A Flash in the iPod

Kim's comments were echoed in Lynch's report for Deutsche Bank.

"Apple's very successful flash-based ... iPod Shuffle changed the demand-supply dynamics of the NAND market earlier this year," Lynch said. "If Apple's new 4GB Flash-based [player] becomes another big hit, we believe a tight NAND market is possible."

One further implication of Apple's move could be a spike in DRAM prices, Kim said. Apple is attempting to purchase more flash memory supply from South Korea's Hynix Semiconductor, he said.

If the company proves successful, Hynix will probably shift production from its DRAM memory products to flash memory, cutting into overall supply for DRAM, he said.

On the storage side, Apple's deal with Samsung raises questions for hard-drive makers Seagate and Hitachi, which sell small hard drives for a variety of Apple's iPod music players and other products.

Sales of 1-inch drives, currently used in the iPod mini, are sure to take the biggest direct hit. But until Apple clarifies its plans, it's unknown how much Seagate and Hitachi will be affected.

"Our forecast still calls for a modest increase in 1-inch drives," says Dave Reinsel, a storage analyst with market researcher IDC. "But this news makes us want to instill more conservatism in our forecast."

Flash memory is significantly more expensive than hard drives on a per-gigabyte basis, but it's sturdier, more compact and uses less power. In an interview earlier this year, Pat O'Malley, Seagate's senior vice president, said he didn't think flash would be competitive with hard drives in players with a capacity of 4 gigabytes until 2007.

Hard drives for use in consumer-electronics devices account for roughly 10% to 15% of Seagate's revenue; how much of that revenue segment is tied to the 1-inch drives isn't clear.

However, Seagate's Ziel notes that the company has more than 30 customers for the 1-inch drives that are used in digital music players such as the iPod mini.

None of the company's consumer-electronics customers -- which include manufacturers of digital video recorders and portable storage drives, as well as digital music players -- accounts for more than 3% of Seagate's overall revenue, he says.

The emergence of a market that includes digital music players, digital video recorders and even cell phones has given the storage industry, which has long been tied to the lagging PC business, a huge leg up.