The soaring popularity of MP3 music players is causing demand for NAND flash memory chips to outstrip the available supply.
Sales of portable media players will grow from 134.5 million units in 2005 to 187.7 million units in 2006, according to a study released today by the market research firm Gartner.
Flash memory is popular with designers of digital cameras, mobile phones, and digital music players because it can store a huge amount of data without requiring constant power.
Despite converting factories from DRAM (dynamic RAM) to NAND production, chip makers won't be able to keep up with such growth. So the market for NAND flash will experience a 5.8 percent shortage in the fourth quarter of 2006 and a 2.6 percent shortage in the first quarter of 2007, Gartner predicted.
That could lead to tough competition among flash makers like Toshiba, Samsung, and the newly merged Micron Technology and Lexar Media for the limited output of the memory suppliers they all depend on.
In the United States, Intel made a bid for the business by agreeing with Micron in 2005 to create a joint venture flash memory company called IM Flash Technologies.
Apple's Possible Impact
The pending flash shortage could become even more severe if Apple Computer releases a high-capacity version of its iPod digital music player, said Joseph Unsworth, a principal research analyst for Gartner.
By the end of the year, Apple could launch a flash-based music player with between 10GB and 20GB of capacity, far above the 1GB to 4GB capacity of its current flash units.
Many devices already have 30GB or 40GB, but they save song data on spinning hard disk drives, not in solid-state electronics. The industry is changing fast. Of the devices made in 2005, 80 percent used flash memory, and the rest used hard drives.
Greater capacity will enable designers to add new features. The next generation of portable media players will include video playback capability, wireless communication, and integration with consumer electronics and cars.
Here is PC World's latest chart evaluating flash-based MP3 players.