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Creative Blames Apple For Flash Memory Shortage

Wednesday, October 26th, 2005 at 3:40 PM - by Staff

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.

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MOSiX Man said:

member since 20 Jun 2001 with 558 posts, unranked, send him a message or view his profile

Wed Oct 26, 2005 4:10 pm

In otherwords: "Whaaaaaa! Apple is beating the rest of us, so now we are going to try and make it sound like they aren't playing fair!"

I know this is a little skewed but, let's look at some math:

Let's see... Apple owns (or soon will) better than 50% of the market for flash-based MP3 player market. Also, Apple is purchasing approximately 40% of the flash memory from just Samsung. Even if Samsung is the #1 producer of flash memory, they are not the entire market. For the sake of my argument, I am going to believe that Samsung produces 60% of the flash memory in this market.

The net result is that Apple has 50%+ marketshare, but it only using about 25% (maybe 30%) of the available flash memory. So, what do these other MP3 player companies have to complain about, other than the fact that Apple is making their products look like crap, and so they can't sell any.

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Biff said:

member since 08 Apr 2004 with 1479 posts, unranked, send him a message or view his profile

Wed Oct 26, 2005 4:33 pm

"Creative Blames Apple for Creative MP3 Player Sales Shortage."

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DrShakagee said:

member since 14 Jun 2001 with 941 posts, TMO Forum Mod, send him a message or view his profile

Wed Oct 26, 2005 4:50 pm

Biff wrote:
"Creative Blames Apple for Creative MP3 Player Sales Shortage."

Heh I was thinking the same thing.

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A guest said: (hide)

Wed Oct 26, 2005 5:01 pm

Quote:
Mr. Hoo also "predicted that Apple's deal will not last long because it is not favorable to the memory chip maker involved."

"I don't think the vendor is benefiting on it, so it's really a one-sided deal," Mr. Hoo said.

Of course, Mr. Hoo can judge because he knows the exact terms of said deal…

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jacrav said:

member since 04 Jul 2001 with 268 posts, unranked, send him a message or view his profile

Wed Oct 26, 2005 11:17 pm

And I thought the 2 GB modules were a different type of flash memory that the 1 GB and lower. Was I mistaken ?

Everything I've read about that deal with Samsung was about Apple getting favorable terms just because it's a new technology, and the company committed to buying large quantities, which allowed Samsung to amortize their production costs faster … Am I wrong ???

Now, if I'm right, how many players does Creative produce that are based on this new flash memory technology ?

Also, I thought Creative had declared war on the iPod … As they say "All's fair in love and war". Are they now conceding defeat ?

Looks like Mr Hoo and Mr Glaser are fighting for the title of "Mr Big Mouth" … and both have bad breath !

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Rainy Day said:

member since 07 Jun 2005 with 607 posts, unranked, send him a message or view his profile

Thu Oct 27, 2005 1:53 am

Mr. Boo Hoo, my heart bleeds peanut butter for you.

Yeah, like Apple held a gun to Samsung’s head and forced them to make this deal. Samsung had their reasons.

This is what sour grapes sound like folks, plain and simple.

Anybody else lovin’ this? Apple on top! Go Apple!

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A guest said: (hide)

Thu Oct 27, 2005 5:26 am

"And in other news, Creative blames Apple for being too darn successful. Back to you, Chet."

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Steve W said:

member since 22 Nov 2002 with 482 posts, unranked, send him a message or view his profile

Thu Oct 27, 2005 9:31 am

Sim Wong Hoo: "Waaahhh! Mommy, that mean ol' Apple's kicking my butt! Make him stoooppp..."

Allow me to snicker.

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Billy K said:

member since 06 May 2004 with 297 posts, unranked, send him a message or view his profile

Thu Oct 27, 2005 10:50 am

WHAT MP3 player industry? Apple *is* the industry. Nobody wants Creative's crap. Apple will sell 70-80% of the MP3 players this season. You're telling me there isn't enough flash memory left for Creative to make the 13 or so players they're going to sell this year?

"I don't think anybody else out there can get [similar terms]. That's not the way the industry practices."

yeah - because Apple will sell 10 million iPos, and you'll...sell 13. And complain. A lot.

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gslusher said:

member since 13 Nov 2002 with 2088 posts, unranked, send him a message or view his profile

Thu Oct 27, 2005 4:18 pm

From the article:

"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."

If Samsung is losing money, their stockholders will beat the crap out of the management.

The real question to ask Mr. Hoo and Creative is this: are you not able to meet demand for your products? If so, you have nothing to complain about. Buying in bulk usually results in lower prices, unless, of course, someone passes a law saying that you can't negotiate lower prices, as with the upcoming Medicare Prescription Drug program in the US.

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