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Hynix, Intel and Micron, Samsung Electronics and Toshiba will all provide Apple with flash chips until 2010. In return Apple will to prepay a total of $1.25bn for flash memory components during the next three months.

'We want to be able to produce as many of our wildly popular iPods as the

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market demands,' said Steve Jobs, Apple's CEO.

For Apple to publicly announce a components deal is unusual, if not unheard of. However such is the importance of Flash chip supply to the company's future, that this announcement will go a long way to reassuring investors. Moreover the $1.25bn payment will affect Apple's financial results for this quarter; by warning investors in advance the company should have lessened the effect that this will have on its share price.

'When your entire company can be brought down by a shortage of one component, you want to diversify,' analyst Gordon Haff told the Financial Times. 'A nand memory shortage could be just disastrous.'

Apple's share price rose slightly following the announcement.