A UBS analyst said today that indications point to Apple using a different type of memory in its next video iPod, a switch that would significantly affect suppliers Sandisk and Marvell.
UBS analyst Alex Guana said Apple could be working on 16GB and 32GB models of their video iPod that use NAND flash memory, as opposed to hard disk drives, or HDDs.
Guana said Sandisk would benefit from the switch and upgraded the company from a "neutral" rating to a "buy."
He explained in a client note that a NAND-based video iPod would help increase demand for the memory and drive up its value. Sandisk has been hurt recently by gluts in NAND inventory that sapped prices.
Guana estimated that demand from a NAND-based video iPod and other Apple devices could cut oversupply to a range of 2% to 4%, from a previous range of 7% to 9%.
The dramatic shift in demand for memory that Apple can create by changing parts for its popular iPods has already been witnessed. According to UBS, between 2005 and 2006 production of 1" HDDs dropped from 14.8 million units to below 4 million as Apple replaced its HDD-based Minis with NAND-based Nanos.
Guana also downgraded Marvell Technology Group from "buy" to "reduce" Tuesday explaining that Apple's move would hurt the company. Guana wrote in a client note that between the growing popularity of NAND and increasing competition from other HDD makers, Marvell's HDD segment will enjoy limited growth at best. About half of Marvell's sales come from its HDDs.
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