The new world order in flash

The sun rises in the East, compasses point North, and Intel Corp. and Advanced Micro Devices Inc. (AMD) are the number one and two players in the flash memory market -- that is, until last year.

While the sunrise and the earth's magnetic field didn't change last year, one of the most dependable competitive structures in the semiconductor industry did undergo a fundamental transformation in 2002, as Samsung Electronics and Toshiba Corp. rode a surge in NAND sales to displace AMD from its customary position as the world's number-two supplier of flash memory chips, according to iSuppli Corp.'s final 2002 semiconductor market share estimates. AMD had held the number-two position in flash for more than a decade.

The table below presents iSuppli's final 2002 flash memory chip ranking, which was released to clients this week as part of its 2002 final semiconductor market share estimate. The estimates are extracted from iSuppli's Competitive Landscaping Tool, which provides rankings of more than 170 semiconductor companies in more than 100 market segments.Samsung's flash memory sales exploded to $1.2 billion in 2002, up a whopping 224.3 percent from $374 million in 2001, according to iSuppli. The increase in sales elevated Samsung six positions in the ranking, rising from number eight in 2001 to number two in 2002, as presented in the table.

Toshiba's sales rose to $842 million in 2002, up by 53.9 percent from $547 million in 2001. The company rose two positions in the ranking, moving from number five in 2001 to number three in 2002.

The remarkable flash sales surge for Samsung and Toshiba was all the more amazing given that 2002 was such a lackluster year in the semiconductor industry, with worldwide chip sales rising by a marginal 1.5 percent. The overall flash memory market, which comprises NAND- and NOR-type parts, didn't fare any better than the total semiconductor industry, with sales growth virtually flat for the year.

However, NAND flash sales exploded in 2002, with revenue hitting $2.1 billion for the year, up 75 percent from $1.2 billion in 2001, according to Jim Cantore, principal memory analyst for iSuppli. NAND flash sales were driven by ravenous demand for digital still cameras and for data storage applications, such as flash memory cards used in those cameras and other products, like MP3 players. As the two leading sellers of NAND flash, Samsung and Toshiba were the prime beneficiaries of this sales increase, Cantore noted.

In contrast, sales revenue from NOR flash memory fell in 2002, due to slower sales growth in cell phones and PCs, the two primary applications for the memory. Intel and AMD, the leading suppliers of NOR flash, suffered the consequences: Intel's flash sales rose a scant 2.6 percent in 2002, while AMD's revenues fell by more than 35 percent for the year.

AMD's flash memory partner, Fujitsu Ltd., also felt the impact of the NOR slump, with its flash sales falling by 25.5 percent in 2002. How long will the new world order persist in flash?

Conditions are changing rapidly in the flash market, Cantore said. Toshiba has doubled its flash capacity during the past six months. With Samsung also driving NAND shipments, NAND price erosion has greatly accelerated in the past 90 to 120 days. Major increases in inventories of finished products that use NOR flash has raised fears of a growing glut.

Despite this, iSuppli predicts 2003 will be a better year for flash memory overall than 2002. However, changing market conditions could shake up the rankings again in 2003.

Top 16 flash memory suppliers in

2002