by Marcus Lai,
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Sony Corp. is in talks to order 20% of Samsung's NAND flash memory chip production, according to Bloomberg.
Sony's PSP handheld entertainment system use NAND flash memory to save data.
Hwang Chang Gyu, head of Samsung's semiconductor business, said he heard from Sony that the electronics giant expects to sell about 20 million PSP units next year.
The large purchase of memory chips and a revised sales forecast could signal an increase in production and a possible price reduction of the PSP handheld, which has seen brisk sales in the U.S., Europe, and Japan.
Sony is on track to double the PSP's user base to 6 million units on initial holiday sales estimates.
Handheld market leader Nintendo continues to dominate in Japan where its Nintendo DS trumps the PSP in sales. The company edges out the PSP in the U.S. at 2.7 million Nintendo DS units sold compared to Sony's 2.43 million units sold.
Related story from eWeek:
Samsung Says May Sell NAND Flash Chips to Sony
By Kim Yeon-hee, Reuters
December 26, 2005
SEOUL (Reuters)—Samsung Electronics Co. Ltd. said on Monday it may sell NAND flash memory chips to Japanese electronics maker Sony Corp. and others, underpinning expectations for surging demand for the chips.
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Samsung shares rose to an all-time high as investors expected these contracts to strengthen the company's hold on more than half the world's NAND chip market.
For Sony, the possible deal comes as the world's second-largest consumer electronics maker strives to play catch-up with rivals such as Apple Computer Inc. in the portable music market.
NAND memory chips are widely used in music players, digital cameras and mobile phones because they retain data even when the power is shut off.
"Samsung Electronics is considering signing contracts to supply NAND flash chips to major companies, including Sony, but nothing in detail has been decided," the South Korean firm said in a statement to the Korea Exchange.
The statement came in response to a Korea Economic Daily report that quoted an unnamed senior official at Samsung as saying Sony had offered to use Samsung's NAND flash chips for its MP3 players to be unveiled next year.
The newspaper also quoted the official as saying both companies would probably sign a contract in the first half of next year, adding the contract would exceed Samsung's sales contract with Apple. The newspaper did not provide a value.
Samsung, which is battling Japanese rival Toshiba Corp. in the NAND flash memory chip market, has been holding down prices to woo more electronics makers to use its chips.
Shares Hit Record
Samsung, the world's top memory-chip maker, started selling its flash chips in the second half of this year to Apple Computer, the maker of iPod music players.
Explosive demand for NAND chips has been behind a recent rally in Samsung's share price, along with signs of a rebound in prices of mainstay dynamic random access memory (DRAM) chips.
Shares in Samsung, which has a 19 percent weighting on Seoul's broad stock price index, closed up 1.4 percent at 654,000 won, off a life high of 663,000 hit earlier in the day.
"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 possible deal with Sony comes after Samsung last month signed to supply flash chips through 2010 to Apple. Hynix Semiconductor Inc., Intel Corp., Micron Technology Inc. and Toshiba also signed contracts with Apple.
Reflecting booming demand for flash chips, Intel and Micron said last month they would form a company to manufacture NAND chips, with an initial investment of $1.2 billion each.
Micron's Chief Executive Steve Appleton told a Reuters Summit last month that the industry would move in coming years to using flash memory instead of hard disk drives for primary storage devices in notebook computers.
(Additional reporting by Kim So-young)
($1=116.42 yen)