SAN JOSE, Calif. The high-flying, NAND-based flash memory market has not collapsed, as expressed by one fabless chip maker on Tuesday (June 28). But the sector has finally experienced some tough and turbulent times, following a lull and disappointing demand for flash-based MP3 players in the consumer market, according to an analyst.
Apple Computer Inc. and other flash-based MP3 vendors have held off their NAND-based memory purchases in recent times, due to a seasonal lull in the market, said Alan Niebel, president of Web-Feet Research Inc. (Monterey, Calif.).
This, in turn, has caused excess component inventories in the market. And prices for NAND-based memories have fallen by as much as 30 percent in recent times, he said. "The NAND market has not collapsed," he said. "What happened is that the anticipated demand for MP3 players did not materialize as people had hoped."
Some estimated that flash-based MP3 vendors would ship a total of 60-to-64 million units this year. Now, flash-based MP3 vendors are only expected to ship a total of 45-to-48 million units in 2005, he added.
Some, however, believe the sky is falling, especially in NAND. According to a fabless supplier of analog-intensive mixed-signal chips into the portable consumer electronics market, a 30 percent fall in NAND flash memory pricing has "temporarily frozen the market" and caused disruption to orders for its own system-level chips (see June 29 story).
The fabless company, SigmaTel Inc. (Austin, Texas), also sliced nearly $20 million, or about 20 percent, off its expected sales revenues for the second quarter of 2005 because of uncertainty in the market as buyers wait to see if flash memory prices can go lower, the company said (see June 29 story).
Commenting on SigmaTel's assessment of the NAND market, Niebel said the fabless chip maker is "overreacting" to the pricing trends in the sector.
"What happened is that there was a big anticipated demand for MP3 players in the April, May, and June time frame," he said. "However, there was a little bit of an overbuilt situation for MP3 players."
This, in turn, caused an excess supply for NAND components in the marketplace, and ultimately, a steep drop in prices for higher-density 2- and 4-gigabit parts, he said.
In the spot market, the price for a 2-Gbit part has fallen from $18.70 in the March time frame, to $11.25 right now, he said. The price for a 4-Gbit part has fallen from $31-to-$32 in the March time frame, to the $20-range today, he said.
Going forward, the supply/demand equation looks mixed. "We do see an oversupply of NAND in Q3," he said. "But by Q4, we will see a balance in supply and demand."
Overall, the NAND-based flash market remains strong. In total, the NAND-based flash sector is expected to hit $9.9 million in 2005, up 34 percent over 2004, he said.