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NAND demand outstripping capacity

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Toshiba admitted yesterday that it is struggling to keep up with demand for flash memory after announcing plans to accelerate production at its latest fab.

At the same time, according to Reuters, the Japanese company is upping the amount it will spend on new chip manufacturing capacity this year by 13 per cent to 203bn yen ($1.92bn).

Corporate Vice President Masashi Muromachi told Reuters that the company’s current capacity could “in no way” meet demand for NAND flash products, singling out Apple’s iPod shuffle as one factor in the current buying frenzy.

Toshiba and flash partner SanDisk officially opened their latest plant, in Yokkaichi, western Japan this week. The firms said the expected output of the new factory will be 10,000 wafers per month by the end of this year, ahead of its original schedule. This will rise to over 40,000 wafers per month by the first half of 2007, and the companies could increase this further. SanDisk and Toshiba expect global demand for NAND-type flash memory chips to grow to ¥2.1 trillion ($19.86bn) in 2008 from ¥700bn ($6bn) in 2004.

The scramble to increase flash capacity will no doubt inspire trepidation amongst some chip industry watchers. The chip industry’s own trade groups, such as the Semiconductor Industry Association, regularly point out its tendency towards boom and bust. There is no reason to expect that demand for flash will not continue to balloon. However, historically, when the industry rushes to put new capacity in place, it inevitably triggers supply gluts further down the line trashing prices if not demand.

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