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MP3 surpasses USB in NAND demand

Posted: 10 Oct 2005 ?? ?Print Version ?Bookmark and Share

Keywords:nand? mp3? apple? isuppli? flash?

Due to Apple Computer Inc.'s introduction of the iPod nano, MP3 players are expected to emerge as the world's second-largest application for NAND-type flash memory in 2005, according to iSuppli Corp.

Removable storage cards and USB drives long have been the dominant applications for NAND flash memory. Up through 2004, these two applications consumed 56 and 20 percent of total NAND output respectively.

However, the demand situation has changed dramatically with the arrival of the 2GB and 4GB iPod nanos, which store music using NAND-type flash memory rather than with Hard Disk Drives (hdds), as with Apple's previous mainstream MP3 player, the iPod mini. iSuppli expects strong sales for the iPod nano, and also predicts other MP3 player makers will follow Apple's example and offer higher density flash-based products.

Because of this, iSuppli predicts MP3 players will consume 21.6 percent of total NAND flash output in 2005, worth $2.1 billion in revenue. This will make USB flash drives the third-largest application for NAND flash in 2005, accounting for 17 percent of NAND sales. MP3 players will remain the second-largest application for NAND flash at least through 2009, as presented in the Figure.

Memory densities in MP3 players are considerably higher than those of the other NAND-flash based products. In fact, the average memory density for MP3 players is the highest of any electronic product, except for servers, which use DRAM rather than flash.

The average flash-memory density in an MP3 player will rise to 1.1GB in 2005, up from 274MB in 2004, iSuppli predicts. Next year will bring even higher densities, with the average increasing to 1.8GB. Some MP3 player models released in the second half are expected to use as much as 6GB and 8GB of NAND.

Such fast growth in MP3 player memory capacity is being enabled by the rapid increases in density and declines in pricing for NAND. Average NAND flash memory pricing has declined by more than 50 percent so far in 2005.

The arrival of Apple's nano also will spur a density race among competing MP3 player makers, as they boost memory capacity to gain competitive advantage. However, many Asian competitors in the MP3 player market increasingly are concerned about their capability to secure adequate supply of NAND, given Apple's extensive flash usage. Some of these companies actually are considering joining up and aggregating their demand in order to gain the kind of leverage in pricing and supply negotiations that Apple now enjoys.

Asian MP3 player makers also are trying to compete with Apple by increasing the number of features and functions in their products. However, they are facing a tough challenge due to Apple's competitive pricing for its 2GB and 4GB iPod nano products.

- Nam Hyung Kim

iSuppli Corp.

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