Good news: The business is up. Bad news: The vendor base and supply chain remain in flux.

“While iSuppli’s NOR revenue forecast is in line with previous projections showing a healthier 2010, the earlier-than-expected upturn of the market has caught flash makers off-guard,” said Michael Yang, senior analyst for iSuppli Corp., in a report.

“Following the recession, companies cautiously started carrying leaner inventories to minimize bloated stock. The sudden, early upsurge in NOR demand--an expansion that started in the second half of 2009 and that has continued since then--has left suppliers scrambling to fulfill orders. And despite capacity increases and close-to-maximum fab utilization levels among NOR suppliers, lead times have ballooned for clients awaiting product,” he added.

The landscape has changed in NOR. As reported, Micron Technology Inc. recently agreed to acquire NOR supplier Numonyx Holdings B.V. in a stock transaction valued at $1.27 billion.

Scrambling for capacity, Taiwanese memory maker Macronix International Co. Ltd. last month bought ProMos Technologies' 300-mm fab located in Hsinchu, Taiwan for NT$8.5 billion ($271 million).

Earlier this month, Microchip Technology Inc. outlined its strategy for its most recent acquisition, Silicon Storage Technology (SST), saying that it will break up SST and sell many of the pieces to outside companies. Microchip also has no plans to enter the commodity NOR flash business and compete against the likes of Micron, Samsung and Spansion.

And with little or no fanfare, NOR supplier Spansion Inc. recently said that it has emerged from Chapter 11 reorganization. Spansion, once ranked the world's leading NOR flash vendor in terms of share, filed for Chapter 11 bankruptcy protection on March 1, 2009.

Like all vendors, Spansion faces some challenges. ''Spansion plans to focus on embedded markets and wireless applications, in which profit margins are better. Unfortunately for Spansion, other companies are also looking at the embedded markets, so this will not be a simple task,'' said Brady Wang, an analyst with Gartner Inc., in a report.

''Also, part of the wireless business, the biggest application of NOR flash, is migrating from execute in place (XIP) architecture to store and download (SnD) architecture, which is not produced by Spansion. Both of these factors indicate that Spansion's plans will require a lot of hard work if they are to produce results,'' Wang said.

There are other issues. ''Filing for bankruptcy protection undoubtedly hurt Spansion's standing with its clients, who are unlikely to go back and rely on a single source. In addition, after filing for protection, Spansion dropped some product lines with low profit margins and small volumes, forcing other clients to move to its competitors. It is unlikely that Spansion will be able to lure them back from competitors that have already become stronger,'' Wang said.

''Prior to entering Chapter 11, Spansion suffered consecutive quarterly losses and dropped behind Numonyx in the vendor rankings (Numonyx increased its market share by 3.6 percent in 2009). In addition, other competitors have managed to grab market share from Spansion,'' Wang said.

''In particular, Macronix benefited from Spansion's losses, managing to increase its revenue by 35.3 percent and market share by 3.37 percent in 2009. The No. 3 vendor, Samsung, on the other hand, was largely unaffected because it did not focus on the same market,'' Wang said.

There is good news for Spansion and others. ''The NOR flash market has begun to recover in 2010, and prices have been moving steadily upward. Capacity, however, has not kept up with demand, indicating that prices will probably increase until at least the last quarter of this year, when capacity may again be able to meet demand,'' Wang said.

''This increase will be led by Macronix, which bought ProMOS's 12-inch fab. We estimate that the conversion, which has already started, will enable Macronix to increase its production by 20,000 wafers per month gradually during the next 12 months. An even faster impact will be felt from Winbond, which has already started to ramp up NOR flash production -- meaning that the price of NOR flash will start to come under pressure in the last quarter of 2010,'' Wang said.

By: DocMemory
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