NAND flash memory downturn to continue

A glut of NAND flash chips will continue to depress prices, which is great for users.

A global glut of NAND flash memory chips, which store songs, photos and other data in gadgets from iPods to digital cameras, will continue for at least the next few months because companies have been slow to rein in production, according to DRAMeXchange Technology.

The market researcher, which is based in the heartland of the global memory spot market in Taipei, predicts the NAND flash supply will grow 149 percent this year despite worsening prices for the chips. The problem is that chip makers such as Samsung Electronics, Hynix Semiconductor and SanDisk's partner, Toshiba, have not moved fast enough to cut production.

The good news for users is that companies will be able to offer more NAND flash storage capacity for a lower price, or offer better deals on existing products such as flash memory cards and MP3 players. Low NAND flash prices could also spur companies to lower prices on hot products such as SSDs (solid state drives) in hopes of growing the market for the drives.

Prices of NAND flash memory dropped 20 percent on average in the month of June, DRAMeXchange said, and an upturn for the market may not be in the offing until as late as September.

The NAND flash market has been so bad that the creator of the chips, SanDisk, on Monday reported a surprise loss of US$68 million for the second quarter. The company blamed the supply glut for its problems, pointing out that it sold a record amount of flash, 120 percent more than the same time last year, but that prices are down 55 percent compared to then.

SanDisk also said NAND flash prices may worsen in the third quarter. The company's Nasdaq-listed stock fell US$4.31, or 24 percent, to end Tuesday at US$13.62 as a result of its earnings news.

To counter the deteriorating market, SanDisk will delay the start of production at a new joint venture chip factory until April 2009 and put plans for another factory on hold until market conditions improve.

Credit Suisse analyst John Pitzer notes that SanDisk's plans to delay building new production lines are a positive for the NAND flash industry and rivals are likely to follow. SanDisk and partner Toshiba account for around a third of the global NAND flash supply, he said in a report.

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