Apple has agreed a half-billion dollar deal with Toshiba Corp for the supply of flash memory chips, as used in iPhones, most iPods and many of its laptops.

The computer company has made a $500 million prepayment to Toshiba in order to secure supplies. Toshiba is the world’s second largest supplier of flash memory, with Apple also sourcing same from the world’s largest supplier, Samsung.

The $500 million deal is “equivalent to about one quarter’s worth of Apple’s demand for flash memory”, Reuters explains.
 

Apple chief operating officer, Tim Cook, stressed the importance of the deal, saying, “We view flash as a very important component for us, because we use it in so many of our products.”  He noted that Apple uses 3% of the world’s Flash storage.

It’s not the first time Apple’s clinched a deal to secure flash memory supplies. Apple paid $1.25 billion in advance to Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure supplies of the component in 2005. That deal extends through until 2010.

Speaking during its financial results call last night, Apple admitted that supplies of the iPhone 3GS are constrained, with the company unable to meet current demand. “We are working to address this,” said chief financial officer, Peter Oppenheimer.

Supplies of some MacBook models are also constrained, but supplies of these should improve in the coming weeks, company executives said.

Apple will still introduce the iPhone into China by the end of its fiscal year (September), the company said.

The company also saw a slight fall in iPod sales, which fell 7 per cent from the year ago quarter to reach 10.2 million units. “We expect tradition MP3 sales to continue to decline over time as we cannibalize ourselves with sales of the iPod touch and iPhone,” Oppenheimer said. “But we still have a great business which we believe last many, many years, and we will continue to manage well.”

Apple admitted its own research which indicates that half of those buying an iPod are new customers. In addition, iPod touch sales rose 130 per cent year-over-year.
 

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