users still will need to store content on their device to enjoy offline access. Moreover, recent high-profile security breaches at Sony, Sega, Nintendo and various government websites have focused renewed attention on data security in the public realm – likely making users more wary about storing content in centralized cloud locations.

A third factor, cost, also plays into the equation, IHS said. While a US$24.99 iTunes Match storage fee per year might be an attractive price to some, other consumers could balk at the idea of paying a yearly charge, compared to a one-time cash outlay in buying additional NAND flash memory for their device.

To be sure, consumers can overcome the cost factor, IHS said. But until issues surrounding data security can be adequately addressed – and more important, until Wi-Fi access becomes more widespread – the future for NAND flash memory remains relatively safe.