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NAND market pins hope on video iPods

Posted: 01 May 2007 ?? ?Print Version ?Bookmark and Share

Keywords:NAND flash memory market status? video iPod and NAND flash? NAND oversupply?

There may yet be hope for the beleaguered NAND flash memory market in 2007, analysts said, if Apple Inc. rushes rumored flash-based video iPods to market and if emerging solid-state drives can make a meaningful impact before the year is out.

Average selling prices (ASPs) for NAND chips have been projected to decline by as much as 65 percent this year after tumbling some 60 percent last year because of lackluster demand, oversupply and a massive fab buildup by companies like Hynix, Micron, Samsung and Toshiba. But analysts said the oversupply situation could ease or even completely dissipate if certain conditions are met.

Speculation that Apple is set to roll NAND-based 16Gbyte and 32Gbyte video iPods has been making the rounds for months. Apple has stuck to its longstanding policy of not commenting on rumors.

In January, the company announced plans to launch 4Gbyte and 8Gbyte iPhones based on NAND flash by midyear.

Word of caution
In a research note for investors published March 13, Alex Gauna, an analyst at UBS Securities LLC, said his firm believes Apple will introduce 16Gbyte and 32Gbyte video players in 2H. Those iPods, coupled with the iPhone's arrival and modest inroads by solid-state drives, should nudge the NAND supply-demand balance back toward equilibrium, Gauna said. But though UBS expects NAND prices to firm, Gauna said some oversupply is likely to persist. "We caution that pronounced adverse seasonal effects are likely to occur again entering 2008," Gauna wrote.

The NAND premium relative to 2.5-inch drives narrowed in 2006.

Satya Chillara, an analyst with Pacific Growth Equities LLC, said NAND flash overcapacity could dry up in 2H, particularly given vendors' penchant for converting NAND capacity to DRAM capacity and vice versa as market conditions change. But Chillara cautioned that Apple may not come through with flash-based video iPods this year. Given the company's focus on its iPhone launch and its fear of cannibalizing its own markets, the new iPods may not hit store shelves before 2008, he said.

Both analysts noted the potential for NAND-based solid-state drives to ease NAND oversupply. Two companies had moved on the solid-state front in March: Intel Corp. unveiled the Z-U130 Value Solid State Drive, and SanDisk Corp. introduced a 32Gbyte solid-state unit offered as a drop-in replacement for hard drives.

But Chillara cautioned that solid-state drive ASPs must hit the "sweet spot" of less than $100 for a 32Gbyte model before the product category plays a meaningful role in NAND consumption.

Fanfare, not traction
UBS believes Apple, Dell Inc. and Hewlett-Packard Co. are all in position to announce NAND-based notebooks this year. Gauna said UBS expects to see "fanfare," but not traction, around solid-state drives in 2007 and 2008, with NAND ASP premiums likely to suppress adoption of the drives until 2009.

For now, the NAND market's fortunes are largely tied to "whether or not Apple starts buying more NAND," said Chillara. He noted that in Q4 2005, Apple alone accounted for 30-40 percent of NAND demand.

- Dylan McGrath
EE Times

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