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.

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