A new report from research firm iSuppli highlights a threat to continued SSD adoption in netbooks, and it also gives some insight into what's behind Samsung's recent positive earnings rumblings. In short, NAND flash memory prices have come roaring back with a vengeance, with the price of a 16Gb MLC NAND module posting a 127 percent price gain from the fourth quarter of 2008 to the second quarter of 2009. iSuppli suggests that this price spike will slow SSD uptake, especially in the cost-sensitive netbook market, and they're probably right.

This price rebound comes courtesy of three drivers: capacity destruction, speculation, and SSD drives themselves. Regarding the first driver, Intel, Micron, and Hynix all closed NAND fabs last year in order to ease some of the capacity glut that was plaguing the industry and pushing prices lower and lower. In fact, there was so much flash production overcapacity that a 2008 supply glut was widely predicted well before the financial crisis knocked the stuffing out of global IT expenditures and consumer demand; when you combine that overcapacity with the downturn, it made 2008 a perfect storm for flash memory makers.

The downturn is by no means over, but the fab shutdowns mean that we've moved from "perfect storm" conditions to merely awful weather, and that improvement has driven the volatile flash market, where memory is traded like any other commodity (crude, soy beans, industrial metals, etc.) into price correction overdrive.

The final factor in easing terrible NAND flash conditions is the success of the flash price downturn in driving widespread SSD adoption. You might recall that Intel significantly accelerated its SSD plans in order to boost demand for NAND flash by creating a volume market for larger chunks of it, thereby absorbing some of that excess capacity and supporting memory module prices. I'm not willing to vouch for the idea that Intel's actions specifically have helped ease the downward pressure on NAND prices, but it's clear that SSDs have really taken off in the volume consumer market, and that goes a long way toward improving demand conditions.

iSuppli doesn't see these price levels lasting, though, and its projections show flash prices trending back downwards through the rest of 2010. It's hard to argue with this prediction, especially since there does not appear to be much consensus that a turnaround in global IT spending is imminent.

Samsung reaps the benefit

The NAND flash price spike also at least partly explains Samsung's recent bullish pre-earnings guidance, in which the company claims that it will solidly beat analysts expectations when it posts its official earnings on July 24th. Samsung says the improved profitability spans all of its units, but there can be no doubt that the company's beleaguered flash memory business has benefited from two major recent moves.

The first of these moves is the aforementioned spike in NAND prices, which will show up in the company's earnings as a major boost from 2008, when Samsung's posted enormously steep fourth-quarter losses on the back of plunging LCD and flash prices. The second move is the dive that the South Korean won has taken against the dollar this year; a cheaper won helps exporters like Samsung and has surely been a factor in the company's renewed prospects.

So my guess is that when Samsung's earnings drop on July 24th, we'll see that the turnaround in the company's NAND flash business was as significant a driver of the company's 2Q 2009 profitability as it was of its 4Q 2008 losses.