Thanks for the memory - Intel loses lead

Samsung has displaced Intel as the world's leading manufacturer of flash memory, a rare change that reflects some trends in the growing market.

Korea-based Samsung sold approximately $615m of flash memory in the third quarter, a 50 per cent increase from the same period a year ago, according to research firm iSuppli. The sales surge was enough to give Samsung a 20 per cent market share, the largest share of any other company.

Toshiba placed second with $532m in sales, a 61 per cent jump from 2002 that amounted to 17.3 per cent of the overall market. Spansion, the name of the now-combined joint venture between AMD and Fujitsu, grew 3 per cent to account for $424m in sales, or 13.8 per cent of the market.

Intel, which had led the pack for decades, slipped to fourth place with $416m in sales, a decline of 4 per cent from a year ago. Overall, iSuppli said flash sales topped $3.1bn in the third quarter, up 27 per cent from 2002.

"This marks the first time that Intel has not been the number one overall flash supplier during a quarter," iSuppli said.

The shift is a result of underlying demand trends and a fateful decision on Intel's part.

Samsung and Toshiba primarily manufacture NAND flash memory, while Intel and AMD primarily make NOR flash.

NAND stands for 'N and', a reference to how data is retrieved. These chips can hold far more data than NOR ('N or') chips and are cheaper at comparable densities. NOR, however, is less prone to data corruption.

NAND is used in digital camera flash cards and MP3 players, two rapidly growing markets, iSuppli said. NOR is used to store information on mobile phones and set-top boxes, markets not growing as fast, the firm said.

As a result, the growth trajectory of Samsung and Toshiba is largely due to a split in the markets in which the two types of chips are used. Direct competition between the two architectures doesn't often occur. Samsung, for instance, landed a contract to supply Nokia with flash for phones but supplied Nokia with NOR flash.

"NAND unit shipments in the third quarter increased by 30 per cent to 132 million units, while bit growth [total memory capacity] skyrocketed by 76 per cent," the firm stated.

In addition, Intel in January raised the price of its NOR flash by as much as 40 per cent. The Santa Clara, California-based manufacturer predicted that shortages would occur, allowing it to justify higher prices.

Instead, customers gravitated toward NOR flash. Ironically, tightening supplies may soon permit NOR makers to try to raise prices, iSuppli predicted.

Over the next few years, more changes will likely impact the flash market. Many engineers and analysts believe that the underlying architecture of flash will have to change. Large and small companies are currently experimenting with different structures and materials, such as memory made of polymers or nanocrystals, for products that may appear by 2007.

In the interim, NAND and NOR will compete more directly, as NAND becomes more reliable and NOR becomes cheaper to manufacture, some industry executives have said.

Michael Kanellos writes for CNET News.com.