Flash defying the IC slowdown
Overcapacity not a problem as sales stay strong
By Jeanne Graham
EBN
(01/19/01, 06:02:30 PM EST)
Despite a massive amount of flash- memory capacity coming on line this year and some softening in the overall IC market, flash-chip sales will grow 50% without a serious overcapacity problem, according to market trackers.In stark contrast to the DRAM business, which has virtually no elasticity, the flash market is almost purely elastic, said Drew Peck, an analyst at SG Cowen Securities Corp., Boston. High elasticity means that if prices are cut by 10%, demand will increase by 20% or more. For the next several years, flash is going to be so elastic, more capacity is not going to be a particularly challenging issue, according to Peck.Flash sales grew 141% last year, to $11 billion, said Alan Niebel, an analyst at Web-Feet Research Inc., Monterrey, Calif. Revenue this year will increase 50%, to about $16.5 billion, he said. Manufacturing capacity will increase by at least 70%, but will not result in a serious overcapacity problem, Niebel added. “I know from talking with companies like Intel and Fujitsu that they've got long-term agreements taking up most of their capacity for 2001, which is the same scenario for 2002.” Despite disappointing shipments of cell phones-the biggest user of flash-pent-up demand from other OEM markets has continued to buoy flash sales. “There are lots of different areas for flash that are still growing,” Niebel said. Those areas include set-top boxes, MP3 players, digital cameras, DVDs, GPS systems, and Internet appliances. Market analysts say the slump in PC sales and lower-than-expected cell-phone sales might cause an inventory correction during the first quarter, but that would be only temporary. “We don't see dramatic changes in the marketplace,” said Phi-lippe Berge, director of central marketing at STMicroelectronics Inc., Lexington, Mass. “We see a growing demand for flash in terms of quantities, essentially linked to the growth of various end applications. And we see a continuing increase in the density of the flash products we're being asked to ship.” Bing Yeh, president and chief executive of Silicon Storage Technology Inc., Sunnyvale, Calif., projects a doubling of his company's revenue growth to $1 billion in 2001. “Our strategy is to be a broad-based supplier of products from very low density to very high density.” SST is a fabless company with a strategy that takes advantage of the fragmented flash market by offering diverse products to support many applications, Yeh said. “For every company, DRAM is the same,” he said. “It can be plugged into the same socket. It has a commodity nature. But flash is not like that.” Executives at both Advanced Micro Devices Inc., Sunnyvale, Calif., and Intel Corp., Santa Clara, Calif, said they expect a cooling off in the flash market, but both also forecasted increased sales compared with 2000. Hector Ruiz, AMD's president, predicted a 40% increase in flash sales, pointing to end products that are broad-based and the company's rather small participation in the cell-phone market. Intel, whose capital spending budget is $7.5 billion, has no changes in flash plans, said Curt Nichols, vice president of the company's flash product group. Those plans include ramping up Fab23 in Colorado, Fab15 in Oregon, and Fab11 in Mexico. “Demand has been exceeding supply for more than a year and a half now,” Nichols said. Unlike some manufacturers, Intel sells about two-thirds of its flash products to the cell-phone market, which is expected to grow 30% in 2001, Nichols said. The remaining third of Intel's flash goes to communications for products such as set-top boxes and routers, he said. |
