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Cellphone Exodus Will Deflate nor Flash Market … Again

The NOR flash memory market is bracing for another revenue dip this year and in 2014, after experiencing a decline in 2012, according to information and analytics provider IHS’s IHS iSuppli Flash Dynamics Market Brief. Cellphones are the main culprit, as that market shifts to alternative NAND solutions. Dwindling demand from PCs also factors in to the extended downturn.

Global NOR flash-memory market revenue in 2013 will fall 2% from $3.47 billion last year to $3.4 billion. That follows a 20% fall in 2012 from the $4.34 billion total revenue in 2011. Revenue will contract 5% further next year before reversing the trend in 2015 and 2016 (see the figure).

“NOR, ironically, is turning out to be its own worst enemy in its traditional stronghold of cellphones,” says Ryan Chien, IHS’s analyst for memory and storage. “Following the path blazed by low-end handsets, feature phones are switching away from parallel NOR and toward cheaper serial NOR. With the feature-phone market representing 42% of cellphone shipments in 2012, NOR is facing a tough road ahead. However, new applications for NOR eventually stop the market’s decline.”

Source: IHS iSuppli Research, February 2013

In 2012, top NOR suppliers (for example Micron Technology and Spansion) accelerated efforts to diversify sales into new segments like home automation and automotive infotainment. However, these burgeoning industries are significantly smaller than the cellphone market. Thus, the revenue downturn in NOR usage among cellphones and PCs couldn’t offset the increases created from the growing industrial and automotive segments.

Loss of market share by higher-cost parallel NOR also factored into the overall decline in NOR revenue. In this case, a low-power and more economical alternative—Serial Peripheral Interface (SPI) NOR—ate into overall revenue.

From an individual company perspective, Micron Technology’s NOR sales proved disappointing, tempered only by some positive signs that mitigated the otherwise languid results. It reported a 6% drop in NOR revenue in its November quarter to about $220 million, down sharply from $380 million in the first quarter of 2011.

Customer demand remained weak, and many NOR customers continued to transition toward NAND.

On top of that, Micron didn’t deny rumors swirling around the sale or closure of its Israeli NOR fab. IHS believes the move would be prudent, given the company’s internal shift to phase-change memory. It has the potential to displace NOR-flash-based applications, and is increasingly part of Micron’s wireless portfolio.

Working in Micron’s favor are improved margins due to cost-cutting and rising average-selling prices, which the company believes will continue in the first quarter this year due to its 45-nm process and 300-mm wafers for NOR nearing production. Furthermore, though the embedded-memory segment dropped 2%, operating income jumped 10%. In a similar vein, wireless revenue rose 15%, and operating losses shrunk 20%.

The NOR industry as a whole is experiencing a competitive realignment. For example, low-density NAND products have infiltrated the product lines of Taiwanese-based Macronix International and Winbond Electronics, as well as Spansion from California. This past July, Silicon Valley-based ISSI, a developer of low-power, high-speed chips, acquired flash-memory producer Chingis Technology of Taiwan to boost its specialty memory line. In October, Adesto acquired Atmel’s struggling SPI NOR line to expand its nonvolatile memory business.

These developments reveal two trends: a shift in emphasis by existing competitors to products other than NOR, and active players stepping away from the NOR arena altogether. Still, signs of hope remain for NOR flash, even in those consumer devices where NAND and other comparable memories are replacing NOR. For instance, after its disappearance from Apple’s iPhone 4S, NOR returned with the iPhone 5.

High-volume, high-density applications like TVs and automotive infotainment also require NOR flash’s speed to enable a responsive networked experience. Routers, modems and personal navigation devices use these chips to help leverage the connected trend.

Other key growth areas for NOR revolve around the automotive and home-automation segments. Applications include vehicle engine control, temperature sensors, smart meters and home-security systems.