Flash Prices Spike But Chips Are Down
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Semiconductor sales will remain depressed in the second half of 2009 and possibly worsen, while prices for NAND flash have spiked this year, according to market research firm iSuppli.
The spike in flash will cause a subsequent increase in prices for solid-state drive (SSD) storage technology in notebook PCs in 2009, according to iSuppli. Average pricing for 16Gbit density Multi-Level Cell (MLC) NAND flash shot up from $1.80 in the fourth quarter of 2008 to $4.10 in the second quarter of 2009.
That price is expected to drop back to $3.50 in Q3 and $3 in Q4, with prices holding steady in the mid-$2 range throughout 2010, barring no surprises like bankruptcies or events that caused the current spike: the iPhone 3GS.
Apple (NASDAQ: AAPL) bought up a huge amount of NAND flash memory earlier this year, causing the price spike, and it was enough to cause a shortage in a market where there had previously been a glut of supply.
"The NAND flash market performed better than anticipated during the first quarter. However, the NAND price rally was driven by a reduction in supply and a temporary product refresh with Apple, yet demand remains weak," said Dale Ford, senior vice president of market intelligence services for iSuppli, in an e-mail comment to InternetNews.com.
As part of Apple's refresh of its popular smartphone line, it increased the storage, from 8GB and 16GB in the iPhone 3G to 16GB and 32GB in the 3GS. Apple is also expected to be working on the next generation of iPods and has long been rumored to be working on a tablet PC as well.
On top of Apple's massive buy, NAND flash suppliers in 2008 cut capacity in the year due to weak market demand in an attempt to return to profitability. This caused pricing to rise, despite continued poor sales due to the overall economic conditions.
Stalled out sales
The broader market, though, isn't looking so good. iSuppli has revised its sales estimates for the second half of 2009 related to electronic equipment, downward. Worldwide electronic equipment revenue is set to decline to $1.38 trillion in 2009, down 9.8 percent from $1.53 trillion in 2008. iSuppli's previous forecast in April predicted a 7.6 percent decline in revenue.
Global semiconductor revenue is set to fall to $198.9 billion in 2009, down 23 percent from $258.5 billion in 2008. In April, iSuppli predicted a 21.5 percent decline.
While all electronics segments are expected to experience contractions this year, iSuppli singled out the automotive sector as the major culprit behind the downgrade.
"The decline of worldwide automobile sales, particularly in North America, has had a major impact on overall electronic equipment shipments," Ford said in a statement. "iSuppli has cut its 2009 automotive electronics forecast to $75.2 billion, down 24.4 percent from $99.6 billion in 2008. This is a reduction of 3.8 percentage points from iSuppli's previous forecast."
The other five major electronic equipment categories data processing, wired communications, wireless communications, consumer and industrial all had their growth forecasts revised downward by one to six percent due to market turbulence and lack of visibility.