NAND flash expected to boost semiconductor growth but will excess inventory kill the rally?
Fueled by consumer products like smartphones, tablets, and now ultrabooks, the global NAND flash market should reach $22.9 billion this year, up 8% from 2011 levels, say analysts from IHS/iSuppli. Long term, the growth is expected to continue, with worldwide revenues reaching $30.9 billion by 2016.
Not surprisingly, consumer products like tablets and smart phones will drive the growth. The tablet segment of the overall NAND flash market will reach 12% of the market this year, or around 3.6 GB. That’s slated to rise to 16.3 billion GB by 2015, which represents 17% of the market. That won’t be driven just by higher unit counts. IHS predicts that the average NAND density of the iPad will reach 33.8 GB in 2012, alone, compared to 20.2 GB for non iPads.
The ultrabook sector presents a target of opportunity for NAND flash in the form of SSDs. If the sector takes off as hoped, it could expand the PC segment of the NAND flash market to greater than 15%. Michael Yang, senior principal analyst for memory & storage at HIS, estimates the SSD sector of NAND flash will rise to 3.3 billion GB this year, up from 1.7 billion in 2011.
Elsewhere, the smartphone segment is going strong, with an estimated 626 units shipping in 2012, each containing an average of 9 GB of NAND flash. That’s a total of 5.7 billion GB, for those who are counting. Perhaps more impressive is the long-term protection of smartphone consumption. By 2016, Yang says, smart phones will ship with an average of 18.9 GB, representing 16% of total NAND bit shipments.
Meanwhile, the outlook for chips as a whole is positive, with a predicted growth of 4.3% over 2011 levels for total 2012 revenues of $324.6 billion. It’s a modest bump over the original 3.3% estimated earlier this year.
According to the IHS gang, inventory reduction is the key to sustainable growth. Although integrated device manufacturers, who design and manufacture their own ICs, have reduced their inventory by 5.4% since Q2 2011, that’s nowhere near enough. That figure needs to drop another 5% for sustainability.
The concern of the overall chip market is echoed in the NAND flash space. The 2011 NAND flash market finished softer than expected, driven by underwhelming performance in the tablet sector. Now, inventory reduction appears to be the name of the game. "Given the lukewarm performance of the tablet segment last year, there was some trepidation coming into 2012 for the NAND industry,” said Yang. “But even though most NAND manufacturers had planned to be on the fast track in 2012 to increase production at newly built fabs, each supplier has since reduced capital spending compared to its original plans, electing to moderate supply expansions to allow demand to catch up.”