Creative Labs Inc. president Craig McHugh said during a Wednesday conference call that the MP3 player industry faces a shortage of 1GB flash memory chips, and that the situation "is primarily a result of a special deal that Apple has secured from a key supplier for the holiday season." Martyn Williams reported on the situation for an IDG News Service article found on Playlist.

That key supplier is Samsung, although Creative chairman and CEO Sim Wong Hoo did not refer to the company by name when he told financial analysts that several Chinese MP3 player manufacturers are now out of business because of pressure placed on the industry by the Apple deal. "If Creative is losing money then it's very difficult for other companies to really fight in this battle," Mr. Williams quoted him as saying.

Mr. Hoo also "predicted that Apple's deal will not last long because it is not favorable to the memory chip maker involved," Mr. Williams wrote. "I don't think the vendor is benefiting on it, so it's really a one-sided deal," Mr. Hoo said. "I don't think anybody else out there can get [similar terms]. That's not the way the industry practices."

Creative's conference call was held to announce financial results from the previous fiscal quarter, which saw net sales increase but net income drop, with the admission by the company that it would have posted a loss if it hadn't been able to write off a gain from investments. Sales of Creative's MP3 players were 123% higher than the year-ago quarter, however.