Expect flash memory prices to drop 32% this year despite an increase in unit shipments.

Prices will fall for a second straight year because of sluggish demand for the memory chips from cellular telephone manufacturers, according to a new report by iSuppli, a procurement service and market researcher.

The flash memory market fell 28% in 2001 to $7.6 billion. Continuing weakness in end equipment markets will result in another 20% decline in flash revenue.

"The principle application market for flash memory—wireless handsets—remains in the doldrums as upgrade sales continue to lag and new next-generation (2.5G and 3G) phones fail to spark consumer demand," says principal memory analyst Jim Cantore. "With flash manufacturing capacity at an all time high, the industry is awash with inventory. So despite an actual gain in unit shipments forecast at about 17% for 2002, flash memory revenues will continue to fall as prices decline more than 32% for the year," he says

Prices will remain weak until 2003 when the flash market will grow 13%.