Perhaps the best theme to depict 2006 was the year of 'Great Expectations'. NAND-based mobile storage, as well as NAND storage for computing, was introduced to the electronics industry last year. It carries the expectations of enabling sleeker, more robust, and truly mobile devices like notebooks, smart phones, and audio/video/gaming media players to allow the user to access his personal information anywhere at any time using flash memory.
Like the economy, flash memory did quite well in 2006—despite rising interest rates, higher energy prices, and the ongoing war in Iraq. Consequently both the economy and the semiconductor industry are in an upswing. As the year came to a close, a few important trends began to surface. The economy ended the year fairly strong (if you don’t take into account the housing market and high interest rates that were used as a check on 'inflation'), but the dollar is dropping against other major currencies. Although the stock markets rose to levels not seen in five years, there is a bit of trepidation regarding a softening of the U.S. economy. America may have to take a back seat in regards to its growth in relation to stronger prospects in Europe and Asia.
Correlating this economics scenario to the flash market points to how a few financial analysts are gauging their expectations for 2007 on whether the NAND market is overheated and headed for a dive or just in a 'normal' seasonal slump that will recover when a few new 'killer' flash applications surface in Q1 and Q2. These financial analysts claim that too much NAND production or supply will come on the market in Q1 and prices will tank much faster than in 2006. Such negative expectations are being vented on SanDisk and a few other tech stocks (except Apple, where the stock price is driven down by fears that the NAND market will decline or lose its growth in 2007). As a result, despite the impressive gains that the flash market made in 2006 and its bright future with more applications using mobile NAND storage, flash companies are being penalized because their growth models may not match the financial analysts' models.
As a counter to these 'glass is half empty' expectations, Web-Feet Research sees a few bright scenarios that can bring out more demand in 2007 that may offset fears of oversupply. Last month, Microsoft's Vista was released along with Office 2007 and Exchange, a move that should stimulate more PC upgrades—some of which employ flash cache. In gaming, Sony is increasing its shipments of the PlayStation 3, while Nintendo is shipping more units of the Wii console, and Microsoft Xbox 360 is also shipping more titles and systems. These three game consoles are consuming more flash on-board and in flash cards and USB drives. For the 2006 holiday season, CEA claimed that the number one gift would be upgrades of digital still cameras from 2MP cameras to over 5MP lens. Wide screen, flat HDTVs were also on many shopping lists, since both LCD and plasma sets have become more affordable. Flash cards are being discounted quite heavily and selling in volume. On the MP3 market, the iPod nano and shuffle are still the number one seller, SanDisk's Sansa is holding onto second place, while Microsoft is making a run at selling their newly-released Zune MP3 player with a 30-Gbyte 1.8-in. HDD.
In this industry, like in many others, timing is everything. Apple was the first company to rejuvenate the electronics industry through vertical integration and savvy brand marketing. In Apple's defense, they do have quite a track record for keeping secret about their plans and Jobs has sprung amazing 'opening night-like' product announcements that have turned the industry around many times. For the long term, Apple has placed its bets on NAND. The seasonality of slackening sales in Q1 is an established pattern. Demand will pick up in Q2 and beyond. With these patterns known by Apple, many rumors exist that Apple will be releasing an iPod phone or iPhone that will incorporate NAND storage for music playback this quarter. By Q2, Apple may release a flash-based video iPod player. These two releases (and possibly others) coming from Apple or other companies early this month should help to stimulate the industry during the winter doldrums.
Flash had amazing growth in 2005, reaching an all time record of $20.5 billion, while DRAM only produced $25.6 billion. In 2006, flash fought on two separate fronts; trying to rejuvenate the NOR market and concurrently continuing a healthy expansion of the NAND market reaching a total flash revenue of $22.9 billion. DRAM made an exceptional rebound in 2006, where the DRAM revenues should grow 25.8% in reaching over $32.1 billion, due by increasing ASPs for all products. DRAM should make further gains in 2007, as users upgrade their Windows operating system to Vista and add between 2 Gbytes and 4 Gbytes of DRAM to their PCs. Often these two memory markets do not overlap, except in the multi-chip package (MCP) or combo devices within the cell phone market. Margins for low-power DRAM, along with SRAM and pseudo SRAM, are much higher than DRAM in PCs, so Hynix and Samsung will devote more DRAM production to this growing market.
Like the computing market, the new mobile market is segmenting its system memory requirements into work memory and storage. Mobile work memory usage is growing at a 10% to 15% rate per year, while storage is tripling its size, as nearly unlimited amounts of music, video, and data files are stored predominantly on NAND Flash media. Some applications will use the small form factor (0.85-in. to 1-in.) microHDD and 1.8-in. to 2.5-in. HDD products offered from Hitachi, Seagate, Fujitsu, Toshiba, and others.