RealTime IT News

Oversupply Is Flip Flopping Flash and DRAM

The red hot demand for computer memory is expected to keep burning for at least the next three years, according to a recent report.

The demand is radically impacting the way larger manufacturers are approaching their core business models.

The survey, by Monterey, Calif.-based Web-Feet Research, estimates that 2004 through 2006 will be excellent growth years for both Flash memory and DRAM manufacturers.

Web-Feet estimates growth rates this year of 209 percent, 191 percent in 2005 and 150 percent in 2006.

The analyst firm also suggests that by the end of 2006, nine completely new memory products will be on the market in a varying combination of NOR and NAND cells. That will raise the number of commercially available components from 22 to 31.

After added production capacity, researchers found three other things fueling the demand: the transition to larger 300mm wafers, the progression towards 90-nanometer manufacturing and the increase of the multi-bit cell components.

"We have seen a change in architectures for cell phones and terminals and this change requires a significant amount of NAND Flash memory," Radu Andrei, Web-Feet Research president told internetnews.com. "Supply and demand were not quite in balance in 2001 and 2002 when we had too much memory. The situation has improved after September 2003 as devices with more capabilities has created additional demand. That is good news because the high demand will continue."

Andriei said his firm was interested in how the Flash industry will respond to a continuously increasing demand for Flash memory for the coming 12 quarters. The focus was on the manufacturing trends for the four main memory formats; floating gate, trapped charge, NOR (used for memory in PCs and laptops), and NAND (used for storage in smaller form factors).

The study found an ongoing over-demand situation for both NOR and NAND through the end of the year. The imbalance will be as high as 15.7 percent for the NAND components in the second quarter of 2004 and as low as 0 percent for NAND low capacity components in the fourth quarter of 2004.

As a result of the aggressive built-up of memory components by the established players, new players are entering the market with "significant manufacturing capacities and capabilities." The study profiled the business strategy of 13 NOR Flash, as well as 8 actual and future NAND Flash manufacturers and vendors.

The landscape is currently dominated by market leader Samsung with more than 50 percent market share, followed by Toshiba, SanDisk, French-owned Renesas Technology, and a joint venture between Hitachi and Mitsubishi.

That is expected to change with the entry of traditional DRAM manufacturers like Micron Technology, Infineon Technologies, Korea-based Hynix, Taiwan-based Powerchip Semiconductor and French-owned STMicroelectronics .

"It's pretty obvious that the larger companies are restructuring their lines," Andriei said. "It's simple to adjust the manufacturing lines to produce Flash or DRAM and it costs about the same. It is not totally interchangeable, but more of a fine-tuning."

The result: Flash will be a good money making business for the next 2 to 4 years Andriei said. And as the larger companies enter into the Flash and DRAM picture, the historical volatility of the computer memory market is smoothed out in the big picture.

"You still see some volatility on the spot market, but not so much between the business-to-business market, which are subject to long-term contracts," Andriei said. "As these long-term agreements wind down one by one, you'll see us quickly approaching a buyers market again.