Media players suck Flash market dry

A high-capacity Nand-based iPod could spell trouble for the Flash market

The rising popularity of portable media players such as Apple's iPod Nano is outpacing the production capacity for Flash memory, analyst firm Gartner warns.

The analyst firm projects a shortage of Nand Flash memory of 5.8 per cent by the end of this year, which is set to level off to 2.6 per cent by early 2007.

The shortage is being driven by a 40 per cent increase in sales of portable media players to 187.7 million units for 2006.

About 80 per cent of those are Flash memory based devices while the remaining 20 per cent is made up of hard drive based models.

The Nand Flash shortage could become even more severe if Apple unveils a high capacity iPod Nano later this year, Gartner predicts.

The largest capacity flash-based iPod currently offers up to 2GB of storage space, but Gartner believes that Apple is looking to introduce a 10GB or 12GB model later this year. The firm projects that it will cost about $250, making it as expensive as the current 2GB model.

As the largest maker of media players, Apple's buying power allows the firm to buy its parts below the average market price. This in turn causes a spike in prices in other memory segments.

"If a high-capacity Nand-based iPod is introduced, the severity of the allocation will intensify during the fourth quarter of this year, and our outlook of supply and demand for the first quarter of 2007 could become more severe than initially anticipated," said Joseph Unsworth, principal research analyst for Gartner.

"Pricing pressure from Apple also puts indirect pressure on competing consumer products, such as Flash cards and USB flash drives, which are still the major drivers of the Nand Flash market. All of these products compete for consumers' discretionary spending."