Samsung Plans to Sell NAND Chips to Sony

Samsung Plans to Sell NAND Chips to Sony

Samsung Electronics Co. Ltd., the South Korean memory-chip giant, has revealed its plans to sell NAND flash memory chips to Sony Corp., world's No. 2 consumer electronic appliances company.

Korea Economic Daily carried a news report disclosing Sony's plans to buy NAND flash memory chips from Samsung for its new MP3 players. In response, South Korean Stock Exchange asked Samsung to shed light on the issue.

On Monday, Samsung issued a statement for the Korea Exchange that read, “Samsung Electronics is considering signing contracts to supply NAND flash chips to major companies, including Sony, but nothing in detail has been decided.” Soon after the statement Samsung's share prices soared.

“News of Samsung Electronics' supply deal with Sony has reinforced growing optimism about bullish demand for NAND flash chips,” said Jae H. Lee, an analyst at Daiwa Securities in Seoul. “Market consensus is that seasonal factors may pressure earnings in the first six months of next year, but profitability will improve in the second half.”

The NAND flash memory chips find application in cellular phones, music systems and digital cameras because of their property of retaining data even when the power supply is cut off. As a result, there is a huge demand for flash memory chips. Samsung, the largest maker of flash memory chips has kept prices low, in order to attract buyer companies and to compete with rival Japanese company Toshiba.

This year Samsung has signed contracts with many other consumer electronics giants including Apple, Intel and Micron to sell its flash memory chips. The recent surge in demand for flash memory chips has also revived prices of Samsung's Dynamic Random Access Memory (DRAM) chips.

Sony's possible alliance with Samsung is a move to pull alongside its major rival in the music player market Apple Computers, the manufacturer of iPod music systems.