Just how hot are NAND flash memory chips? Well, Korean flash memory manufacturers HynixSemiconductor and Samsung Electronics both recently reported seeing an "infinite" demand for NAND flash. As of June, flash fans have another IPO to fawn over, Taiwan's Silicon Motion (NASDAQ:SIMO). Even Barron's ran a column last month on the flash memory market.

Why all the excitement? As chip capacities expand beyond one gigabyte, flash memory is appearing in an ever-increasing number of devices. Apple's new iPod nano stores music on NAND flash memory from Samsung, rather than one-inch hard drives from Seagate Technology (NYSE:STX) and Hitachi (NYSE:HIT). The flash memory chips' slim size allows Apple to make the nano much smaller than its predecessor, the iPod mini. The iPod nano is having a huge effect on the flash market, as Apple's voracious appetite consumes about 40% of Samsung's total flash production.

Historically, USB flash drives and removable memory cards for digital cameras have been the two biggest uses for NAND flash memory. Camera memory cards consume more than 50% of NAND flash memory manufacturing, according to industry tracking firm iSuppli Corp; digital music players like the new iPod are soon expected to leapfrog flash drives into second place.

Hard drives aren't the only storage technology getting squeezed out by NAND flash. The NOR variety of flash memory, made by companies like Intel (NASDAQ:INTC) and Advanced Micro Devices' (NYSE:AMD) Spansion unit, generally appears in devices like cell phones that have smaller storage capacity requirements, but benefit from NOR flash's faster read capability and random data access. Recently, however, NAND flash has been making inroads into NOR's turf in the cell phone market.

Investors have certainly noticed NAND flash's strong growth; manufacturer SanDisk's (NASDAQ:SNDK) stock hit a 52-week high on Monday. Memory manufacturers and their investors shouldn't count on perpetually strong profits, since semiconductor manufacturers' vast excess capacity will likely be adapted to produce more flash memory as demand increases. Worldwide consumption of DRAM computer memory has grown like wildfire during the last 15 years, but a chart of DRAM maker Micron Technology's (NYSE:MU) stock price over the last decade reflects a lot of pain. Micron investors lost more than half their money during that time as excess production killed profit margins. Flash manufacturers could experience a similar fate.

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Fool contributor Dan Bloom does not have any financial interest in any stock mentioned in this column.