Flash prices could lead to cheap iPods & phones

Prices of NAND flash memory could plummet this year because of weak demand and an oversupply in the market, according to analysts.

Question of the day!

Does your smartphone replace your need for a laptop when on the move?

Question of the day!

Does your smartphone replace your need for a laptop when on the move?

% of PC Advisor readers agree with you

Yes

TBC

No

TBC

What tasks can your smartphone do that would have traditionally been done on a laptop?

Tweet your answer here...

119 characters remaining

Follow the conversation at @SmartphoneFocus

web browsing, search facilities, voip, email, word processing everything RT @Graham_D_C

Mainly email but getting better at spreadsheets etc, RT @IDGdan

If concerns about the US economy deepen, consumers may reduce spending on phones, iPods and the other devices that use NAND flash, weakening demand for the chips and depressing prices, said Nam Hyung Kim, director and chief memory analyst for iSuppli. He predicted that prices could fall by as much as 55 percent this year.

Up to 90 percent of NAND flash is sold as storage for MP3 players and mobile phones, or as cards such as the MicroSD that are slotted into digital cameras and other devices.

The reduced price for flash could lead to cheaper products for consumers. Apple already dropped the price of its 1GB iPod Shuffle this week, partly because of the falling prices of flash memory, said Shaw Wu, an analyst with American Technology Research.

"Flash pricing definitely has an impact in terms of giving Apple the ammunition to be able to lower price points," Wu said. At the same time, flash pricing was down a lot in the fourth quarter of 2007, so Apple could have dropped its prices sooner, though it would have earned it slimmer margins on its iPods, Wu said.

The concerns about the economy and consumer spending prompted iSuppli to slash its revenue forecast for the flash industry this year. It now expects global NAND revenue to climb between 7 percent and 9 percent, down from its earlier projection of 27 percent, Kim said. Global NAND revenue in 2007 was $13.9bn, up 12.5 percent from $12.36bn in 2006, he said.

This year's revenue growth will also be affected by a reduction in NAND flash orders by device makers, Kim said. Apple, one of the largest buyers of NAND flash, ordered $1.2bn worth of flash memory last year, but has slashed its order forecast for 2008, according to Kim.

Pricing in the NAND business is cyclical and the declines this year would not be unique. This year's 55 percent decline will actually be slightly less than the decline last year, when prices dropped about 60 percent, Kim said. Last year, however, Apple's iPhone helped to shore up the market when it was released mid-year. Apple isn't expected to have a new killer product this year that will bolster the market in the same way.

The killer application that will drive NAND flash sales during 2008 will be mobile phones, said Joseph Unsworth, principal analyst at Gartner. Of the 1.2 billion mobile phones expected to be sold this year, about 650 million will have flash card slots, Unsworth said. The sweet spot in NAND flash remains 1GB and 2GB capacities as many users can't find the need for more, Unsworth said.

The expected drop in demand isn't leading NAND manufacturers to scale back production, Unsworth said. For fear of losing customers and market share, companies are adding production capacity and flooding the market with NAND, he said.

Excess inventory and increased capital spending on new factories may ultimately bite into the suppliers' earnings, Kim said. Companies including Samsung, Toshiba, Intel and Micron are investing in new fabs this year, and if the US economy recovers and consumer spending increases, the companies are willing to bite the bullet this year to see larger revenue growth in 2009 and 2010. NAND flash is a mature market with lots of upside in the long term, Kim said.

Samsung took 42.1 percent of the NAND flash market last year with $5.86bn in revenue, a 4.4 percent year-over-year increase, according to data from iSuppli. Toshiba was second place with 27.2 percent and $3.88bn in revenue, an increase of 20.3 percent year-over-year. Hynix was third with 8.8 percent growth and $2.38bn in revenue. Micron and Intel, in fourth and fifth place respectively, showed very strong growth of 139.2 percent and 269.6 percent respectively.

For more mobile phone news, reviews and tutorials, see Mobile Advisor, in association with BlackBerry

Submit to:Digg Slashdot Del.icio.us Reddit

• FREE email newsletters. Get news, reviews and features straight to your inbox
• For videos of the latest products, visit PC Advisor TV
• Sign up for RSS to get the latest news and reviews, direct to your desktop
• Get PC Advisor news, reviews and blogs on your website for free

Latest technology news:

• British Library to offer 65,000 free ebooks in Amazon deal
• More companies look to virtualisation says Citrix
• Antivirus programs fail to stop new malware
• NASA's Endeavour blasts off on last mission to space station
• Toyota in Prius global recall after braking software fault