Smartphone and tablet boom drive NAND Flash growth

16 Nov 2010

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The global NAND flash memory business will post record revenue in 2010, thanks to increased usage in smartphones and the newly invigorated tablet category, according to iSuppli.

Revenue for NAND flash memory in 2010 is projected to reach US$18.7bn, up a robust 38pc from US$13.5bn last year, boosted in large part by surging use in consumer electronics devices like smartphones and Apple Inc.’s iPad.

And with supply and demand both ramping up in the second half and well into next year, the NAND flash memory segment will continue to enjoy growth in 2011 — albeit at a less torrid pace of 25pc — to US$22.5bn, iSuppli data shows.

The higher NAND revenue is reflected as well in a parallel upsurge of bit growth, soaring a mighty 71pc to 10 billion gigabytes in 2010, with a substantial portion of the expansion due to die shrinks and production of 3-bit-per-cell TLC memory.

During the next two years, however, projections call for a mild decline in average selling prices (ASP) ranging from 23pc to 29pc. In addition, oversupply could be a problem beyond 2011, and 2012 presents significant risk for a downturn, iSuppli warns. Given the current upbeat outlook, the industry may be goaded by over optimism to increase NAND flash production ahead of actual demand — leading to oversupply and a subsequent fall in the market.

Already, the fourth quarter is anticipated to experience some turbulence as manufacturing starts to slow in November and as demand from all segments — including the high-performing embedded NAND sector — downshifts after the holiday season.

Overall, NAND flash revenue will dip slightly in 2012, pick up the year after, and then retreat once more in 2014, as shown by iSuppli’s forecast in the attached file.

Also adding to concerns of potential oversupply is the expected rise in capital expenditure among suppliers — again borne by the industry’s optimism — to a record US$1.6bn by 2011, iSuppli data shows.

With planned fabs from Samsung Electronics, Toshiba Corp. and the Intel-Micron joint venture of IMFT adding another 70pc increase in production next year, the risk of oversupply is high. Unless suppliers prudently manage production mix according to demand, iSuppli cautions, the additional capacity coming online next year will send the market into a tailspin.

Tablets present new growth opportunity

“Among consumer electronic devices, tablets represent the newest growth sector for NAND flash, in addition to the memory product’s continued healthy application and usage in smartphones,” said Michael Yang, senior analyst for memory and storage at iSuppli. “The mad rush for NAND flash in tablets echoes a similar trend in netbooks two years ago, but is occurring on a larger scale, iSuppli believes, given the high average densities used in tablets.”

Consumption of NAND flash in tablet devices will soar to 1.7 billion gigabytes in 2011, up from 428 million gigabytes in 2010.

Collectively, the iPad will have the highest average NAND flash density of any tablet device, anticipated to reach 52.5GB in 2012. Apple’s expected dominance in the tablet market for some time to come — together with the more than 30 tablet devices to become available in the fourth quarter from major brands — portends a continuing boon for NAND memory.

Nonetheless, iSuppli warns that suppliers will need to walk a fine line as the industry moves to 2x-nanometer and more advanced semiconductor manufacturing processes by the end of the year.

Along with the rise in capacity spending from manufacturers and an expected increase in output from new fabs, suppliers must balance the twin demands of reducing production costs as well as growing the supply of NAND flash in the market.

Should seasonal demand in the second half of the year — and beyond — not shape up to expectations, oversupply and other expenditures could sink an otherwise resilient market and push NAND memory toward a downturn.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com