Infrastructure // PC & Servers
03:19 PM

Flash Memory Market To See First Revenue Decline This Year

Flash memory chips are used in PCs, but nearly 80% of the chips sold each year end up in personal media players, storage cards and USB flash drives.

Market researcher iSuppli on Friday drastically lowered its 2008 worldwide revenue forecast for the NAND flash memory market, which is expected to see its first year-to-year revenue decline.

The revised forecast has revenues from the chips that provide system memory in computers and portable devices falling 14% this year to $12 billion from $13.9 billion in 2007, iSuppli said. Next year, revenues are expected to drop another 15%. ISuppli in the third quarter forecast a decline of 3% this year and 12% next year.

The slide is dramatic for a market that routinely expanded by triple-digit percentages in the late 1990s and early 2000s, the researcher said. As recently as 2005, the market generated more than 62% annual growth.

Driving prices down are retailers exercising their significant bargaining power during the current economic downturn. With retailers squeezing equipment manufacturers, flash memory makers have had no choice but to cut prices to increase their sales. Flash memory chips are used in PCs, but nearly 80% of the chips sold each year end up in personal media players, storage cards and USB flash drives, which are mostly sold in retail stores.

"Unlike other memories, which depend more on non-consumer/non-retail products, NAND flash is bearing the brunt of the challenging retail conditions,” iSuppli analyst Nam Hyung Kim said in a statement. "Combined with uncertain global economic conditions and a lack of killer applications, the NAND flash memory business is facing a triple whammy.

Unit shipments of 1 GB NAND chips are expected to rise by 126% this year, which is down from 179% last year, but high enough to cause an oversupply. Next year, unit grow is expected to plummet to 71%. Over the last five years, the market has averaged a 192% annual increase.

The oversupply is expected to force the average selling price of 1 GB NAND down by 62%, which is expected to be followed by another 50% decline next year, iSuppli said. The production cutbacks are also expected to affect the semiconductor capital equipment industry, which is forecast to see a 38% decline in spending by NAND chipmakers.

The only winners in the market free fall will be consumers, who will have access to fire-sale prices for flash storage devices, iSuppli said.

Chipmakers that have recently reported declining profits as a result of the market turmoil inlcude Toshiba, Fujitsu, Hynix Semiconductor and Samsung Electronics, which recently dropped its takeover bid for SanDisk due to a lackluster performance by the latter flash memory maker.

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