Strong bit demand, weak capex spending to favor Flash suppliers

USA: The flash memory market is setting up for a dramatic shift in the supply-demand balance—one that will greatly favor NAND flash memory suppliers in the next several years, according to IC Insights' recently released Mid-Year Update to the McClean Report.

Unit shipments and bit volume demand continue to increase. At the same time, however, there has been a severe reduction in flash memory capital spending. Combined, these two factors will put upward pressure on average selling prices through 2012.

NAND flash memory unit shipments have declined only one year (2001) since IC Insights started tracking this market in 1993. Moreover, flash units are not forecast to decline through 2013 and that includes 2009 with all of its economic challenges. Unit growth has resulted in very strong flash bit volume growth as well.

Driven by handheld and wireless consumer, computer, and communications devices, flash bit volume increased by triple-digit figures between 2005 and 2008. As difficult as the global economy has been in 2009, NAND flash bit volume is still forecast to increase 83 percent!

Samsung, Micron, and other flash manufacturers show no signs of slowing flash bit volume growth in their forecasts. In fact, their roadmaps suggest that bit volume will continue to roughly double each year through 2013.

While unit and bit-volume demand are forecast to escalate, industry-wide capital spending for NAND flash memory has been severely curtailed. Fig. 1 shows NAND bit volume increasing through 2009 yet total industry-wide capital spending for NAND flash memory is forecast to decline 73 percent in 2009 to only $3 billion (NAND accounts for 99 percent of total flash bit volume). Moreover, no significant expansion or capex spending plans have been announced for 2010, according to the Mid-Year Update.Source: IC Insights, USA

With unit demand increasing and a minimal amount of new facilities and upgrades planned, conditions are setting up for average selling prices to move higher through the balance of 2009 and into 2010. In fact, the rise in ASPs could last well into 2012 since it will take some time before new capacity expansions are brought online.

This trend, though a potential burden to OEMs, could be a significant blessing for flash suppliers who have seen only steep price declines for their products over the past several years.

Sales of NAND Flash memory for smart cell phones to boom

EL SEGUNDO, USA: Global sales of NAND-type flash memory for use in smart cell phones are expected to rise by nearly sixfold from 2008 to 2013, as shipments of the high-end cell phones boom in the coming years, according to iSuppli Corp.

Global revenue from sales of NAND flash for mobile phones is set to rise to $932.5 million in 2013, up from $166.5 million in 2008. This will represent a CAGR of 41.1 percent, compared to the 12.2 percent increase during the same period for the overall NAND flash market.

The figure presents iSuppli’s forecast of NAND flash for use in smartphones.Source: iSuppli, Aug. 2009

“Soaring sales of smart phones, combined with the increasing density of NAND flash in each handset, is causing sales of the memory in this area to boom,” said Michael Yang, senior analyst for mobile and emerging memories at iSuppli.

“NAND flash makers can thank Apple Inc. for starting this trend, with its iPhone models injecting new life into the memory market. However, with the introduction of the a new generation of ‘iPhone killers’, multiple smart-phone makers now are helping to drive NAND demand.”

The market for smartphones is expanding at a much faster rate than that of the overall wireless handset segment. Smartphones will account for 26.4 percent of total cell phone unit shipments in 2013, up from 13.1 percent in 2008, according to iSuppli.

The iPhone is a major factor driving the growth.

“Apple announced it sold 5.2 million iPhone 3G and 3GS models during its fiscal third quarter, which ended in June,” Yang said. “Furthermore, Apple plans to introduce the iPhone in China, possibly early next year. This will open up the market for the iPhone to a new potential audience of 1.3 billion people.”

The arrival of competitive products like the Palm Pre, the BlackBerry Storm and the Google operating-system-equipped T-Mobile G1 will further drive the expansion of the smart-phone market.

NAND usage rises
Along with spurring the growth of the smart-phone market, Apple has taken a leadership position in enhancing the functionality of these products by adding additional NAND flash memory to its iPhone line.

“The more NAND in a smart phone, the more useful it becomes, able to store more songs and video clips, to hold more map data and download more programs from an applications store,” Yang said.

The initial iPhone base model, introduced in January 2007, integrated 4Gbytes of NAND. The latest version of the iPhone, the 3GS unveiled in June, upped the low-end model’s NAND density to 16Gbytes. The high-end 3GS integrates 32Gbytes of NAND.

The new iPhone killers, including the Pre, the Storm and the G1, all include 8Gbytes of NAND. However, some models are increasing their NAND density to higher levels. For example Nokia’s N97 embeds 32Gbytes of NAND flash.

iSuppli predicts NAND densities in smart phones will continue to increase. Due to this and the rising sales of smart phones, the average NAND density in all mobile phones will expand in the coming years.

The average amount of NAND flash in all mobile phones shipped worldwide will rise to 5.8Gbytes per handset in 2013, up from less than 1Gbyte in 2008.