Smith & Associates | Featured Story: Will the iPhone Impact the Electronic Components Open Market?

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Featured Story: Will the iPhone Impact the Electronic Components Open Market?

Sunday, 08 July 2007 18:00

Full Issue

Will the iPhone Impact the Electronic Components Open Market?

With the much-anticipated release of the Apple® iPhone™ at the end of June, many electronic components buyers have wondered how this new device would affect prices and availability on the parts used to build it. Two of Smith & Associates’ commodity managers reviewed the part lists to assess the impact that the iPhone’s introduction and continued production might have on the open market.

Todd Banker, Smith & Associates commodity manager for memory, says NAND flash demand has been spurred recently by the myriad portable consumer electronics such as MP3 players and phones that integrate music and video, and certainly by the iPhone. While some analysts have expressed concern that these devices’ reliance on NAND flash could significantly tighten supply and drive prices higher, Banker says that NAND flash manufacturers have been ramping up production on the types of memory these devices employ for some time. As a result, NAND flash availability should meet demand for the remainder of the year, and prices should be stable.

Apple purchased large volumes of parts directly from component manufacturers, reportedly at considerable discounts from standard pricing. Many iPhone parts, however, are custom-built for the application. The iPhone’s CMOS sensors, coatings involved in the multi-touch display, and the processor are custom components. The iPhone uses a custom processor made by Samsung that carries the Apple logo. As a result, says Todd Traylor, Smith & Associates commodity manager for CPUs, the CPU open market should see little impact from the device, since other cell phone and music/video device manufacturers will not be able to use the Apple-branded processor.

Despite its extensive sales, the iPhone itself will most likely have little effect on the electronic components open market for the near term – what Banker and Traylor both look for is the continued proliferation of smart phones to drive demand for existing commodity components like flash memory and possibly for components associated with LCD and touch screens. In the mean time, it remains to be seen whether increased demand for custom parts will drive component manufacturers closer to production capacity; or whether consumers’ demand for smart phones and similar devices will drive electronics manufacturers to adopt commodity components in efforts to keep costs down and inventories flexible.

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