Samsung moves to lower flash memory prices

South Korea's Samsung has started moving its flash memory chip production to an advanced process that will help it considerably lower its chip production costs.

Samsung Electronics has started producing its first NAND flash memory chips on an advanced process, a move that will help lower the cost of memory cards for consumers in time for the year-end shopping season, according to an analyst.

South Korea's Samsung has started producing memory chips on a 70 nanometer (nm) process technology, the most advanced in the industry for this type of memory, it said Monday.

Flash chips retain data when their power supply is switched off. NAND flash is a type of flash memory commonly used in memory cards and in MP3 players, for example.

The 70 nm process is one stage more advanced than the 90 nm technology commonly used to make many kinds of chips including NAND flash. Memory chips produced by the more advanced process are smaller, faster, and less expensive than those made with the industry-standard 90 nm process, according to Kim Soo-Kyoum, program director for semiconductor research at market research company IDC. The reference to size used to describe a chip-making process refers to the average feature size on a chip built using that process. A nanometer is a billionth of a meter.

Using the new process will enable Samsung, already the world's biggest NAND flash maker, to produce 50 percent to 60 percent more chips from a single wafer using the 70 nm process compared to the number of chips it is able to get from the same-size wafer using the 90 nm process, he said.

Nearly a third of all the company's NAND flash production will be on the 70 nm process by the end of the year, according to Park Sung Hae, a Samsung Electronics spokeswoman.

Samsung had nearly a 60 percent share of the NAND chip market at the end of March, while Japan's Toshiba was the second biggest supplier with about a quarter of the market, according to IDC's Kim.

Both companies are aggressively expanding production using more advanced technology and Samsung's move in particular will force down chip prices, he said.

Samsung is planning to raise its production from about 240,000 wafers per month now to as high as 290,000 wafers per month by the end of the year, he said.

Toshiba produces about 95,000 wafers a month now and will raise its total production by about 20 percent by the end of the year, using a factory it has just finished building, according to Makoto Yasuda, a spokesman for Toshiba.

At the moment the production of NAND flash chips is roughly equal to demand. But the increased production of lower-priced chips by Samsung should lead to an oversupply of chips toward the end of the year, Kim said.

Prices for 2G-bit NAND chips, a common type of NAND chip, could halve from today's price to about US$7 per chip by December. This price could halve again by the end of next year as more makers produce even more chips, he said.

The lower chip prices could lead to memory cards retailing for about a fifth less at the end of the year compared to what they cost now, Kim said.

"It's a war and memory cards are going to get to be a lot cheaper," he said.

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