The NOR flash memory market will grow to $11 billion in 2008, but will lose share to NAND flash memory ICs. In fact, 2005 will mark the first time that NAND flash, used for data storage in a wide variety of consumer electronics equipment, will surpass NOR flash revenue.

Though units shipped may increase, NOR flash revenue will drop from about $9.1 billion in 2004 to $7.9 billion in 2005. NAND flash will grow from $6.5 billion to $8 billion, according to market researcher IC Insights in Scottsdale, Ariz. After rebounding to reach its 2008 peak, NOR revenue will drop back to $10.5 billion in 2009. The overall flash memory market will rise from $15.6 billion in 2004 to $31.9 billion in 2009.

The good news for NOR flash buyers is that they can expect price declines as supply will outstrip demand and suppliers compete for market share. NOR flash tags usually fall as the part matures. The price for the latest density device typically starts out relatively high, but then drops as time passes. However, tags will likely fall even more for mature density flash parts such as 32 megabit (Mb) devices because of stiff competition and the need by consumer electronics manufacturers to continue to lower prices of end-equipment.

Cell phones will continue to be the biggest user of NOR flash memory. Glen Hawk, marketing director for NOR flash for Santa Clara, Calif.-based Intel, says cell phones account for about 50% of the NOR flash memory market and will continue to be the biggest consumer of NOR flash. For that reason, Hawk is bullish about NOR flash.

"There are more handsets being shipped this year than last year and that will continue," he says. Cell-phone shipments are expected to grow from 670 million units in 2004 to 705 million this year to more than one billion by 2008, says IC Insights.

"In addition, nonvolatile memory storage requirements within each handset continue to double every two years." Hawk says 256 Mb NOR flash chips are the most commonly used chips in cell phones.

Cell-phone manufacturers are adding NOR and NAND flash to cell phones. NOR flash is commonly used for code storage while NAND is used for data storage. However, NOR is also used for data storage.

"NOR is a flexible memory," says Hawk. "You can execute codes directly out of it and you can store data. When you start talking large densities, then NAND is a better solution for storage, but for some intermediate or smaller densities, our products work fine."

He says NOR is ideal for handsets and suggests that buyers for cell-phone makers may find it harder to source lower-density NAND flash memory chips. One reason: He notes that Apple's new iPod nano, requires 4 gigabytes of NAND flash memory and Apple has signed a deal with Samsung which locks up about 40% of Samsung's NAND flash production. Other companies will make products similar to the iPod nano which will require large amounts of high-density NAND memory.

Hawk says this trend creates a "huge incentive for NAND suppliers to focus on very high-density flash and optimize their products for data storage. It's very difficult for semiconductor manufacturers to span a large range of densities. If [they] want to optimize [their] technology for high-density products, it is difficult to provide a competitive solution for lower-density stuff," says Hawk. Cell phones typically require lower-density flash.

Flash memory buyers at cell-phone manufacturers should keep an eye on technologies being developed that blend the attributes of NAND and NOR. One such technology is Spansion's MirrorBit ORNAND.

The company, based in Austin, Texas, has not announced any products yet, but says it expects to realize revenue from ORNAND in the first quarter of next year.

"ORNAND draws from the better features of NOR and NAND," says Tom Eby, marketing director for Spansion. "It offers faster read speeds than NAND and higher write speeds than NOR," he says.

While Intel and Spansion, the two market leaders for NOR flash, are bullish, other manufacturers see muted growth for NOR.

Don Barnetson, associate director of flash marketing for Samsung, says NOR is a good choice for low-end cell phones.

"For black and white voice-centric phones when you need less than 128Mb of density, NOR is a better solution," he says. "But with smart phones and 3G phones, we think NOR is fading from the mainstream." Despite that, Samsung has no plans to get out of the NOR market, says Barnetson. Samsung has about 5% of the NOR flash market but is the market leader for NAND flash with about 55% share, according to researcher iSuppli.