Apple iPad, Smartphone Use Driving Record Demand for NAND Flash Memory

The Apple iPad, competing tablets and continually increasing smartphone use are all driving demand for NAND flash memory, says iSuppli, adding a warning about overproduction.

The Apple iPad, the invigorated tablet market and increasing rates of smartphone adoption are all driving the NAND flash memory market toward record revenues, research firm iSuppli reported Nov. 16.

With supply ramping up in the latter half of this year and into 2011, iSuppli analysts expect the NAND flash segment to continue to see strong sales, though suppliers will need to "walk a fine line" as the industry moves to 2x-nanometer and more advanced semiconductor manufacturing processes toward year's end, iSuppli warned.

Revenue for NAND flash memory in 2010 is now expected to reach $18.7 billion, up 38 percent from last year's $13.5 billion. Going forward, growth will continue though the pace will lessen slightly, with revenue expected to reach $22 million in 2011 and climb to $24.4 million in 2013.

"The higher NAND revenue is reflected as well in a parallel upsurge of bit growth, soaring a mighty 71 percent to 10 billion gigabytes in 2010, with a substantial portion of the expansion due to die shrinks and production of 3-bit-per-cell TLC memory," iSuppli reported. Over the next two years, however, average selling prices (ASPs) are expected to decline slightly and, as the NAND market is pressed to produce, over-production may eventually hurt it.

With planned fabs from Samsung, Toshiba and the Intel-Micron joint venture, IMFT, adding another 70 percent increase in production in 2011, the risk of oversupply is strong, iSuppli analysts warn. Should suppliers fail to prudently manage their production mix, the resulting capacity could "send the market into a tailspin," according to the report.

"Among consumer electronic devices, tablets represent the newest growth sector for NAND flash, in addition to the memory product's continued healthy application and usage in smartphones," iSuppli senior analyst Michael Yang said in a statement. "The mad rush for NAND flash in tablets echoes a similar trend in netbooks two years ago, but is occurring on a larger scale, iSuppli believes, given the high average densities used in tablets."

Tablets, led by the Apple iPad, are expected to consume NAND flash at a rate of 1.7 billion gigabytes in 2011, up from just 428 million gigabytes in 2010. The iPad is expected to have the highest average NAND flash density of any tablet, likely reaching 52.5GB in 2012. And while 30 tablets are expected to become available from various major brands in the fourth quarter, iSuppli expects the iPad to continue to dominate "for some time to come."

While, again, such growth will push the demand for NAND memory higher, manufacturers will need to balance the need to reduce production costs with growing supplies.

"Should seasonal demand in the second half of the year-and beyond-not shape up to expectations, oversupply and other expenditures could sink an otherwise resilient market and push NAND memory toward a downturn," states the report.

Research firm ABI recently increased its forecast for tablet shipments in 2010 to 11 million units. In the third quarter alone, according to Strategy Analytics, 4.4 million tablets shipped, 95.5 percent of which were the Apple iPad.