Wednesday, December 21, 2005

Flash Burnout writes that the Flash market is heating up and some companies are getting burned out of the market. First to go is Renesas Technology, which "announced earlier this month that it intends to stop development of new NAND products, effectively signaling that its days of competing in this hot, $11 billion market segment are over."

Jim Handy at Semico Research said, "The NAND market has claimed its first victim. The only way to compete in the NAND market is to put the pedal to the metal."

The NAND flash market has taken off the past few years, first due "to the wide-scale adoption of digital cameras, and now due to portable music players, especially some Apple Computer iPod models."

The drive for lower prices, higher capacities and growing supply to meet rising consumer demand for Flash-enabled consumer electronics will only serve to make market conditions tougher. Joseph Unsworth at Gartner said, "NAND flash is very cut-throat and ultracompetitive, and I think it will become more commoditized than DRAM. Renesas is not suited to compete in a commodity memory business."

Semico's Handy thought overcapacity might hit the NAND market "as early as the second half of 2006, with manufacturers losing money in 2007." He also predicted "another round of losses occurring only two years after that."

Gartner's Unsworth predicted that "NAND revenue will increase at a declining rate through the end of the decade, with the 70% and 53% growth rates of 2004 and 2005, respectively, giving way to 37% growth in 2006, and a compound annual growth rate of 17% spanning 2004 to 2010."

The article cites Gartner figures that finds last year "the average price of a 512-MB flash chip was $6.84. This year the price dropped to under $3, next year it's seen falling to $1.50. By 2010, it's anticipated the chip will cost 18 cents." I'm not sure if this is a typo and whether it should be 512 Mb for megabits, which equals 64 MB or megabytes.

Unsworth anticipated the "NAND market losing steam in 2007 due to "massive supply" and the "maturation of several new [factories], which will overwhelm healthy demand." He added, "No one knows what new applications will come from this technology," hnoting that "knowing ahead of time or gauging the success of Apple's NAND-based iPods wasn't possible."