Q4 NAND flash market to fall short of expectations
Worldwide market revenue for NAND-type flash memory in the third quarter slightly exceeded iSuppli Corp.'s forecast— but disappointing sales of MP3 players has prompted a downgrade of our outlook for fourth-quarter sales.
Global sales of NAND flash memory in the third quarter reached $3.1 billion, a near bull's-eye with iSuppli Corp.'s forecast of $3 billion issued in September. The overall market for NAND flash grew by 11.8 percent in the third quarter compared to $2.7 billion in the second.
As expected, per-megabyte NAND prices fell by 22 percent in the third quarter, while megabyte shipments grew by 44 percent.
"iSuppli is likely to trim its fourth-quarter sales projection in the near future," said Nam Hyung Kim, director and principal analyst for memory ICs and storage systems at iSuppli. "iSuppli previously predicted 21 percent sequential sales growth for the fourth quarter. The primary cause of the reduced outlook was the market for flash-based MP3 players, whose sales appear to be falling short of expectations."
Toshiba stars among the top suppliers
Among the top NAND sellers, No. 2 supplier Toshiba Corp. distinguished itself with revenue growth of 26.2 percent, as its sales rose to $849 million in the third quarter, up from $673 million in the second quarter. The company's market share expanded to 27.8 percent, up from 24.6 percent in the second quarter.
With leading supplier Samsung Electronics Co. Ltd.'s sales having risen by only 4.3 percent during the third quarter, Toshiba closed the gap with its larger, South Korean rival. Toshiba's share in the third quarter trailed Samsung's by 15.3 percentage points, down from 21.6 points in the second quarter. The Japanese chip supplier also increased its lead over its nearest rival, Hynix Semiconductor Inc. of South Korea.
Toshiba's strong performance during the quarter was due to its rapid rise in bit production. The company achieved sequential NAND flash bit production growth of 70 percent during the third quarter, exceeding the industry average of 44 percent.
U.S.-based NAND flash up-and-comers Intel Corp. and Micron Technology Inc. achieved the strongest growth of all suppliers, with their sales rising by 127.8 percent and 35.3 percent on a sequential basis respectively. However, this growth was from a very small base as both companies are still developing their NAND-flash businesses.
Hynix increased its sales by 11.9 percent during the quarter and remained the third largest NAND supplier based on iSuppli's market share estimates.
The table below and attached presents iSuppli's revenue ranking of NAND flash suppliers in the third quarter.
MLC adoption on the rise
One positive development for the NAND flash market in the third quarter was a fast rise of sales of Multi-Level Cell (MLC) parts. MLC allows the storage of more than bit per memory cell, dramatically increasing NAND flash density.
Samsung and Hynix's production of NAND parts using MLC technology increased to 40 percent and 50 percent of total manufacturing, respectively during the third quarter, beating iSuppli's forecast.
At the present rate of adoption, 80 percent of global NAND megabit production will use MLC technology by the first quarter of 2007, iSuppli predicts.
Still struggling
Despite progress in the MLC segment, iSuppli is still maintaining its negative near-term market rating of conditions for NAND flash due to the lackluster demand outlook late in the fourth quarter and in the first quarter of 2007.
However, improving margins for DRAM will compel DRAM suppliers to allocate more production to DRAM, and less to NAND.
DRAM suppliers' NAND capacity represents 75 percent of global NAND output. This should lead to more positive pricing and supply conditions for NAND in 2007, iSuppli predicts.
