Signs emerge of comeback for flash memory
By Robin Lamb
EBN
(04/29/02 13:03 p.m. EST)
Speculation among analysts and suppliers that the flash memory
market will rebound in the latter half of this year has sent some
buyers to the negotiating table to update contracts and lock in
prices.
Analysts report news of
lead times increasing by
eight weeks or more by the end of 2002, and suppliers fear that
capacity may become an issue.
“There are some rumors that vendors are hinting to customers that
they might have allocation by the end of this year,” said Rich
Wawrzyniak, an analyst at Semico Research Corp. in Irvine, Calif.
“The problem is: why would they go on allocation? Is capacity all
booked up?”
Flash maker Silicon Storage Technology Inc., which relies on a
number of foundries for its supply, has had to “scramble” to
maintain capacity levels for certain chip lines, according to Bing
Yeh, president and chief executive of the Sunnyvale, Calif.,
company.
“The surge was unexpected. We're seeing a few products that, if we
don't act right now, we'll run into problems with a few months from
now,” Yeh said.
Atmel Corp., San Jose, sells flash in discrete and embedded form
and suggested high-density supplies could tighten later in 2002 due
to a lack of production lines running at 0.18-micron and below.
“Fab utilization is improving now, but I've seen numbers of 50% or
below, while 0.18 is 85% to 90% already,” said John Bryant, the
company's vice president of flash memory marketing.
With the market still in recovery, however, many companies have
cut back their capital spending for the year.
“Even though the flash market is forecast to recover this year, I
don't think a great deal of capex will go toward flash,” said Bill
McClean, an analyst at IC Insights Inc., Scottsdale, Ariz. “Spending
for flash is taking a breather.”
This is expected to change, though, as the market picks up and
spending returns in 2003.
“There's certainly capacity right now,” said Keith Horn, vice
president of marketing at Fujitsu Microelectronics America Inc. in
San Jose. “As we go through the next one or two quarters,
companies will have to make plans for additional capacity.”
To address the issue, Fujitsu is migrating from 0.17- to 0.13-micron
technology at several plants. Earlier this month, Toshiba Corp.,
citing improving market conditions, said it would reopen a flash
memory and SRAM fab in Yokkaichi, Japan, that has been closed
since October.
During its quarterly earnings call earlier this month, AMD, the
world's No. 2 flash maker, said that its Fab 25 in Austin, Texas,
would be converted entirely to flash production.
“There is a pickup in the market and a lot more demand,” said Alan
Niebel, an analyst at Web-Feet Research Inc., Monterey, Calif. “It's
more than just NAND [flash] in digital cameras. There are flash
cards in PDAs, network systems, cell phones, and some GPS
systems, as well as games and other consumer devices. Across the
board, there's a demand for data storage products.”
Niebel suggests purchasers try to negotiate long-term agreements
with major manufacturers.
“In the past six months, customers have enjoyed artificially low
prices and lead times,” said Atmel's Bryant. “I think we'll see the
industry go back to a more normal situation. I don't think prices are
going to double, but in some cases they could rise 25% or more.”
The average selling price for flash memory dropped from $6.57 to
$3.72 in the 12 months leading to January 2002, before increasing
by 6 cents, to $3.78, in February. With the increase comes concerns
that lead times-currently at four to six weeks-are stretching out.
“For the last 15 to 18 months, customers have not had to worry
about lead times,” Fujitsu's Horn said. “Either they had inventory or
knew we had inventory. That's changed. There's now a lead time for
flash that can be eight to 12 weeks for some devices.”
For SST, the first quarter brought customers looking to discuss
volume support, according to Yeh. “This is the first time we've had
these discussions in five quarters,” he said.
Indeed, without the excess inventory on hand, customers are
showing more interest in discussing contracts, according to Horn.
Niebel expects the flash market to increase to $9.3 billion in 2002,
from $8.15 billion last year. He also expects shipments to reach
2.18 billion units this year, up from 1.68 billion in 2001.
“The first quarter of this year was still pretty weak,” he said.
“Bookings are strong right now. This quarter is very strong and
[we're expecting] a lot of growth in the second half.”
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