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Daily News

Digital Camera, Storage Sales Drive Flash Shortage
Nov 24, 2003
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Strong demand for digital cameras and an unexpected surge in sales of new removable storage devices for personal computers have led to a shortage of removable flash memory, according to industry analysts.

Consumers should not expect to see prices rise, but the shortage could keep equipment makers from lowering prices or adding new features, the analysts said.

"When prices are flat the OEMs tend not to pass on price increases to users, but instead they tend to squeeze costs in other places to accommodate the higher prices they're paying for flash," said Jim Handy, an analyst at Semico Research.

Samsung Corp. and Toshiba Corp., the top supplier of NAND chips, the flash memory used in removable storage devices, have faced a surge in demand, Mr. Handy and others said.

NAND is used in cards for storing such things as digital photos in cameras that can be removed from devices and plugged into a PC for downloading images, as well as in small keychain-size USB drives used for manually transferring stored data from one computer to another.

Handset makers are also starting to add removable storage flash cards to cell phones used in Japan and Korea, he added.

This is good news for SanDisk Corp., the world's largest supplier of flash memory storage cards. SanDisk reported record product revenues in the third quarter as a result of what it called the "industry-wide NAND flash memory capacity shortages." The company's stock price has tripled since the beginning of the year.

The shortage could mean lower gross margins for smaller flash memory device makers, according to Satya Chillara, an analyst at WR Hambrecht & Co. "The second-tier guys are paying higher prices because they can't get capacity," he said.

The NAND shortage is not expected to ease until mid-2004 or even the end of 2004, after STMicroelectronics and Hynix Semiconductor Inc. get their initial flash chips into the market, said Betsy Van Hees, a principal analyst at market research firm iSuppli.

The total flash memory market is forecast to grow 42 percent in 2003 and 36 percent next year, Ms. Van Hees said. (Reuters)

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