Demand for flash memory drops along with product shipments

Asian layoffs likely to affect flash chip production

A decreased demand for NAND flash-related applications has led DRAMeXchange Technology and others to lower their outlook for 2009 NAND flash chip sales .

DRAMeXchange trimmed its forecast for higher chip sales from 108.2 to 81 percent. DRAMeXchange expects the market to reach 1.16 billion units sold in 2009, a decrease of 5.4 percent over 2008.

While the lowered sales expectations may not appear dramatic, over the past three years NAND flash sales grew 175 percent, 151 and 121 percent in 2006, 2007 and 2008, respectively. So 2009 will be the first year in several years that the market sees only double-digit growth.

Gregory Wong, an analyst with Forward Insights, said NAND flash chip sales were down 20.1 percent between 2007 and 2008, with 12.4 billion flash chips sold last year compared to 15.8 billion in 2007. He doesn't expect those figures to improve for 2009.

While January 26 marks the beginning of the Chinese Year of the Ox, Wong said Asian workers will have little to be bullish about when it comes to the technology marketplace. "The layoffs in Asia will occur just before Chinese New Year. This way the companies will avoid paying year-end bonuses," Wong said. "If those rumors are true, there will be a lot of people let go."

Wong said widespread layoffs will hit NAND flash chip production and sales negatively.

Both Toshiba and SanDisk -- two top producers of NAND flash chips -- shut down their facilities for 13 days after December 31 and said they would run manufacturing facilities at 70 percent capacity until demand flash memory demand increases.

"I think Samsung will take some days off, too," said Wong, who blamed poor sales on an overstock of flash memory cards. "There's eight to nine weeks of flash memory card inventory out there."

DRAMeXchange expects flash chip suppliers to reduce production by 10 percent between the fourth quarter of 2008 and the first quarter of 2009. It blamed the drop in flash memory sales on lackluster performance of products such as mobile phones and MP3 players. The 2009 forecast for mobile phone shipments is about 1.16 billion units, 5.4 percent lower than in 2008. For example, Nokia said its shipment of mobile phones declined 5 percent in 2008. Samsung and LG have also revised their 2008 mobile phone shipment forecast down by 8 percent and 12 percent, respectively.

Solid state disk (SSD) drives are also expected to see little growth in 2009 because of their high price and "reliability issues," DRAMeXchange reported. "Most [laptops] still mainly adopt hard disk drives as its major storage device. The penetration rate of SSD in the low cost PC market will be lower than 10 percent in 2009," the company said.

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