Cellular market affects flash suppliers

In a new report from iSuppli (www.isuppli.com), the cellular market is proving to be a disappointment for flash suppliers. According to the report, “Flash Memory – 3Q01 Update: Weak Economy Shifts Application Market Share for Flash Memory,” the annual growth is estimated at a measly 1% for 2001.

However, cellular phones continue to be the driving application behind flash memory. In 2000, the cellular market was the most treasured segment for flash suppliers. According to iSuppli, the mobile communications segment total available market was estimated at 46% of the total flash market. This boom has unfortunately stalled for 2001.

All cellular phone manufacturers have issued profit warnings and announced layoffs, a result of the slowdown and the lessened profitability for handset manufacturers. iSuppli is forecasting cellular handsets for 2001 at an estimated 407 million units, a decline of 1.5% year to year. This downward trend has not only affected the cellular phone market, it has also taken place in the PDA segment with similar announcements of profit warnings and workforce reductions.

Handset manufacturers rely on flash suppliers for data capabilities in next-generation handsets. Higher density memory enables cellular phone manufacturers to enhance features for its customers to include storing audio music files and Web caching as well as Java applications without significantly increasing the cost of building the phones.

The flash suppliers can take comfort in the fact that flash memory applications used in consumer products such as MP3 players, digital cameras and the automotive segment are doing well.

This flip-flop favoring the consumer-market demand is driving a shift in the market application breakdown. iSuppli now is forecasting that consumer market share will grow in 2001 to 28% from 23% in 2000, and the mobile communications segment will decline to 40%. Unfortunately, the market intelligence services company added that the entire flash memory market is not growing this year, despite the demand increase for consumer applications.

One company that is continuing its handset flash supply is Sharp (www.sharp-usa.com). The company just announced a 32Mb flash memory for cellular handsets. The chip will allow handsets to be smaller and lighter (0.27 inches) and will hold more memory, making it suitable for data services. Other companies such as Intel (www.intel.com) and Fujitsu (www.fujitsu.com) are continuing their development of flash memory interfaces as well.