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NOR Flash Faces Dim Prospects in an Overly Crowded Field of Producers

16 April 2013

The NOR flash market is set for another challenging year in 2013 as a packed field of manufacturers all vie for a piece of a gradually shrinking pie, according to an IHS iSuppli Flash Dynamics market brief from information and analytics provider IHS.

Global revenue for NOR this year is set to decline to approximately $3.41 billion, down from the $3.48 billion in 2012, with the projected 2013 takings representing just 40 percent of the industry's $9.3 billion peak in 2004. While the business overall has been active in establishing multimemory strategies designed to bolster diversification and boost fading NOR prospects, the projected revenue trajectory for the future remains discouraging.

In particular, more than 16 NOR manufacturers compete in an already fragmented, narrowing market where continued growth and coexistence for all appears unsustainable. The presence of too many manufacturers has resulted in overly aggressive competition in the supply chain, damaging NOR's prospects.

The NOR space slowed discernibly in the fourth quarter of 2012, which helped to bring on the lowest full-year revenue for the industry in more than 10 years. Revenue for the October to December 2012 period fell to $839 million, down 6 percent from $891 million in the third quarter and barely above the $835 million low posted in the second quarter.

The losing manufacturers were led by Idaho-based Micron Technology, Spansion from California and Macronix International of Taiwan. Winbond Electronics, also of Taiwan, held ground with flat revenue growth, with South Korea's Samsung Electronics the only major NOR producer to see any sort of increase.

To be sure, the NOR industry is in the midst of a paradigm shift, driven by lower-cost insurgents such as serial peripheral interface (SPI) NOR. And NOR has routinely faced weak fourth-quarter performance since 2008, dropping a sequential 10 percent on average during the final quarter of every year. Rival NAND likewise suffers from a seasonal fourth-quarter downturn, but it recently benefited from sizable third-quarter bumps. In comparison, NOR can only boast of a middling 2 percent uptick for the same period.

Warring suppliers contend in an ongoing battle

Micron's NOR business was the worst performer last year among major NOR suppliers, falling 37 percent to $872 million. Both average selling prices and shipment volumes suffered, particularly in lower-end mobile handsets known as feature phones. Micron continues to advocate cost reductions, and is guiding flat revenue and costs for the first quarter this year-a turnaround from the quarterly decline of the fourth.

Spansion, the other American NOR producer of note, has also struggled. Spansion's 2012 revenue contracted 16 percent to $876 million, but the company enjoyed a 32 percent gross margin and 7 percent operating margin in the fourth quarter as it widened its foundry supply base. Still, Spansion's automotive and smart-grid segments underperformed expectations, and excess inventories on its hands will likely result in a second sequential round of revenue decrease during the first quarter this year.

The Taiwanese were also embroiled in their own battles, though their concerns have more to do with market share than profitability. Winbond managed to increase its annual NOR revenue 13 percent to $364 million, but its projected capital expenditures to fund 58- and 46-nanometer nodes will fall by a third from last year because of the weak demand climate. Even so, Winbond enjoyed better results than fellow Taiwanese producer Macronix, whose NOR revenue fell nearly 13 percent to $458 million in 2012 as all applications outside of handsets labored.

In general, the need for Taiwanese NOR manufacturers to diversify is becoming more urgent. Even growth favorite Eon Silicon saw its revenue last year shrink 34 percent, continuing an ongoing slide after its rapid climb to a 2010 peak of $169 million.

Read more >> Weak Q4 Caps Off Disappointing Year for NOR

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