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iSuppli warns on NAND flash slowdown

Posted: 22 Feb 2008     Print Version  Bookmark and Share

Keywords:NAND  slowdown global revenue  flash 

Market research firm iSuppli Corp. is downgrading its 2008 outlook for global NAND flash revenue growth to single digit percentage, amid troubling signs of order reductions and weakness in consumer spending. The research firm now sees a marginal increase from last year's Rs.54,874.96 crore ($13.9 billion). Previous outlook pegged 2008 growth at 27 per cent.

According to iSuppli, NAND flash is used heavily in consumer-electronics applications, including flash storage cards, MP3 players and USB flash drives that are driven by retail sales to consumers. With consumer confidence taking a dive due to the U.S. subprime mortgage crisis, the NAND market outlook has diminished considerably in 2008.

"Unless the economy recovers vigorously later this year, last year's DRAM market disaster could be repeated in NAND this year," said Nam Hyung Kim, director and chief analyst, memory, for iSuppli.

Caution ahead
In an early warning sign of consumer weakness, Apple Inc. has slashed its 2008 NAND order forecast significantly and has informed suppliers that its demand growth will slow in 2008 compared to 2007, according to iSuppli sources. This is expected to have a huge impact on the NAND market. With its extremely popular flash-memory based iPods, Apple was the world's third largest OEM buyer of NAND flash memory in 2007, with purchases of Rs.4,737.41 crore ($1.2 billion), representing 13.1 per cent of the global market, according to iSuppli's OEM Semiconductor Spend Analysis tool. Before word of Apple's warning, iSuppli had predicted the company's NAND flash purchases would rise by 32.2 per cent this year, helping drive significant market growth.

On the supply side, iSuppli predicts slower NAND demand will have a major impact on suppliers' financial results. Capital spending on NAND production will rise by more than 20 per cent this year, ensuring easy availability of parts. This will cause prices to decrease. iSuppli believes that NAND prices already are below suppliers' fully loaded costs.

"In light of these factors, NAND suppliers are likely to go into the red in the first quarter, and are not likely to recover in the second," Kim warned.

Q4 warning
Serving as a preview of the lackluster NAND market conditions to come is the Q4 07 result. Global NAND revenue for the period declined to Rs.16,186.14 crore ($4.1 billion), down 2.4 per cent from Rs.16,580.92 crore ($4.2 billion) from Q3. Of the top eight NAND suppliers, six suffered sequential declines in revenue, notes iSuppli. The only companies to achieve a sequential gain in revenue were Intel Corp. and Micron Technology Inc., which produce NAND through their joint venture, IM Flash Technologies (IMFT). The two companies also led growth for the entire year of 2007, with revenue rising by 139.2 per cent for Micron and a whopping 269.6 per cent for Intel. IMFT achieved explosive growth in unit production that offset the impact of falling prices.

As for the DRAM market, iSuppli predicts a poor year as well, with revenue increasing by only 4 per cent in 2008.




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