Is flash a bright spot in recession?

Fall in consumer demand is affecting its growth, but surge in smartphones and solid-state drives bodes well for flash from 2011 in Asia, say observers.
Written by Vivian Yeo, Contributor

The global economic downturn will trickle down on flash memory demand, industry watchers say. But the proliferation of flash in smartphones and enterprise storage in Asia in the years to come will help the technology make a quick recovery.

A report by In-Stat in February noted that flash memory sales volumes and revenues will see a quick recovery in spite of recessionary woes. Flash, it said, will become an "indispensable resource" and cement its position as a "fundamental building-block technology" as the number of products embedded with flash, grow.

Worldwide, flash revenues will grow at a compound annual growth rate of 24 percent to reach US$72 billion by 2012, In-Stat predicted. "An oversupply in 2011 will probably drive the market in a negative direction that year, but growth should recover, with a shortage starting late in 2012," the market analyst said.

Also around this period, video and solid-state drives (SSDs) will play an important role in the growth of flash memory, the report added.

Gregory Wong, president of Forward Insights, a consulting and market research firm specializing in non-volatile semiconductor memory, pointed out in an e-mail interview there are indeed encouraging signs for flash memory in the next few years.

"Smartphones are increasing storage capacities taking the lead from the iPhone, and the iPhone itself will likely see a 32GB product rolled out soon," he said. "SSD volumes will continue to increase reaching one-quarter of bit consumption in 2012 primarily driven by SSDs in notebook PCs."

According to Wong, flash memory growth will continue--at a slower pace this year and next. From 2011, the growth prospects "look good" as a result of the boost by SSDs and smartphones.

"Since Asia is a hub for PC and cellphone manufacturing, the rise in particular of SSDs is likely to be positive for Asian manufacturers," noted Wong. "SSDs will offer companies in Taiwan, China and Singapore opportunities."

However, all Nand flash vendors are currently unprofitable, he said, adding that this scenario is not likely to change with the current pricing levels. The average selling price of flash memory had rebounded recently, but that was due to adjustment in production by suppliers, and not demand-driven. "Companies have cut back on production to match demand, however, the price increases could reverse if vendors start to turn on that capacity again," said Wong.

Chong Soon Cheong, marketing director of Asia South at Sun Microsystems, also expressed optimism about the role of flash in enterprise storage. Sun last month announced its integration of flash in the Sun Storage 7000 Unified Storage family.

The enterprise flash market is poised for significant growth in 2009, driven by better economies of scale for flash technology that more efficiently allows companies to serve and manage exponentially growing amounts of data," he said in an e-mail. "While it will not be possible to convert all disks to SSD due to cost efficiencies, systems will continue to use a mix of SSD, memory and disk."

Pointing out that Sun is "taking the lead" in using SSDs in its systems and storage during the current economic climate, Chong said enterprise SSDs can create substantial improvements in server utilization and application performance. They also use less power, which helps customers to lower operational costs.

"Flash memory will find applications in areas where high performance is a necessity such as ones that are I/O-bound or virtualized and in the areas of Web 2.0, media, and high-performance computing," he noted.

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