Article from Forbes.com; it mostly repeats what we already know. They forecast shortages until 2002, then new capacity will begin to bite. My take, though, is that forecasts 2 or 3 years away for this kind of market are nonsense. We know that both much more demand and much more supply will be on-line in 2 years. How the two will match up is impossible to forecast.
I just hope that the Toshiba JV makes SNDK & Toshiba the low cost producers.
As The Gadget Market Grows, So Does Flash
Memory
By Arik Hesseldahl
Electronic gadgets are big business. Consumers are snapping up mobile
phones, pagers, PalmPilots, MP3 players and digital cameras in record
numbers.
As many as a 1.2 billion mobile phones will be shipped each year by 2004,
according to Cahners In-Stat Group, Scottsdale, Ariz., up from about 400 million this year. S3 (Nasdaq: SIII - news),
which sells the trendy little Diamond Rio MP3 player, reported a 69% surge in unit sales over the fourth quarter of 1999
and has plans to expand into home and car audio systems. A recent study by InfoTrends Research Group found that
digital cameras will outship film cameras by 2002 and will exceed 42 million units by 2005. And inside each is a little
piece of silicon called flash memory.
Flash memory is a type of semiconductor chip that, unlike the memory found in most PCs, stores information even
after the power has been turned off. Enter an address or appointment into your PalmPilot and it is flash memory that
stores the information when you switch off or change the batteries. Ditto for the music files and pictures in your MP3
player or digital camera.
Flash memory is called that because it allows you to quickly erase and save data in large blocks of several thousand bits
at a time, or ``in a flash.'' Conventional SRAM and DRAM memory data are erased and saved a bit at a time.
Brian Matas, vice president of IC Insights, a semiconductors market research firm in Scottsdale, Ariz., estimated this
year's global flash market at $10 billion, an increase of 119% over the previous year. He expects the market to grow in
size to $18.3 billion by 2003.
Unfortunately, there is not enough flash to go around. Semiconductor manufacturers such as Intel (Nasdaq: INTC -
news), Advanced Micro Devices (NYSE: AMD - news) and Japan's Fujitsu are among those struggling to a sudden
surge in flash demand.
Fujitsu said last Wednesday that it plans to spend $550 million to triple flash manufacturing capacity at its facility in
Oregon by 2002. Intel is also expanding its capacity, pumping $1.5 billion into a Colorado fabrication facility, or ``fab,''
it acquired from Rockwell International for flash production. Intel said it shipped flash in record numbers last quarter,
though it didn't give specific numbers. AMD chief executive William J. ``Jerry'' Sanders III said in a recent speech to
shareholders the company plans to double flash capacity in 2001 and possibly add a third fab to the Japanese facility it
co-owns with Fujitsu, which he said could double capacity yet again in 2002.
Yet in a case straight out of Economics 101, flash prices have stabilized but have not necessarily begun to increase. In
response to the increasing shortage, electronics manufacturers with the holiday gift-buying season in mind have been
locking in exclusive long-term deals with flash suppliers. Examples include mobile phone maker Ericsson's (Nasdaq:
ERICY - news) $1.5 billion deal with Intel, and a $400 million deal between AMD and Korea's Samsung. Similar deals
with other flash suppliers are likely to follow. Those who haven't arranged their flash supplies may find themselves
running short.
Other semiconductor companies looking to cash in with renewed interest in flash include Japan's Toshiba,
STMicroelectronics (NYSE: STM - news) and Hitachi (NYSE: HIT - news), each of which reported more than $100
million in flash business last year, according to Rich Wawrzyniak, analyst at Semico Research, based in Phoenix, Ariz.
And while flash is just part of the story behind increasing profits at semiconductor giants like Intel and AMD, the
upswing in the market is most visible at pure-play companies like Silicon Storage Technology (Nasdaq: SSTI - news)
and SanDisk (Nasdaq: SNDK - news), both based in Sunnyvale, Calif.
Last month SST reported a $9.6 million profit on revenue of $62.3 million, versus a loss of $6.6 million on revenue of
$18.3 million in the same quarter a year ago. Shareholders in SST have ridden the flash shortage to all-time highs--from
about $7 per share last July 1 to more than $105 on May 1.
SanDisk, which makes removable flash memory products that are particularly useful in digital cameras, just reported a
148% surge in first-quarter revenue over the quarter a year ago. Shares in SanDisk started July at $44 per share, climbed
to $149 by Feb. 23, when it split 2-for-1 and topped out at $145 on March 27. On May 4 it closed at $90.50.
Analysts expect the shortage to continue into 2002, after which new manufacturing capacity will begin to come online in
2003 and 2004, eventually pushing the market toward another likely period of oversupply, Matas said. While IC
Insights is forecasting a year-over-year growth rate of about 22%, or $3 billion, in the flash market between 2001 and
2002, that growth will slow over the following two years to slightly more than 8% ($1.4 billion) in 2003 and to less than
3% ($500 million) in 2004. The semiconductors industry is, after all, a very cyclical business.
``There will be a lot of new capacity coming online, and we expect an overall industry slowdown around then,'' Matas
said. |
