ItInsightsWorld General: Flash Prices Rebound and the Apple Bargaining Balance Shifts

A telling image of the flash memory reversal comes from the Southern California desert: Scott Nelson, a sales executive who once sold NAND chips to Apple, stopped his off-road motorcycle during a ride, lifted a rifle and fired at an old iPod.

For years, Nelson sold flash memory chips to Apple but felt he was badly shortchanged in every deal. The Japanese maker Kioxia had almost no bargaining power because Apple was the world’s largest buyer of the chips used in iPhone devices to store photos, music and applications. Apple used its market position to squeeze suppliers for every dollar it could, and pushed manufacturers to disclose books to monitor sales and make sure no other customer got a better price.

That imbalance has long rankled Kioxia and other NAND makers: Apple bought storage cheaply, then sold capacity to consumers at far higher prices. Nelson was so unhappy with the bargaining gap that he signaled dissent by using an Android phone.

Apple’s Storage Bill Surges

Nelson still keeps the shattered remains of that iPod, Apple’s first device to carry flash storage, and its placement on his desk now carries a sharper meaning.

According to TechInsights, demand from AI hyperscale data-center operators has pushed flash prices to five times their original level over the past year, opening a new era for suppliers such as Kioxia. TechInsights estimates that two years ago, Apple bought nearly twice as much flash capacity as Microsoft, Amazon, Meta and Google combined; now, the major cloud buyers are purchasing twice as much as Apple.

A Payback Moment

This summer, at the industry’s largest conference in Santa Clara, California, NAND suppliers and their sales teams openly savored the idea of payback against Apple. AI deals had given Kioxia’s sales executives and other flash makers fresh leverage to demand higher prices from Apple.

During this year, Meta, Microsoft and Amazon signed contracts with Kioxia that promised higher prices in exchange for long-term, stable supply and could protect Kioxia’s profitability if the market turned lower. The company declined to comment.

Hyperscale cloud providers can pay more. Compared with manufacturing an iPhone, flash takes up a smaller share of data-center costs, and accounting rules allow companies to spread the expense over future years.

TechInsights estimates Apple’s flash storage spending this year will reach $25 billion; in 2025, Apple paid only $6 billion for roughly the same quantity of flash. Apple Executive Chairman Tim Cook likened the rise in memory-chip prices to “a once-in-a-century flood.”

A Misjudged Cycle

Even so, people familiar with the situation said Apple was caught off guard after brushing aside warnings from analysts.

These people said Apple executives had believed they understood the market better than anyone else. Flash that cost $68 per GB in 2005 fell to 5 cents in 2023; now demand from the AI industry has driven prices to more than 30 cents per GB, a 550% increase, threatening Apple’s lucrative profit margin on extra storage.

Period	Flash price
2005	$68 per GB
2023	5 cents
Today	more than 30 cents per GB

Last year, customers buying iPhone 17 Pro could pay an additional $200 to double storage from 256GB. The Wall Street Journal analysis showed the extra storage cost Apple $15 at the time; now, it has risen to $66.

Suppliers Push Apple on Price

“Apple has historically squeezed memory suppliers hard on price,” TechInsights analyst Walt Coon said. “Now, as the balance of power changes, the suppliers’ frustration has been fully vented.”

Apple said in a statement: “For many years, we have maintained relationships with many suppliers, and the partnerships built over decades are precious to us. We look forward to continuing important cooperation with them in the future.”

Storage Margins Above 80%

The Wall Street Journal found that from the initial launch of the iPhone and iPad through 2025, Apple earned more than 80 cents of gross profit for every $1 it charged iPhone and iPad users for additional storage capacity. For Mac computers sold since 2010, Apple’s average gross profit was also close to 80 cents per dollar.

In recent months, Apple raised prices on almost all products; iPhone prices rose by an average of 13%, including some older models that would normally be discounted.

The question for Apple is whether higher prices push customers to keep iPhones longer or whether they continue upgrading at the previous pace. The question for flash makers is when, or whether, Apple can regain its bargaining advantage in the flash market.

Bernstein Research analyst Mark Newman said: “Apple’s relationship with the flash memory industry has always been a mix of love and hate.” He said Apple had provided these manufacturers with stable demand for many years, but Apple’s ability to squeeze prices helped shareholders while leaving suppliers feeling badly burned.

From iPod to iPhone

In 2001, engineers at Kioxia — then called Toshiba — showed two Apple executives a 1.8-inch diameter, 5GB-capacity hard drive they had developed, not knowing what to do with it.

A person familiar with the meeting said Apple executives immediately saw that the drive fit a secret project, and Apple bought exclusive rights to the small hard drive. It later became a key component of the iPod, which became one of Apple’s hit products.

The arrival of flash technology marked a step forward in data storage. Flash proved better suited to consumer electronics than hard drives with spinning disks and failure-prone parts: it is a chip without moving parts, smaller, capable of storing more data, and lower in power consumption.

In 2005, Apple used flash to launch the iPod Nano, a music player thinner than a pencil. At the time, Apple prepaid $1.25 billion to secure flash supply from five companies through 2010. Suppliers saw the opportunity and built more factories. In June 2007, Apple introduced the flash-based iPhone, a smartphone that transformed the consumer electronics industry.

As the iPhone became a success, Apple came to absorb more than one-fifth of the world’s flash supply. TechInsights estimates it spent $3 billion to $4 billion each year on flash and became the world’s largest NAND buyer.

Aggressive Price Pressure

Apple’s enormous demand for flash storage further strengthened its bargaining power, and suppliers had to accept Apple’s demands, pushing prices to the lowest levels in the industry. Flash makers also benefited from Apple’s large orders because chip manufacturing fixed costs are extremely high and factories must run at full capacity to be profitable.

Apple had another hard-line negotiating tool: refusing to commit to purchases. After placing low-price orders, Apple sometimes declined to accept shipments when flash prices fell, leaving suppliers with piles of unsold chips, including products customized for Apple. Kioxia executives joked that they felt like Charlie Brown, the American comic character, trying to kick a football while Lucy pulled it away at the last moment.

These stalemates usually ended with suppliers cutting Apple’s purchase prices even further.

The key figure behind this strategy was Tony Blevins, who served as head of Apple’s procurement organization. Suppliers said he earned the nickname “the Blevins Terminator” because of skillful negotiations, and some viewed his methods as cold and ruthless.

Audits, Threats and Midnight Negotiations

Blevins left Apple in 2022. He sometimes scheduled suppliers into back-to-back negotiation meetings so rival sales teams could see one another, intensifying competitive pressure. Sales representatives learned to carry energy bars to sustain themselves during talks, and Apple executives sometimes dragged negotiations on past midnight without a dinner break.

Blevins was known for playing bad cop, and that reputation gave his team another bargaining lever: if contract terms did not meet their demands, they threatened to bring in Blevins.

An important contract clause gave Apple the right to audit suppliers’ books. People familiar with the agreements said flash manufacturers were usually required to name Apple as a “most favored customer,” ensuring no other buyer received a lower price than Apple; Apple used audits to verify that no other customer obtained cheaper flash.

More than ten years ago, Apple discovered that Micron had sold flash at a lower price to another customer and later obtained a settlement of tens of millions of dollars through arbitration. Apple’s audits became frequent enough that Blevins negotiated a bulk discount with Deloitte.

People familiar with Apple’s purchasing operation said the audits also gave the iPhone maker first-hand knowledge of flash suppliers’ operations, including output from different machines on factory floors, letting Apple negotiators judge how urgently each supplier needed large orders.

IDC estimates that last year about 100 million iPhone users paid extra for larger storage capacity to store high-definition video, downloaded content, text-message attachments and data-heavy apps.

Many users spent $200 to add 256GB, while others paid as much as $800 for 1.75TB. The Wall Street Journal analysis showed that, at an 85% profit margin, this generated more than $10 billion of gross profit for Apple. Mac and iPad users also choose storage upgrades, adding billions of dollars more in revenue; when devices run out of space, Apple charges monthly iCloud storage fees.

Years of Retaliation and Backlash

For years, flash suppliers tried to change the power dynamic and win the upper hand in negotiations.

Around the end of 2015, SanDisk declined Apple’s request for more supply because other customers were willing to pay higher prices. A person familiar with the call said Blevins threatened to retaliate against a SanDisk salesperson, claiming he would make SanDisk CEO Sanjay Mehrotra “crawl back to Apple on his knees.”

Around 2017, flash supply tightened, and SanDisk’s new owner Western Digital asked Apple to pay a fee to reserve flash chips, without promising to sell any chips to Apple.

Blevins was furious. People familiar with the exchange said he wrote the date on his office whiteboard, circled it deliberately, and sent the photo to Western Digital executive Mike Cordano, vowing future revenge.

A year later, flash prices fell and Blevins finally had a chance. People familiar with the meeting said Cordano and colleague Jerry Kagele brought a refund check to Blevins’s office, hoping to repair relations. Insiders said Blevins demanded that they never charge reservation fees again; the two agreed, and the dispute was settled with a handshake.

As punishment, Blevins told the pair that if Western Digital wanted Apple to buy its flash chips, it had to pay Apple to test the chips; even then, Apple had no obligation to purchase any of them.

Blevins then had Apple security escorts send the two out of the office.

The industry bottom came in 2023. The pandemic-era surge in device demand faded, and flash prices fell to only 5 cents per GB. Bernstein Research estimated that the flash industry’s operating losses reached $19 billion that year, while Apple earned $14 billion of gross profit simply from selling additional flash storage capacity.

For Nelson, the Kioxia sales executive, those days remain a hard-earned lesson, and his wish for the industry is explicit: “I hope we never go through that period again.”