Chipmakers agree: Flash-memory shortage has begun

Chipmakers agree: Flash-memory shortage has begun

Amid an industry-wide shortage of flash memory chips, Intel Monday will announce the sale of its one-billionth flash memory chip and present a "state of flash memory address", according to company representative David Dickstein of the Intel Graphics and Flash division.

Intel's Monday event comes amidst warnings of mass shortages of both NOR flash memory, which is lower density flash memory used in cell phones and Internet routers, and NAND flash memory, a higher-density version used in MP3 players, digital cameras, and set-top boxes.

Skyrocketing demand for products that require flash memory will keep all flash-memory production below capacity until 2002, with the nadir occurring sometime near the end of this year, according to one industry source.

The result of the shortage is higher prices for customers looking to buy flash memory-enabled devices and lag times of as long as four months in getting newly manufactured flash memory to market, according to Brian Kumagai, the business development manager for low-power SRAM and NOR flash at Toshiba America Information Systems Inc.

"We're definitely seeing an increase in pricing, and the [flash memory] shortage is driving that," said Kumagai, adding, "I believe we are anticipating another two years of this shortage."

Toshiba's current effort to align its flash memory supply chain with a select group of companies to ensure inventory for those companies finds Toshiba turning away many would-be flash memory customers.

"Obviously, we can't support everyone who asks for support," Kumagai said.

With that in mind, flash memory users, particularly cell phone manufacturers, have begun giving themselves options by producing different version of their products, compatible with not only Toshiba flash memory, but also with flash memory from Intel and Advanced Micro Devices (AMD), which partners with Fujitsu in flash memory fabrication. This way, according to Kumagai, Toshiba can choose from whatever flash memory is available.

Intel officials have confirmed that the chip giant already has sold out of all flash-memory inventory through the remainder of 2000.

To offset this shortage, Intel plans to institute a new flash-memory fabrication plant, or fab, every quarter, beginning with a plant in Oregon by summertime. Intel's New Mexico fab will follow, with a fab in Colorado, recently purchased from Rockwell, going full tilt as the only flash-dedicated fab in the United States by the end of the year, according to Dickstein.

AMD, which earns one third of its revenue from the sale of flash-memory, partners with Fujitsu in a joint flash-memory manufacturing agreement reaching back to 1993. Together, the two companies occupy 30 percent of the total flash-memory market, according to Kevin Plouse, the vice president of technical marketing and business development for AMD's Memory Group.

"Last May, we were the first to predict this shortage, and we predicted it would take at least two years to develop the production capabilities to catch up with a huge imbalance in demand caused mainly by a surge in cell phones," said Plouse, who also sees the shortage of flash memory reaching well into 2002.

AMD and Fujitsu hope to minimise the impact of a flash memory shortage by ramping up extra manufacturing capacity in foundries working for the two companies.

"Instead of building new fabs, we're finding companies that are wholly owned by AMD or Fujitsu, companies that were either manufacturing DRAM or logic fabs, and converting them to flash," Plouse said.

"I agree that there is a surge of products requiring flash, and if things continue the way they are going we may never catch up [with demand]," Plouse said.

AMD, which also has set up long-term arrangements with some of its core customers to maintain a flash-memory supply through 2001, predicts the flash-memory market will reach $US10 billion this year alone.

To give some idea of how quickly production of flash memory has grown, it took 12 years for Intel to reach Monday's "one billionth sold" mark, whereas it will take less than two years for Intel to double that figure, according to Intel's Dickstein.

"We're looking at a less constrained flash memory environment by the second quarter of next year," Dickstein said.

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