NAND flash memory is enjoying tremendous popularity, as the chip is used in a wide variety of devices such as cameras, smartphones, tablets, and even high-performance notebooks. However, there are concerns that NAND flash is becoming a victim of its own success, like DRAM.
Intel says goodbye
Well, Intel is supposed to be aggressively expanding into the SSD market, and most SSDs use NAND-based flash memory. So why would it get rid of manufacturing capacity when it's needed the most? The fact is, NAND prices are falling and Intel is keen on exiting before margins become too low.
But, while there is a possibility of falling margins for NAND manufacturers, I don't think this decline will be anything close to DRAM proportions.
NAND vs. DRAM
DRAM prices have fallen due to a number of factors common to the chip industry. But the difference is that oversupply of DRAM chips in the market was worsened due to the worldwide decline in PC shipments.
NAND is less likely to suffer the same fate because demand conditions still remain strong. According to Gartner, smartphone shipments are expected to rise by 35% to 630 million units this year. And by 2015, this figure is set to more than double, to 1.1 billion units. JPMorgan Chase, too, forecasts an astounding 55.2% rise in tablet shipments to 99.3 million units for the year 2012.
NAND also stands to gain from the booming cloud computing industry. With more people and businesses set to rely on cloud computing and storage, the market for enterprise-class solid-state drives is also set to grow tremendously. IDC expects cloud computing to integrate into most connected devices by 2013, and spending on cloud computing services is expected to touch a whopping $72.9 billion by 2015. Now that would definitely require a lot of NAND!
Given the growth potential of the NAND flash industry, here are a few companies that you might want to keep an eye on:
On the other hand, STEC
OCZ Technology Group
Micron Technology has its hands in the DRAM as well as the NAND space. While NAND has been a growth point for the company, its profits are being weighed down by its DRAM business. For this reason, I would stay away from Micron until we see some signs of overall improvement in its business.
The Foolish takeaway
The NAND party isn't over yet. I expect to see demand for these memory chips grow as long as tablets and smartphones remain popular. You want a piece of the action, right? Don't forget to stay up to speed with the latest news on the NAND flash industry by adding the following tickers to your Watchlist. It's free and lets you stay on top of the latest news and analysis for your favorite companies.