NOR flash memory prices will stabilize as demand picks up
By James Carbone -- Purchasing, 10/15/2009 2:00:00 AM
Buyers can expect prices for NOR flash memory to stabilize after falling most of the year as supplier production cutbacks resulted in NOR flash supply being more in line with demand.
NOR prices fell sharply earlier in the year because of weaker demand for end equipment that uses flash and because of the overall economic slowdown. The average price of a NOR flash chip will fall from $1.68 in 2008 to $1.23 in 2009, says researcher IC Insights. However, the price will be flat in 2010 and increase marginally to $1.25 in 2010.
In 2009, NOR unit shipments will increase 1%, but with prices falling 27%, the overall NOR flash market will decline 26% to $4.6 billion after falling 19% in 2008 to $6.2 billion. As prices stabilize in 2010 and unit demand picks up, the NOR market will increase slightly to $4.7 billion.
Like other semiconductor segments, NOR flash revenue declined sharply in the fourth quarter of 2008 and the first quarter of 2009 because of the global economic downturn and declining demand for end equipment.
NOR suppliers have cut back production because of weaker demand and some think the market has hit bottom and the NOR market is slowly recovering. In fact some saw improvement in the second quarter.
"Purchasing managers never bought anything in the first quarter so their inventory levels were dangerously low," says YG Han, corporate vice president of Silicon Storage Technology (SST) in Sunnyvale, Calif. "They started buying in the second," he says. As a result, SST's business was about 25% better than the company had projected it would be although sales were down sharply from the second quarter 2008.
He says there should be decent NOR demand in the third quarter, but there is a lack of visibility in end customer demand. That means suppliers won't be increasing production until they are sure demand will continue to rise. "Everyone is cautious and is being conservative in their planning," he says.
With production cutbacks, Han expects price firming for NOR. In fact, SST is raising prices on some NOR parts 10–20%. "We think our customers are willing to pay more to secure capacity," he says.
Perhaps, but most suppliers will likely be content with prices stabilizing until volumes pick up in 2010. Jeff Bader, director of the embedded business group at NOR supplier Numonyx in Rolle, Switzerland, says that there will be price firming because flash manufacturers have cut back on production.
"There has been reduced NOR output to match the incredible drop off in demand," he says.
He says a "broad economic recovery" has not yet occurred, although there have been some bright spots for NOR flash memory as well as other semiconductors. He says the stimulus package in China has resulted in greater demand for end equipment and semiconductors, including NOR and PC demand appears to be improving.
Once the overall economy recovers and demand for end equipment returns, NOR will post modest growth in the next several years, Bader suggests.
"We see single-digit growth over the horizon driven by small unit growth and some bit density growth," says Bader. He says PCs will help drive density growth. PCs use NOR in basic input and output. Densities had been in the 16-bit and 32-bit range, but are moving to 64-bit and 128-bit. Higher densities carry higher price tags.
Cell phones will continue to drive NOR flash memory growth, although smart phones are switching to NAND flash. Han of SST says of the 1.3 billion mobile phones that ship in 2009, about 1 billion of them will have NOR flash although many of them will also use NAND flash. About 200–300 million units will be equipped exclusively with NOR, he says.
While smart phones will continue to grow, many lower end phones will continue to ship and continue to be equipped with NOR.
NOR flash is typically used for code storage and NAND is used for data storage in devices. "NOR will become less relevant because the overall flash market is getting bigger, but is dominated by NAND products," says Brian Matas, vice president of researcher at IC Insights, based in Scottsdale, Ariz.
He says the NOR market will post single-digit growth from 2010–2012, but NAND will have 20% annual growth.
Bader of Numonyx says that NOR will continue to be used in many applications that need code storage. Many of those applications are in equipment that have long lifecycles such as servers and networking equipment. Such applications will never "move to NAND at any price because they need the code reliability" that NOR provides.
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