Cashing in on flash

With the rapid improvement in storage capabilities, flash memory-based portable MP3 players are stealing a march on their hard drive rivals in the Middle East consumer markets.

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By  Administrator Published  September 8, 2007

With Apple's all-conquering iPod dominating the market for hard drive-based MP3 players, rival vendors have turned to the increasingly dynamic flash memory market to claim a stake in the sector.

In the hustle for pole position, rival vendors have sought to cram more memory into increasingly compact devices. This trend has seen consumer demand explode for flash memory devices, which has led to OEM wholesale prices for flash memory chips falling to as little as US$25 for 2GB. Despite the greater storage capacity provided by hard drive MP3 players, flash memory has proven more cost-effective in models with a memory configuration of less than 4GB.

According to market research supplied by GfK Marketing, hard drive-based MP3 players in the UAE accounted for just 10% of all MP3 player sales in the final quarter of 2006 - a trend that has continued for much of 2007.

Observers have cited the compact size, durability and economic efficacy of flash-based memory as making it a logical choice for digital audio products.

"Most consumers use their MP3 players everyday," says Samsung Gulf's Makarand Phadke.

"This puts a higher premium on the durability of a particular product as the devices are more vulnerable to daily wear-and-tear. Flash memory has enabled vendors to develop products that weigh less and are more durable. The reduced cost of flash memory also aids price rationalisation and maintains healthier margins for channel players."

As a relatively new player in the market, Samsung aims to challenge Apple's hegemony with its recently launched flash-based K3, K5 and U3 models.

"Samsung has been trailing in the MP3 player market as consumers tended to favour products with larger storage capacities using hard disk drives," admits Phadke, who claims the initial lag in sales is to be expected. "We are confident we can quickly make significant gains in terms of market share with the release of our expanded product range."

Samsung's innovative K5 has been a huge hit in the region, thanks largely to its innovative design which incorporates a slide-out speaker system.

"The K5 enables users to enjoy their music individually or in a group without the need for cumbersome speaker accessories," Phadke claims.

The K3 and K5 models are also among the first Samsung digital audio players to feature the company's impressive OLED display technology.

"Samsung's use of flash memory and OLED displays has enabled it to rollout a product that combines class and quality, at an affordable price," claims Phadke. The entry-level K5 undercuts Apple's iPod nano on price and boasts additional features which Samsung claims guarantees its popularity among consumers.

While Phadke says Samsung has traditionally faced slim margins in the highly competitive flash memory market, the new products are priced to ensure greater returns for the company and it's partners.

"We have traditionally had to contend with 7% profit margins in this sector," he concedes. "Our objective in this market segment is to shift large volumes in order to maximise our returns."

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