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iSuppli predicts NAND market down over short term


Tuesday, August 15, 2006

Just when NAND seemed unbeatable in the marketplace, the memory segment experienced a disappointing Q2 while the NOR and DRAM segments staged a bit of a comeback.

Global NAND flash sales fell to $2.7 billion, down 15.7 percent from Q1’s $3.24 billion, according to a new report from iSuppli.

In contrast, NOR flash revenue rose 6 percent and DRAM achieved a 16 percent sales increase in Q2.

NAND revenues suffered from a 33 percent drop in average selling prices (ASP) for flash, a much steeper decline than iSuppli’s prediction from three months ago of 20 percent. Megabyte unit shipments were in line with the iSuppli forecast, but at a 25 percent increase, they did not rise enough to offset the falling ASPs.

Looking ahead, the overall per-megabyte ASP for NAND appears to be on track for a nearly 60 percent decrease for all of 2006, exceeding iSuppli’s previous forecast of a 53 percent decline for the year.

“NAND ASP declines were due to a flood of supply on the market, as manufacturers ratcheted up production faster than demand grew,” said Nam Hyung Kim, director and principal analyst for iSuppli, in a statement.

“On the other hand, the major increases in production allowed NAND flash revenue in the second quarter to increase by a healthy 21 percent compared to the same period in 2005—so not all the news was bad for the NAND market,” Kim added.

The news wasn’t bad either for number-three supplier Hynix Semiconductor Inc., which was the best performer in the NAND industry in Q2 and the only company to achieve sequential growth in sales, iSuppli said. Hynix's NAND flash sales rose to $505 million in Q2, up 5 percent from $481 million in the first. Hynix increased its market share to 18.5 percent, up from 14.8 percent in Q1.

Samsung Electronics Co. Ltd. and Toshiba Corp. remained the top two suppliers with 46.4 percent and 24.7 percent market share respectively.

“With NAND sales falling short of iSuppli’s estimate, we are considering trimming our annual sales growth forecast for this year to the 15 to 20 percent range, down from 37 percent before,” Kim said. “iSuppli also may cut its 2007 market forecast due to uncertain demand and intensifying competition ahead.”

Demand drivers are continuing to evolve in the NAND market, iSuppli said. MP3 players drove shipments in 2005 and portable media players and mobile phones are propelling sales this year. The next big demand driver for NAND, solid state drives in computers, is expected to emerge in 2008, rather than in 2007.

With no new killer application expected in 2007, sales growth will be lower than previously expected next year, Kim warned. Furthermore, the uncertain global economy, tightening customer budgets, rising energy prices and increases in interest rates are all risk factors for the consumer-oriented NAND market.

Despite this, iSuppli is maintaining its neutral rating for the near-term NAND market conditions as we still believe that the market conditions will improve in the fourth quarter.

By: DocMemory
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