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Flash price plunge heralds cheaper MP3 players?

NAND falls as DRAM rallies

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iPods and other MP3 players look set to become much cheaper thanks to a dramatic decline in the price of NAND Flash chips. According to memory industry watcher DRAMeXchange, NAND Flash prices on the spot market have fallen by more than 50 per cent since the start of 2006. It said 2GBb and 4Gb NAND Flash chip prices fell by 63 per cent on average. Other parts saw their prices drop by at least 43 per cent.

Ironically, it's a fall in end-user demand for low-end music players that has pulled the rug from under the NAND Flash market. Good sales in the run-up to Christmas - some iPod models sold out, for example - have been followed by an expected post-holiday decline, though the extent of the fall appears to have taken NAND Flash makers by surprise. Certainly, their customers are spending less, and they, in turn, have been forced to cut prices to stimulate demand.

Indeed, Apple cut the prices of its Flash-based iPod Shuffles in February when it released the 1GB iPod Nano. Even if further cuts fail to make it to market, canny manufacturers may well choose to stock up on cheaper Flash in preparation for future player demand. If everyone does it, of course, the price will remain depressed and they'll get no advantage.

According to market watcher iSuppli, NAND Flash and DRAM sales will total $40.2bn this year, up 12.9 per cent on 2005's total, $35.6bn. However, while the company expected NAND Flash sales to rise 49 per cent this year, it's now forecasting growth of just 28 per cent.

Its apparent pessimism is shared by DRAMeXchange, which said it doesn't expect NAND Flash prices to rebound until after Q2 - it's pegging its hopes of a change on the sudden emergence of a "killer application". One such could be the Flash-based hard drive Samsung is pitching, or Intel's scheme to use Flash to boost PC boot times.

In contrast, DRAM prices have risen through the first few months of the year, though the upward slope leveled off this month, iSuppli noted. It said worldwide DRAM revenue will rise to $26.4bn this year, up 6.2 per cent from $24.8bn in 2005 instead of the five per cent decline the company previously forecast. ®

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