STMicroelectronics N.V. and Hynix Semiconductor Inc. last week jumped into the NAND flash memory market with plans to jointly develop 512Mbit parts within a few months, expanding the procurement options of storage equipment makers.
ST's decision to co-develop NAND flash with Hynix is confirmation that the technology is gaining acceptance and could upstage the rival NOR architecture and dominate the market for non-PC memory, according to analysts and industry executives.
"It's clear that NAND has now become a significant percentage of the overall flash market," said Philippe Berge, director of central marketing for the memory group at ST, Geneva. "If we want to remain or improve our leadership position in flash, we have to be in NAND."
Despite its position as the fourth-largest global supplier of NOR flash, ST is facing some serious competition as it enters the $8 billion NAND market with Hynix in tow.
Korea's Samsung Electronics Inc. and Japan's Toshiba Corp. are the top NAND flash suppliers, with Toshiba and SanDisk Corp. holding a majority of NAND patents, according to Alan Niebel, an analyst at Web-Feet Research Inc. in Monterey, Calif.
"One issue that has yet to be resolved is how ST and Hynix are going to license NAND IP from Toshiba and SanDisk in order to be able to market their products," Niebel said.
Berge would only say that ST will equally share with Hynix the proprietary technology developed through their alliance, which calls for the first set of NAND flash products to be made at a Hynix plant in Seoul.
There are powerful incentives for ST and Hynix to attempt to supply NAND flash, a market experiencing strong growth. Web-Feet's Niebel estimates the flash memory market this year will grow 33%, to $10.8 billion from $8.1 billion in 2002. NAND products will constitute about 34% of that, up from 25.5% in 2002 and 14.3% in 2001.
Not only are these figures difficult to ignore, but the driving force behind them is equally attractive, according to ST's Berge, who said more OEMs are clamoring for NAND products because of their small size and many applications.
"We believe that in a number of multimedia applications, which are strategic to ST and where we want to have a global offering, NAND will become important," he said. "We're always trying to have the products that will meet the evolution of our customers' requirements, and this was one of the factors in our decision to collaborate with Hynix."
ST didn't disclose how much capital the two partners will devote to the joint program, but said about 20 engineers are working on the project. ST will retain the right to manufacture the products in its own fabs and has already earmarked two potential plants, including its Singapore facility.
Analysts said ST chose to team with Hynix because it can benefit from the Korean company's DRAM expertise. Hynix, on the other hand, gains a financially stronger ally and the opportunity to use its existing DRAM fab to make NAND flash, which is significantly easier to do than converting a DRAM plant to produce NOR flash, Niebel said.
The alliance could also give ST a chance to take over Hynix's memory business in the event Hynix is broken up, analysts said.
"ST denies any intention to acquire the memory business of Hynix," said Francois Colli, an analyst at BNP Paribas, Paris. "However, we view this alliance as a way for ST to develop quickly a new product while monitoring closely the developments at Hynix, which we believe could be split up."