Apple Computer Inc. and Sony Corp. may hold the key to NAND flash-memory makers’ success or failure in the second half.
Demand for NAND flash-memory chips has been weaker than expected this year, leading to steep price declines. But major chip makers are moving aggressively to boost capacity in anticipation that the two electronics manufacturers will launch new products that will help spur chip demand and absorb excess supply in the market.
Analysts say if Apple, of the U.S., and Sony, of Japan, launch new devices using NAND flash-memory chips in the second half, that will provide a much-needed catalyst to ease price declines in the industry. But any hitches or delays by the two companies will likely exacerbate an oversupply situation, making it tougher for NAND flash-memory chip manufacturers to weather the second half, typically a strong selling season for technology products, they say.
NAND flash-memory chips are widely used in a variety of consumer electronic products such as MP3 players and digital cameras and differ from dynamic random access memory, or DRAM, chips for their ability to retain data in devices even when power is switched off.
“Apple and Sony will decide the destiny of the NAND flash market in the fourth quarter,” said iSuppli Corp. analyst Nam Hyung Kim. “Potential demand from Apple and Sony could consume up to 40% of the global NAND supply in the fourth quarter. But any delay in new product launches will blow away the supply-and-demand balance and will spur significant oversupply and price declines.”
The average spot price of a four-gigabit NAND flash-memory chip fetched $7.22 Monday, down from $8.93 in late June, according to DRAMeXchange, a Taiwan-based online chip clearinghouse.
Many analysts anticipate Apple — the maker of the popular iPod music player — to launch a higher-density eight-gigabyte NAND flash-memory-based music player later this year after flash-memory-card producer SanDisk Corp. of the U.S. earlier this month unveiled a new MP3 player with eight gigabytes of memory.
Last year, Apple unveiled its two- and four-gigabyte “iPod nano,” which uses NAND flash-memory chips instead of bulky hard-disk drives to store songs. The launch of the svelte model helped to bring the global NAND flash market into an unexpected shortage in the second half of 2005, and many are hopeful that Apple will help chip makers’ businesses again this year.
Jill Tan, a spokeswoman for Apple in Asia, declined to comment.
According to iSuppli’s Mr. Kim, Sony is also expected to launch a flash-memory-chip-based portable media player and a new version of its Playstation Portable game player. He said the new products will have as much as eight to 10 gigabytes of NAND flash memory per system.
A Sony spokeswoman declined to comment on the company’s future product launches.
Many chip makers in Asia in recent weeks have announced further capacity-expansion plans in a sign that they remain optimistic about prospects for the NAND flash-memory market this year and in the longer term, despite falling prices.
Toshiba Corp. of Japan — the world’s second-largest maker of NAND flash-memory chips by revenue after South Korea-based Samsung Electronics Co. — said earlier this month that it and its partner SanDisk will invest about 600 billion yen ($5.12 billion) for a new advanced NAND flash-memory plant in Yokkaichi, Japan. The two companies have started construction of a fourth fabrication plant at the site and aim to jointly grab 40% of the growing NAND flash-memory market by 2008.
Toshiba’s share of the NAND flash-memory market stood at 24.6% in the second quarter, according to iSuppli, behind Samsung’s 46.2%. Hynix Semiconductor Inc. of South Korea trailed in third place with a share of 18.5%.
“NAND flash will continue to remain among the strongest growth areas in the semiconductor market…we will continue to take measures to combat the price declines through cost reduction,” said Toshiba spokesman Keisuke Ohmori.
Toshiba expects the NAND flash market to see an average annual growth rate of over 35% between 2004 and 2008 in terms of value.
Samsung Electronics said that despite the current weak conditions in the NAND flash-memory-chip market, the company has no plans to slow down its capacity-expansion plans.
“We expect stronger demand to arise from new digital devices including MP3 players and handsets,” said Woosik Chu, Samsung’s vice president for investor relations.
The chip maker has an agreement to supply NAND flash-memory chips to Apple through 2010. Samsung also supplies Sony with memory chips.
(via WSJ)
