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Craig McHugh said that 1GB chips are proving particularly elusive and blamed Apple.

'Industry demand for high-capacity flash memory currently outstrips supply and this will impact availability of our 1GB flash MP3 players for the holiday quarter,' he said in a conference call following the announcement of Creative's latest financial results. 'The shortage of flash memory, according to industry analyst speculation, is primarily a result of a special deal that Apple has secured from a key

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supplier for the holiday season.'

Creative posted a bigger loss than expected, partly because Apple has squeezed prices. However the company expects to return to profitability with new portable video and music players and PC sound cards.

'I'm very excited about the launch of the Sound Blaster X-Fi,' said Sim Wong Hoo, chairman and CEO of Creative. 'The reviews have been outstanding, with the X-Fi cards winning top awards from several major magazines.... With the Sound Blaster X-Fi family of sound cards, we have introduced the first products with our Xtreme Fidelity audio standard, which is just the beginning of our implementation across our different product categories.'

He also noted that a number of competitors in the MP3 space have been forced out of the market because of the competitive pressure that Apple is applying.

'If Creative is losing money then it's very difficult for other companies to really fight in this battle,' he said. Nonetheless the withdrawal of these companies should enable Creative to increase its share of the growing market.