NAND flash controller design houses have seen tight capacity at their foundry partners including United Microelectronics Corporation (UMC) and Semiconductor Manufacturing International Corporation (SMIC), and are concerned growingly tight foundry capacity may disrupt their shipments and affect NAND flash pricing, according to industry sources.

Some NAND flash controller suppliers have indicated that their supply may not be able to satisfy customer demand in the second quarter if their foundry partners continue to see tight capacity, the sources said. This supply disruption is likely to impact NAND flash prices for the quarter.

NAND flash demand has been weak, but pricing has been stable as major suppliers are limiting their supply to the market.

But the sources said Apple may start negotiating long-term supply contracts with its chip partners in the second quarter. Apple's demand will continue to play a significant role in the NAND flash industry in 2010.

Sources with module makers have also noted that the current slow demand for memory cards and flash drives has not pushed down chip prices significantly. Major chip suppliers especially Samsung Electronics continue to give priority to profitability over shipment volume, according to the sources.

The sources said Apple has been reluctant to strike a deal with NAND flash suppliers for this year, as prices remain at high levels.