Huge Apple Chip Order Drives Speculation

Apple Computer has ordered an ungodly 100 million 8 GB NAND flash chips, driving speculation that Apple has something big up its sleeve beyond the next iPhone slated for release this summer. The move has also caused a flurry of activity in the distressed semiconductor manufacturing, and may result in new deal-making opportunities for Micron Technologies.

There’s nothing unusual about Apple ordering NAND chips, which are primarily used for mobile devices, but the size of the order is staggering. To get a sense of the outsized nature of the order, Apple shipped approxmately 4.5 million iPhones during the fourth quarter of 2008. Even if every iPhone user on the planet bought the new version this summer, even the most optimistic count would be 45 million iPhones–not even half the number of chips ordered by Apple.

So it does seem likely that Apple is getting ready to unveil, maybe not one, but several new devices. Observers are speculating that a next-generation iPod is in the works, but given the way Apple does things, they’re more likely preparing the next major step forward in the convergence of smartphones and netbooks. There’s a lot of opportunity here for the right product; the problem with current options is that smartphones are still too small for serious work, while netbooks have too little memory for anything but browsing the Internet. (Erik Sherman reports that Apple may be developing new seamless metal cases for iPods and iPhone made out of extruded alumnium.)

Apple has already shown it understands that people would give just about anything for a single device that includes a music player, phone, and computing capabilities — in their pockets of possible. And when I say people would give just about anything, I mean exactly that. As Apple showed with its new tiered-pricing plan, it isn’t concerned about being expensive, because it understands that its customers have an emotional attachment to the Apple brand that transcends price. The only other mobile device maker that seems to give enough thought to brand dynamics is Nokia, the market leader in smartphone sales worldwide; Nokia is just introducing the E71 smartphone to the U.S. market, and that could be pushing Apple to move quickly.

While Apple’s order seems to have pushed chip prices higher, at least temporarily, there probably isn’t a direct correlation between the order and chip maker Micron Technology’s $550 million debt offering earlier this week. Micron could use the cash to step up manufacturing, but that suggests short-term thinking that’s uncharacteristic of chip makers in general, who like to keep capacity as tight as possible in order to maintain price levels. Micron could be bucking that trend, of course, or it could be about to pick up a distressed manufacturer or two.

Chip analyst Dinesh Moorjani thinks Micron could use the cash to acquire the likes of Qimonda, Spansion, or ProMOS Technologies, notes Barrons.