NAND Flash to cool off significantly in 2008

After projecting a 27 percent rise in revenue growth in NAND previously, iSuppli has abruptly lowered their projections, saying a single digit rise is much more likely.

The problem will extend to DRAM chips as well, a market already significantly softened during 2007. While many NAND manufacturers have the capability to switch to DRAM as a safe haven, struggles there will not provide much solace.

One has to look no further than companies such as Apple, which recently warned it will be cutting orders of NAND chips due to lighter-than-expected demand in the post-holiday period. Being the third largest OEM buyer of these chips, its pullback definitely hampers revenue growth.

But it's not just Apple: others are following suit. This is directly related to a general slowdown in consumer spending, which has become more pronounced over the past few months as the economy began to stumble.

Consumers are passing over MP3 players, flash storage cards, and other devices using NAND in favor of more necessary items, most of which do not include those chips.

iSuppli says that revenues should only increase "marginally" from 2007, when NAND Flash netted $13.9 billion. The growth will also be much smaller than that of the period from 2006 to 2007, when revenues grew 12.5 percent.

Six of the top eight suppliers achieved revenue growth last year -- that's likely not to continue.

"Unless the economy recovers vigorously later this year, last year's DRAM market disaster could be repeated in NAND this year," memory analysts Nam Hyung Kim said. "NAND suppliers are likely to go into the red in the first quarter, and are not likely to recover in the second."

Analysts at the firm said there is some hope for the market, but that only becomes a reality if DRAM pricing bounces back. iSuppli said it did not see that happening within the next several months.