Can the iPhone 3G Save Sandisk?

If you are like me, and don't have a life, you track NAND spot prices in the middle of the night after checking in on Asian equity prices and oil. There has been little good news on any front, at least for the bulls.

The stock of Sandisk (SNDK-NASDAQ) kicked up its heels yesterday after printing a 52-week low. Much ado about nothing? Clearly there have been fears that NAND pricing would collapse this summer as oversupply continues to plague the industry; some analysts are expecting price declines of up to 20%.

But NAND spot prices have recently moved higher, due, in part, to larger players reducing supply. Micron and Hynix are moving capacity from NAND to DRAM, which should be felt later in the third quarter. and Apple ordering subsequent to the 50 million 8Gb MLC, which translates to about 4M iPhones:

NAND flash memory chips are used in USB flash drives, MP3 players, cell phones, and other small-form-factor consumer electronics devices. What does Apple need with 50 million NAND chips? Two words: 3G iPhone. Apple is gearing up to distribute the new 3G iPhone starting next week in no less than 70 countries--and at a significantly reduced cost (not counting service contracts) than the original iPhone. A worldwide recession notwithstanding, it appears that Apple is betting that the current state of the economy won't but a damper on iPhone sales Hot Hardware

Apple (AAPL-NASDAQ) has certainly stockpiled a stash of chips, but can only impact the market so much. How much?

ThinkPanumure is taking a shot at estimating the impact:

Major factors that should prevent a NAND spot pricing decline include the Apple build—with Apple building both 8GB and 16GB iPhones, average 12GB density. We believe that the 50M 8Gb chip order approximates to about 4M iPhones. Checks indicate another backup order of similar size should materialize in August.

While, in the big scheme of things, the Apple 3G iPhone is a small contributor to demand, it does take out the 1-2% NAND oversupply intra-quarter and stabilize NAND pricing trends, which has been one of the contributing factors to SNDK stock decline in 2H June. ThinkPanmure Research Note

Sandisk clearly is not out the woods, just yet.

Our concerns remain with high NAND channel inventory in retail and at OEMs and the 2H June NAND price decline which hurt all NAND OEMs. For Sandisk, at retail, price elasticity of demand and how good it could be in a weak consumer spending environment will be key to 2H08, in our opinion.

The price decline in Sandisk has crushed everything in its path. I have always thought there were more moving parts to this story than any other out there, although excess capacity was an overriding theme. Seeing the forest through the trees here was easy if you did not get caught up in the day to day datapoints.

Takeover chatter is probably just that, but Sandisk bulls have at least a glimmer of hope. And while solid state drives will not replace hard drives anytime soon, solid-state drives in PC’s and servers cannot come soon enough if you own this stock. “Back to School” builds start soon, perhaps that will move the needle by the end of July.

With NAND pricing at or below cash costs for most players, large and small, something has got to give. Sandisk’s stock already has.
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Long painful slide...

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Apple Gobbles Up 50M Samsung NAND Chips
Hot HardWare
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