According to DRAMeXchange the Apple iPhone and iPod will take up roughly 25% of worldwide NAND Flash production in Q3 2007.

That would not be a problem if the NAND production would not have gone down. Beginning Q2, NAND Flash makers have started to produce chips based on even thinner circuitry and had lower yield rates than expected.
DRAMeXchange is predicting a flash chip shortage will occur in Q3, with some vendors not being able to secure flash memory.
Of course prices will go up for NAND chips as well.

DRAMeXchange is a global leading provider of market intelligence, in-depth analysis reports and consultant services on major electronics components.
See also the site.