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KeithDust2000

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KeithDust2000

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Monday, 11/17/2003 10:45:06 PM

Monday, November 17, 2003 10:45:06 PM

Cell phone, consumer electronics sales begin taxing supplies of NOR flash

Jack Robertson
ebnonline

11/17/2003 11:00 AM EST
URL: http://www.ebnews.com/showArticle?articleID=16100852

Solid demand for mobile phones and consumer electronics devices has caused sales of NOR flash memory to surge the last two months and is leading to tighter supplies and pushing the price of some parts higher.

STMicroelectronics N.V., Geneva, reported a 27% sequential increase in third-quarter NOR revenue, a sudden upturn that has remained at a level higher than would be expected during the traditional holiday season, according to Philippe Berge, ST's director of memory products marketing.

Toshiba America Electronic Components Inc. (TAEC), Irvine, Calif., reported that requests for NOR have jumped 30% in the last two months, while Silicon Storage Technology Inc., Sunnyvale, Calif., said shipments of NOR set a record in the third quarter of well more than 1 million units a day.

"In just a few weeks we jumped from off-the-shelf sales to 12-week delivery lead times," said Derek Best, SST's senior vice president of sales and marketing. Best said the company has placed some NOR parts on allocation and expects to set another unit shipment record in the fourth quarter.

Scott Nelson, TAEC's director of business development for the memory business unit, agreed that NOR supply is tight but said so far the company has avoided allocation.

"The quick pickup in demand surprised the market, which hadn't anticipated the longer delivery lead times," said John Nation, flash memory marketing director for the Spansion product line at FASL LLC, the new combine of Advanced Micro Devices Inc. and Fujitsu Ltd. "For the last two years a wide range of flash components were available off-the-shelf and ready for immediate shipment."

Nation said that the sales rebound cleared out FASL's NOR flash inventory, adding that many customers must now wait on flash wafers to come through the production pipeline before receiving product.

Going up

Not surprisingly, tight NOR supply has halted a more than yearlong price slide and in some cases caused tags to jump by 5% to 10%.

Jim Handy, Los Gatos, Calif.-based nonvolatile memory analyst for Semico Research Corp., said that prices for 64Mbit NOR moved up to $7 in the third quarter from an average of $5.50 in the second. Handy said that 8Mbit NOR has climbed to $1 in the fourth quarter, a 40% increase over third-quarter average prices, while 16Mbit NOR has increased to $1.40 from a third-quarter average of $1.20.

Analysts cited the significant hike in mobile phone shipments as one key factor behind the changing NOR flash market. Alan Niebel, an analyst with Web-Feet Research Inc., Monterey, Calif., estimated that global cell phone sales this year will top 450 million units and could reach 470 million.

Additionally, cell phones are demanding larger storage capacity, which is leading more suppliers to develop higher-density NOR chips. Ed Doller, director of strategic marketing for Intel Corp.'s flash products group, said that the storage capacity of mobile phones has doubled in the last year to an average of 100Mbits, which is being served largely by 64- and 128-Mbit NOR.

In fact, ASPs for leading-edge densities, particularly 128- and 256Mbit NOR, should be dropping as suppliers improve their manufacturing yields, according to Niebel. Instead, vendors are holding their prices firm.

SST's Best said the cell phone industry's demand for higher-density flash is exacerbating the shortage of lower-density NOR, further contributing to stronger prices. At the same time, SST, which predominantly sells lower-density devices for consumer electronics applications, is finding that demand in its core market is burgeoning, Best said.

Short or long term?

How long the NOR market remains bullish is the subject of much speculation, as OEMs and suppliers wait to see if stronger orders are the result of seasonal demand or part of a more general improvement.

While Intel said it is too soon to tell, SST's Best said he "isn't looking for any fall-off in NOR orders after the holiday sales season," at least in the consumer electronics sector.

Whatever the outcome, suppliers are stepping up to take advantage of strong demand--although for now much of the production increases are coming from higher yields associated with die shrinks

Scott Beekman, TAEC's manager of business development for communication memory products, said Toshiba is transitioning NOR flash from 0.16- to 0.13-micron processes to increase yields and is adding additional capacity that can be used for either NOR or NAND flash.

Fabless SST has increased its cadre of foundries by adding Grace Semiconductor Manufacturing and Hua Hong NEC Electronics, both of Shanghai. Berge said ST is increasing NOR production at a fab in Singapore in addition to other plants.

Nation said that the MirrorBit architecture of FASL's Spansion NOR benefits from a short production cycle because it uses fewer process steps than other flash memory designs. Because of that, he said FASL should be able to get its products to market sooner and help alleviate long delivery times.

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More good news. The big question is: Can FASL LLC avoid a loss this quarter?

Keith