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Price Erosion Spurs NOR Flash Revenue Decline in 2005

Cutthroat competition is spurring continued price erosion for NOR-type flash memory, resulting in a significant decline in market revenue this year, according to iSuppli Corp.

Cutthroat competition is spurring continued price erosion for NOR-type flash memory, resulting in a significant decline in market revenue this year, according to iSuppli Corp.

Worldwide high-density NOR flash memory revenue will decline to US$5.2 billion in 2005, down 7.4% from US$5.6 billion in 2004, iSuppli predicts. Average selling prices (ASPs) for high-density NOR will decline to an average of US$4.85 in 2005, down 24% from US$6.40 in 2004.

iSuppli defines high-density NOR parts as devices ranging from 64Mbit to 1Gbit.
“NOR leaders Intel and Spansion have been engaged in a tough price war over the past few years as they fought to gain market share. The price erosion has reached the point where suppliers must ship high-density flash using actual or effective two-bit-per-cell technologies in order to maintain acceptable profit margins,” said Mark DeVoss, senior analyst for iSuppli.

Examples of such actual or effective two-bit-per-cell technologies include StrataFlash from Intel and MirrorBit from Spansion.

The battlefield for the NOR price war is the mobile-phone market, where demand for higher and higher densities of flash continues to grow. Third-generation (3G) mobile phones in some markets now require as much as 1GBit of NOR flash, while 2.5G models are seeing density requirements increase to 256Mbits, up from 128Mbits.

To serve this area amid intense ASP pressures, suppliers must be able to deliver 256Mbit-density and above NOR flash in Multichip Packaging (MCP) that at minimum includes two-bit-per-cell technology, 1.8-volt operation and burst capability, DeVoss said.

Of the top-three NOR flash suppliers to the mobile phone market - Intel, Spansion and STMicroelectronics - only Intel has been shipping such products for a prolonged period of time.

Spansion and STMicroelectronics have over the past six to nine months been serving this demand by selling products consisting of two or three single-bit-per-cell (SLC) 128Mbit NOR flash memories packaged together in one MCP. However, the price erosion for these 128Mbit SLC MCPs is now severe enough to preclude profitable shipping any longer.

Spansion is now shipping its 256Mbit density S29WS256N MirrorBit device. STMicroelectronics is also about to begin shipping such a device.

Existing market conditions will make it tough on Spansion and STMicroelectronics, but without the availability of two-bit-per-cell NOR devices, the pain would become excruciating. As 2.5 and 3G mobile phones claim a larger portion of handset shipments, the demand for higher-density devices will have to be met with two-bit-per-cell NOR, iSuppli believes.

iSuppli forecasts shipment revenue for high-density NOR flash will rise to US$7.1 billion by 2009.

While not exclusive to mobile phones, the high-density NOR market will be driven by the handset market, especially for devices with densities of 256Mbit and higher. In 2005, 256Mbit to 1,024Mbit devices are forecast to account for 37% of total NOR flash revenue, and this will rise to 76% of the total by 2009, iSuppli predicts.

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