A strong rise in sales to the mobile phone market propelled NOR flash supplier Spansion into the lead in the global market for flash memory used in wireless handsets, and caused its ranking in the overall flash market to improve by one position in 2006, according to iSuppli.

Spansion's market share increased to 29.9% in 2006, up from 25.8% in 2005. This allowed Spansion to rise one position in the worldwide mobile phone flash memory rankings to take the top rank, displacing Intel as the market leader.

Spansion's sales of its NOR-type flash memory to the mobile phone market rose to US$1.8 billion in 2006, up 35% from $1.4 billion in 2005. This was more than double the increase for the overall mobile phone flash market, which grew by 16.4% in 2006 to reach US$6.1 billion, up from US$5.2 billion in 2005.

Source: iSuppli, compiled by DigiTimes.com, April 2007

"The major factor behind Spansion's impressive gains was its increasing sales to top-tier handset makers and market share increases in Japan and the Asia/Pacific region," said Mark DeVoss, senior analyst, flash /SRAM/MCP for iSuppli. "In contrast, Intel – the number one supplier in 2005 – slipped to number two in 2006, with its flash memory sales to the mobile phone market rising only 5.1% for the year to reach US$1.6 billion, up from US$1.5 billion in 2005. Intel's share in mobile phone flash fell to 26.1% in 2006, down from 28.9% in 2005. Intel's woes in the mobile phone flash market are believed to be related to capacity issues that affected deliveries primarily to Asian mobile phone makers."

The third-place ranking in mobile phone flash went to STMicroelectronics, whose revenue rose by 25.7% to US$959 million in 2006, up from US$763 million in 2005, DeVoss added. Although STMicroelectronics retained its third-place ranking, the company managed to gain share in this segment, with an increase of 1.2 percentage points.

Flashy performance for Spansion

Spansion's strong performance in mobile phone flash in 2006 boosted its fortunes in the overall global flash market, which consists of all NOR and NAND parts sold into all applications. Although fourth-quarter results were disappointing for Spansion, the company had a very good year in the overall flash market, rising to the No. 3 position, up from fourth in 2005.

Samsung Electronics and Toshiba continued to lead in the overall flash market due to their strong positions in NAND-type flash. Intel slipped from the No. 3 spot in 2005 to No. 5 in 2006.

NOR vs. NAND

Looking at the overall revenue numbers for 2006, iSuppli indicated that NOR was up 6% while NAND was up nearly 15%. While 2006, didn't look all that bad on paper, it was well documented that NOR suppliers continued to struggle with profitability issues, while NAND makers experienced very aggressive average selling price (ASP) erosion.

Unfortunately, both of these troubling trends are continuing to haunt flash memory suppliers during the beginning of 2007, although there are indications that conditions are improving for NAND, iSuppli believes.

Beyond 2007, the prospects for NAND are notably brighter as the PC market moves into the era of flash-based Solid State Drives (SSDs). However, the major NOR suppliers, with their destiny still tied to the mobile phone market, continue to lack a new killer application that could drive a recovery.