NAND memory prices to fall as demand weakens

Sluggish consumer spending means fewer orders for NAND flash memory.

By Jim Carbone -- Purchasing, 2/20/2008 9:28:00 AM

The global NAND flash memory market will grow 9% or less in 2008 because of order reductions and weakness in consumer spending, according to researcher iSuppli.

The researcher had earlier forecast that NAND revenue would grow 27%. In 2007, NAND sales revenue totaled $13.9 billion.
The good news for buyers is that capital spending on flash production is increasing this year. With weaker demand, NAND prices will fall.

NAND flash is used heavily in consumer-electronics applications, including flash storage cards, MP3 players and USB flash drives. Those applications are driven by retail sales to consumers. With consumer confidence taking a dive due to the U.S. sub-prime mortgage crisis, the NAND market outlook has diminished considerably in 2008.

“Unless the economy recovers vigorously later this year, last year’s DRAM market disaster could be repeated in NAND this year,” said Nam Hyung Kim, director and chief analyst, memory, for iSuppli.

One warning sign of consumer weakness is Apple Inc.’s slashing its 2008 NAND order forecast significantly. The company has told suppliers that its demand growth will slow in 2008 compared to 2007, says iSuppli sources. This will have a significant impact on the NAND market.

With its flash-memory-based iPods, Apple was the world's third largest OEM buyer of NAND flash memory in 2007 with purchases of $1.2 billion, representing 13.1% of the global market, according to iSuppli.

On the supply side, slower NAND demand will have a major impact on suppliers’ financial results. Capital spending on NAND production will rise by more than 20% this year, ensuring easy availability of parts. This will cause prices to decrease.

iSuppli believes that NAND prices already are below suppliers’ fully loaded costs.

“In light of these factors, NAND suppliers are likely to go into the red in the first quarter and are not likely to recover in the second,” says Kim.

Also see:  Memory IC prices erosion weakens industry’s growth