About four years ago, after a dinner in Palo Alto, I struck up a conversation with Phil Schiller, Apple (AAPL) senior vice president of worldwide product marketing. I’d been covering Apple as a beat reporter for several years at that point, and trying to buttonhole him with product questions had become one of my favorite sports. That evening, I wanted to talk about NAND flash memory. Apple wasn’t using the storage chips in any of its iPods, and I was convinced that the company had to, soon.
As usual, Phil wasn’t playing ball – or perhaps more accurately, he wasn’t letting me hit any past him.
Apple had no plans to use flash, he said. Hard drives just had way more storage for the price, and he didn’t see that changing anytime soon. But look how quickly flash prices were coming down, I said. Didn’t matter, he said. Hard drive prices were coming down, too. But you could make iPods so much thinner and lighter using flash, I said. Our hard-disk iPods are already better-looking and more popular than the competition’s flash players, he said.
A couple of years later, Apple’s flash philosophy had clearly changed. One could fairly call 2005 Apple’s “year of flash” – the company kicked off the year by introducing the flash-based iPod shuffle, and closed it out with the flash-based iPod nano. The nano went on to become Apple’s most popular iPod, it sparked an industry-wide rush into flash, and now Apple is practically synonymous with flash-based gadgets. Apple fell so hard for flash in 2005 that it even began pre-paying flash suppliers such as Intel (INTC) and Micron (MU) to the tune of more than $1 billion to ensure a steady stream of the storage chips.
Apple’s flash moves continue to have a broader impact. More recently, Apple’s flash epiphany accounts for the confidence SanDisk (SNDK) CEO Eli Harari projected during the company’s earnings call earlier this month. And it’s clearly a reason why the iPhone is among Harari’s favorite new gadgets.
On that call, Harari made a bold prediction. “iPhone validates everything we’ve been saying about flash storage in multimedia handsets,” he said. “It may have far greater impact on the flash market in 2008 than the launch of the iPod nano had in 2005.” As reason for his optimism, he noted that Apple’s competitors in the phone space have come calling since the iPhone’s debut, eager to bring their own storage-rich phones to market.
Apple has already said it hopes to sell 10 million iPhones in 2008, which is a lot of flash chips. (And that’s not factoring in the
increasing number of laptops that are using flash alongside or instead of hard drives for better performance.)
If Harari is right about the iPhone being the next nano, 2008 could be a banner year for flash memory. In 2005, the year Apple helped stoke a flash gadget frenzy with its shuffle and nano, SanDisk’s stock price jumped from the $20-range into the $50- and $60-range where it trades today.
Will it happen again? Who knows. One thing seems certain, though: You won’t find a lot of people in 2008 dismissing flash memory.
