Spansion passes Intel in cell-phone flash market

Sales for 2006 were up 35 percent over 2005, though flash memory producers are finding it harder to make profits as chip prices fall

Spansion posted a sharp rise in the number of NOR flash chips it sold to mobile phone makers in 2006, allowing the company to push Intel to second place in that market segment, according to an analyst report released Monday.

Spansion sold $1.8 billion worth of NOR flash in that sector during 2006, increasing 35 percent above its sales for 2005 and growing far faster than the market as a whole, which rose 16.4 percent to $6.1 billion, said iSuppli Corp.

At the same time, Intel suffered from problems with production capacity, limiting its revenue growth to an increase of just 5.1 percent, to reach $1.6 billion, according to Mark DeVoss, a senior analyst for iSuppli.

Together, those factors produced a 29.9 percent share of the global mobile phone flash market for Spansion, which had not existed as an independent company until chipmaker AMD spun it off in December 2005. The next largest supplier was Intel with 26.1 percent share, then ST Microelectronics NV with 15.7 percent, Samsung with 11.2 percent, and Toshiba with 6.5 percent.

Despite the growing popularity of solid-state memory in electronic devices like digital cameras, smartphones, printers, and TVs, both NOR and NAND flash memory producers are struggling to stay profitable as chip prices fall. That trend will continue in 2007, although NAND flash makers could find salvation as PC designers increasingly trade rotating disk storage for solid state memory, iSuppli said. The future still looks bleak for NOR makers, who rely almost completely on wireless handset sales.

That shifting market is one reason that Spansion's big sales figures in 2006 earned it only a third-place position in the flash market as a whole, which includes global sales of both NAND and NOR flash for all applications. Spansion is also one of the few flash providers to make only NOR, buying NAND from its competitors when customers demand mixed platforms, DeVoss said. Overall, Samsung and Toshiba continued to control the top spots in the larger market as Intel's weak year dropped it to fifth place behind ST Microelectronics.

Spansion acknowledges that the NOR profits are vulnerable because that market has traditionally operated as a commodity industry, competing through price more than product differentiation. But the company insists it can find a winning edge by adding extra services like related software, hardware, packaging, and third-party verification, according to a statement on its Web site.