Whether you believe it or not the news from the factories in China that supply the majority of the promotional USB flash drives in the world today make depressing reading.
Following a power outage at Toshiba's production plant on December 8th NAND flash production was disrupted for two days with the incident driving up spot prices on the flash commodity markets by around 4%. These relatively modest increases have spooked the market and may of the factories that buy NAND flash have increased their prices for assembled 4GB USB flash drives by as much as 15%.
To be fair 4GB prices had fallen significantly in the last couple of months so this incident might just have given the factories an opportunity to correct prices that had fallen too far. The net of the net is that prices today for 4GB USB flash drives are up by around 15% from last week so anyone looking to purchase 4GB promotional or branded USB flash drives any time soon is in for a nasty shock, particularly if they based their expectations of quotes from suppliers last week.
The longer-term implications of the power failure and the knock on effects on Toshiba's production are more concerning. Some sources are suggesting that the disruption will decrease Toshiba's monthly NAND flash shipments by 10-20%. If correct the reduced shipment volumes translate into a 3.5-7% cut in global supply albeit it will take until Jan-Feb 2011 before the impact is fully felt.
Although USB flash drives use a significant number of NAND flash chips the lions share of the demand comes from Smartphones and tablet PCs manufactures.
Prices for smaller 1GB and 2GB USB flash drives have remained reasonably static so if you are looking for promotional USB flash drives in the short term then you're best to target quotes for the smaller 1Gb and 2GB versions but even then make sure you get your quotes in writing and be clear how long they are valid for.