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Apple discount may presage bigger music-player bargains

August may be the time to buy

Apple's decision to cut the price of its iPod shuffle last week may be just a foretaste of the bargains to come for people buying a digital music player, analysts say.

Those looking to buy a new media player may find even better bargains in the months ahead thanks to several factors, including increased competition, falling component costs and fire sales on older models as vendors introduce new devices. In short, August may be one of the best times in recent years to find music-player bargains.

Apple cut the price of its 1GB iPod shuffle last week from £99 to £89. A spokeswoman for Apple would not say why the prices were reduced.

Other companies appear ready to follow Apple's move.

Reigncom, which makes the iRiver portable music players, normally follows Apple's price moves, said a spokeswoman for the company. Reigncom has also been keeping a watch on plunging flash memory prices, a key component in media players, and expects to pass on savings from those price cuts to consumers.

"We hope [flash memory] prices drop all summer so we can add more memory for a lower price," the spokesperson said.

Prices for the most widely-used flash memory chips in music players – 1GB and 2GB NAND chips – have been on the decline for months. One reason the 1GB parts have been falling in price is that they are reaching the end of their life. The 2GB chips, which can hold twice as many songs, are quickly becoming the most popular NAND chips in the industry.

Consumers can also thank chip makers such as Samsung and Micron for the falling component prices, since their production increases have helped saturate the market, weighing down prices.

The 2GB flash memory chips are currently priced at around $11 (£6.30) each, compared to $18 (£10.20) in the first quarter of the year, according to Merrill Lynch. The financial services firm predicts that the chips will fall another 31 percent in price between July and September, and even more later in the year.

"The price decline has just started. Who knows when it will stop?" said Sun Chung, a memory chip analyst at Nomura Securities in Seoul.

The window of opportunity to benefit from the cheap flash prices may be small, however. When chip makers start to feel the pain from lower prices they are likely to slow production to avoid losses, pushing prices higher again.

A spell of weak demand for MP3 players at the moment could also prod vendors into offering deeper discounts later in the year.

Creative Technology, the second biggest maker of MP3 players after Apple, said last week that softer-than-expected demand for music players and lower selling prices would cause it to miss sales targets for its current quarter.

It didn't say why it had been forced to cut prices for its MP3 players, but analysts said an industry-wide "dads and grads" sales promotion in June had been a big disappointment. Vendors had hoped people would buy music players as gifts for graduating students and for Father's Day. Instead, sales were weak, leaving some companies holding excess inventory that they need to get rid of.

Several companies plan to introduce new music-player models in August, just ahead of the back-to-school sales season. Vendors typically offer discounts on older lines when they introduce new ones, another reason why it should be a buyer's market for music players in the coming months.


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