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Digital Devices And Lower Prices Boost Removable Storage

Revenue from removable-storage devices used with PCs, digital cameras, advanced cell phones, and other gadgets nearly doubled in 2003, according to Gartner.
Worldwide revenue from removable-storage devices used with PCs, digital cameras, advanced cell phones, and other gadgets nearly doubled in 2003 due to lower prices and strong consumer demand, a market-research firm said Wednesday.

Sales of flash cards, which are used to store photos, video, and music files, and USB flash drives--portable-storage devices used to move digital data between PCs--totaled $4.25 billion last year, compared with $2.13 billion in 2002, Gartner said.

The upward trend is expected to continue through 2008, according to Gartner. Revenue from flash cards is expected to total $4.5 billion this year, $5 billion in 2005, and $7.2 billion in 2008. Sales of USB flash drives are expected to reach $1.1 billion this year, $1.8 billion in 2005, and $3 billion in 2008.

Lower prices drove demand in the first half of 2003, stimulating sales among consumers looking to add memory to hold more pictures, video, and music files. Lower prices for chips used in the flash cards and drives, which are collectively called "removable solid-state storage," caused the price drop. Increased demand in the second half of 2003 led to a shortage of RSS chips, which stabilized prices and increased revenue for storage and some chip companies

Intel, for example, is expected to narrow its second-quarter forecast to the upper range of its previous guidance due, in part, to the growing demand for flash memory, financial analysts said Wednesday.

"When you have lower chip costs, it translates into lower prices for the finished products," Gartner's Joseph Unsworth said. In 2003, "consumers were able to go into a store and buy more megabytes within the same budget."

Among RSS manufacturers, SanDisk led with a 25.9% market share and revenue of $1.1 billion, followed by Toshiba with 15.3% and $649.7 million; Sony, 11.9% and $503.6 million; Lexar Media, 8.9% and $380.3 million; and Renasas Technology, 7.4% and $312.7 million.

The popularity of digital still cameras provided the biggest boost in flash card sales, but higher demand for digital video cameras, camera phones, and handheld computers also contributed to the growth. Flash-card sales in 2003 rose 82%, to $3.6 billion, from $1.9 billion the previous year.

The increase in sales of flash drives that can move data between PCs by plugging into a desktop's universal serial bus, or USB, were even more dramatic, leaping to $613.1 million from $135.6 million. A growing number of consumers are choosing the small devices, often called "key-chain cards," over traditional diskettes, Unsworth said.

Overall demand for removable storage is expected to remain strong this year and next, according to Gartner. Chip prices are expected to drop in the second half of the year, as supplies catch up with demand, prompting lower prices for removable storage, which is expected to stimulate demand once again among consumers.

Prices for flash chips are expected to drop even further in 2005, as new manufacturers entering the market--such as Infineon Technologies, Hynix Semiconductor, STMicroelectronics and Micron Technology--increase production, Unsworth said.

"They're just starting to ramp up production, so they're having a small impact this year," he said. "But, in 2005, they are going to have a large impact on the supply side, in addition to the existing players, who are not going to be sitting idly by. They're also going to increase production."

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