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© mpanch dreamstime.com Analysis | February 26, 2013

Cellphones hang up on NOR Flash Market

After a decline in 2012, the NOR flash market memory is set to shrink again in 2013 and in 2014, as more segments of the cellphone market eschew the device in favor of alternative NAND solutions, according to IHS iSuppli.
Global NOR flash memory market revenue in 2013 is forecast to dip to $3.40 billion, down 2 percent from $3.47 billion last year and from $4.34 billion in 2011. Revenue will contract a further 5 percent next year before starting to pick up in 2015 and 2016. The projected fall this year follows a 20 percent decline in 2012, marking an extended three-year contraction for the memory.

“NOR—ironically--is turning out to be its own worst enemy in its traditional stronghold of cellphones,” said Ryan Chien, analyst for memory & storage at IHS. “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 percent of cellphone shipments in 2012, NOR is facing a tough road ahead. However, new applications for NOR eventually will stop the market’s decline.”

NOR sales also are suffering because of dwindling demand from PCs, another historically strong market for the memory.

NOR seeks greener pastures

Amid declining sales in cellphones and PCs, top NOR suppliers such as Micron Technology and Spansion in 2012 accelerated their efforts to diversify their sales into new segments like home automation and automotive infotainment. But while offering better growth prospects, these segments are much smaller than the cellphone market.

Because of this, revenue derived from the use of NOR in cellphones and PCs fell more rapidly than increases could be found in the growing industrial and automotive segments.

The overall decline in NOR revenue was also due to the loss of market share suffered by higher-cost parallel NOR. Gains were made instead by the low-power—and more economical—Serial Peripheral Interface (SPI) NOR segment, which ate into overall revenue.

Heartache and hope for Micron

For Micron Technology, a leading player in the space, NOR sales proved disappointing, tempered only by some positive signs that mitigated the depressed results. The Idaho-based manufacturer reported a 6 percent 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.

Moreover, the company did not deny rumors swirling around the sale or closure of its NOR fab in Israel. Such a move would be prudent, IHS believes, given the internal shift by the company to phase-change memory, which has the potential to displace applications using NOR flash and is increasingly part of Micron’s wireless portfolio.

The mitigating factors in Micron’s favor included improving margins due to cost cuts and rising average selling prices, which the manufacturer believes will continue in the first quarter this year as its 45-nanometer process and 300-millimeter wafers for NOR near production.

And although Micron’s revenue in the embedded memory segment was down 2 percent, operating income jumped 10 percent, reflecting the more favorable margin situation. Meanwhile, wireless revenue rose 15 percent, and operating losses narrowed by 20 percent.

Industry recalibrates

The NOR industry overall finds itself in the midst of a competitive realignment. Producers like Taiwanese-based Macronix International and Winbond Electronics, as well as Spansion from California, are adding low-density NAND products to their product lines.

In July, flash memory producer Chingis Technology of Taiwan was acquired by Silicon Valley-based ISSI—a developer of low-power, high-speed chips—to boost its specialty memory line. Then in October, Adesto acquired Atmel’s struggling SPI NOR line to augment its non-volatile memory business; both firms are based in California.

All these developments have either taken active players out of the field, or lessened the emphasis on NOR as existing competitors shifted their emphasis to products other than NOR.

Yet signs of hope remain for NOR flash, even in consumer devices where the memory is fast being replaced by NAND and other comparable solutions. For instance, after a notable disappearance from Apple’s iPhone 4S, NOR returned to the iPhone 5.

Televisions and automotive infotainment electronics are other high-volume, high-density applications that still require the speed of NOR flash to enable a responsive networked experience. Routers, modems and personal navigation devices likewise use the chips to help leverage the connected trend, while socket wins in the Sony PlayStation 3 and Microsoft Xbox360 suggest a place for NOR in next-generation game console designs.

No surrender for NOR

Given its reduced presence in the traditional cellphone and PC space, the NOR industry is now enlarging its footprint in key growth segments like automotive and home automation, with applications such as vehicle engine control, temperature sensors, smart meters, and home security systems. A leaner, more nimble operating model is also arising throughout the NOR industry, as it contends with lowering prices and a shrinking base in formerly strong established markets.

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