Market Watch

NOR Prospects Still Down This Year, But Key Growth Areas Hold Hope

Revenue is projected to shrink in 2013 as industry players reorient strategies

February 19, 2013

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The NOR segment of the flash memory industry will continue to suffer declines as revenue is projected to fall for a second consecutive year in 2013, according to an IHS iSuppli Flash Dynamics market brief from information and analytics provider IHS.

Revenue in 2013 for the NOR industry is forecast to dip to $3.40 billion, down from $3.47 billion last year and $4.34 billion in 2011. Revenue will contract a further 5 percent next year before starting to pick up in 2015 and 2016. Shipments this year, however, will rise to 4.83 billion units from 4.64 billion in 2012, as more NOR-enabled products help to mitigate the revenue drop.

With revenue last year falling a steep 20 percent, the NOR industry faced one of its toughest times despite diversifying beyond mobile handsets into other segments like home automation and automotive infotainment. The root cause of the revenue contraction was the accelerated shift by top manufacturers such as Micron Technology and Spansion away from previously lucrative consumer applications, moving instead toward high-growth but low-volume industrial uses. Revenue derived from the use of NOR in cellphones, for instance, was falling more rapidly than increases could be found in growth segments, prompting the shift by manufacturers.

The overall decline in NOR revenue was also due to the loss of market suffered by higher-cost parallel NOR. Gains were made instead by the low-power—and more economical—Serial Peripheral Interface (SPI) NOR segment, which ate into overall revenue.

Finally, NOR is losing out in its traditional strongholds of mobile handsets and PCs. Low-end smartphones and more sophisticated models now have switched to using NAND, while entry-level phones are moving to SPI NOR.

Micron’s travails—tempered by some positive signals

For Micron Technology, a leading player in the space, NOR sales proved disappointing, tempered only by some positive signs that mitigated the depressed results. The Idaho-based manufacturer reported a 6 percent drop in NOR revenue in its November quarter to about $220 million, down sharply from $380 million in the first quarter of 2011. Customer demand remained weak, and many NOR customers continued to transition toward NAND.

Moreover, the company did not deny rumors swirling around the sale or closure of its NOR fab in Israel. Such a move would be prudent, IHS believes, given the internal shift by the company to phase-change memory, which has the potential to displace applications using NOR flash and is increasingly part of Micron’s wireless portfolio.

The mitigating factors in Micron’s favor included improving margins due to cost cuts and rising average selling prices, which the manufacturer believes will continue in the first quarter this year as its 45-nanometer process and 300-millimeter wafers near production. And although Micron’s revenue in the embedded memory segment was down 2 percent, operating income jumped 10 percent, reflecting the more favorable margin situation. Meanwhile, wireless revenue rose 15 percent, and operating losses narrowed by 20 percent.

Industry recalibrates, draws strength from growth areas

Still, the NOR industry overall finds itself in the midst of a rough strategic realignment. Producers like Taiwanese-based Macronix International and Winbond Electronics, as well as Spansion from California, are adding low-density NAND products to their product lines. In July, flash memory producer Chingis Technology of Taiwan was acquired by Silicon Valley-based ISSI—a developer of low-power, high-speed chips—to boost its specialty memory line. Then in October, Adesto acquired Atmel’s struggling SPI NOR line to augment its non-volatile memory business; both firms are based in California. All these developments have either taken active players out of the field, or lessened the emphasis on NOR as existing competitors shifted their emphasis to products other than NOR.

Yet signs of hope remain for NOR flash, even in consumer devices where the memory is fast being replaced by NAND and other comparable solutions. For instance, after a notable disappearance from Apple’s iPhone 4S, NOR returned to the iPhone 5.

Televisions and automotive infotainment electronics are other high-volume, high-density applications that still require the speed of NOR flash to enable a responsive networked experience. Routers, modems and personal navigation devices likewise use the chips to help leverage the connected trend, while socket wins in the Sony PlayStation 3 and Microsoft Xbox360 suggest a place for NOR in next-generation game console designs.

Given its reduced presence in the traditional handset and PC space, the NOR industry is now enlarging its footprint in key growth segments like automotive and home automation, with applications such as vehicle engine control, temperature sensors, smart meters, and home security systems. A leaner, more nimble operating model is also arising throughout the NOR industry, as it contends with lowering prices and a shrinking base in formerly strong established markets.

Read More >> NOR Industry Seeking Relief after Tough 2012

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