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Rise of NAND reshapes NOR market

Posted: 16 May 2006 ?? ?Print Version ?Bookmark and Share

Keywords:mark devoss? isuppli? embedded? spotlight? memory?

Q1 of 2005 marked the first time that nand-type flash revenues exceeded those of nor. iSuppli Corp. expects this situation to continue in the future, as the seemingly insatiable demand for low-cost solid-state storage in consumer electronics continues to drive NAND demand. By 2007, NAND will account for 61 percent of total flash-memory revenue.

The demand for NAND is mainly being driven by the removable flash card, USB drive and MP3 player markets. In contrast, NOR flash suppliers serve the two broad markets of wireless and embedded products, with the bulk of sales of high-density and high average selling price (ASP) parts being driven by the handset segment.

Recent months have been very tough for the major suppliers of NOR flash memory for the mobile-phone market: Intel, Spansion and STMicroelectronics. Market share competition has spurred severe ASP erosion. When coupled with the maturation of the handset market and no new application on the horizon to bolster growth, the incentive to invest in more NOR capacity via process shrinks or larger wafers has been diminished.

NOR suppliers have migrated or are moving to multiple bit-per-cell technologies to increase density. As they complete their move to the next generation of advanced flash lithography (i.e. 90nm), they most likely will have sufficient wafer capacity in place at existing 200mm fabs to satisfy handset demand through the end of the decade.

This capacity will be augmented further as other products using 200mm capacity move to 300mm facilities. Memory manufacturers need volume production to keep their factories running and to justify further investments in wafer fabrication facilities and technologies. Without the volumes, the suppliers' only choice is to revert to a strategy of continuing to cost-reduce existing products to remain in the business.

If this scenario begins to drive the situation in NOR, the question is: Will all of the current players remain in the business? It's a sure bet some of the minor players will be forced to exit because the big guns seeking incremental growth will be targeting smaller market segments that have been served by smaller suppliers in the past.

The potential shrinking of the supplier base for NOR should be a concern to handset manufacturers who have enjoyed a prolonged period of favorable pricing. If the NOR supply base gets smaller than what is needed to support phone demand, what course of action should be taken?

During the past few years, NAND has been touted as a replacement for NOR in mobile phones. However, will there be enough NAND available to fill the void left by NOR supplier departures?

iSuppli believes the answer to this question is "No."

Supply of the lower-density NAND used in mobile phonesi.e. 128Mbit to 1Gbitis dwindling as suppliers shift production to high-density devices for the removable storage market. When available, those low-density NAND parts are commanding a price premium.

In the case of NAND, as with DRAM, legacy devices disappear from the market and only a few parts of the highest density are supported at any given time. Unless NAND suppliers are prepared to offer extremely attractive prices for these high-density devices, handset makers could be priced out of access to NAND.

Dynamics of the flash market have changed fundamentally because, for the first time in the history of NOR, its destiny has been interwoven with that of a competing technology. Because of this, iSuppli believes that consumers and suppliers of NOR should closely monitor the supply situation.

Long-term agreements for guaranteed supply are already emerging, such as the deal between Apple Computer Inc. and Samsung Electronics Co. Ltd. Such a deal and the rate at which NAND is being consumed by applications beyond mobile phones should drive handset suppliers to consider their future memory support plans very carefully.

To maintain their role as long-term providers to a broad base of memory applications, NOR-only suppliers should augment their offerings with products that will be compelling to the consumer market, which is presently enamored with NAND.

Such products could be NAND-like offerings, or they could be new memory technologies that meet a wide variety of requirementsincluding non-volatility and fast read/write times.

- Mark DeVoss
Sr. Analyst, Flash/SRAM/MCP
iSuppli Corp.

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