NAND Flash vendors have increased chip prices citing strong demand for new smartphones particularly the iPhone 7 featuring up to 256GB of storage, according to industry sources. Prices will keep soaring until the fourth quarter of 2016.

Nevertheless, NAND Flash prices could start falling in the first quarter of 2017 if sales of the new iPhone disappoint, the sources warned.

Major NAND-chip suppliers including Samsung Electronics and SK Hynix have all raised their quotes citing a pull-in of orders from their system customers, the sources said. Meanwhile, module firms and distributors intend to stockpile to boost their inventory value. As a result, the supply of NAND Flash has fallen short of demand, and the shortage is more severe than previously expected, the sources indicated.

Apple's purchases remain critical to the overall consumption of NAND Flash, the sources said. The vendor, with its iPhone 6 and 6s series, consumed about 15% of overall NAND supply in 2015.

In addition, the ongoing rally in NAND-chip prices will negatively affect the penetration rate of SSDs in the notebook segment, and inhibit replenishment demand prior to the back-to-school season, the sources noted.