By Kiyoshi Takenaka and Rhee So-eui
Honk Kong (Reuters) - Hot-selling flash memory chips are likely to fuel growth in the microchip industry in coming years, but their lofty profit margins are set to deflate as extra supplies pour in from new entrants such as Intel Corp.
(INTC.O: Quote, Profile, Research, Stock Buzz).
With competition stoked by newcomers, some producers of NAND-type flash memory such as STMicroelectronics (STM.PA: Quote, Profile, Research, Stock Buzz) and Infineon Technologies (IFXGn.DE: Quote, Profile, Research, Stock Buzz) may find themselves being forced out of the market, analysts say.
NAND flash memory can retain data when power is turned off and is used in portable consumer electronics such as Apple Computer Inc.'s (AAPL.O: Quote, Profile, Research, Stock Buzz) iPod music players and digital cameras.
"Historically, anyone who got into NAND flash did well because the market was incredibly strong," Gartner senior analyst Joseph Unsworth said.
"I think the outlook is strong, but it's not going to be favorable for everybody. You have all these new entrants piling in. It's very difficult to succeed in this market now."
Lured by strong growth prospects, some industry heavyweights are now entering the market and crashing the party, casting a shadow over profitability of the NAND flash memory business, which has enjoyed profit margins of some 40 percent.
Intel and Micron Technology Inc. (MU.N: Quote, Profile, Research, Stock Buzz) announced in November they would form a NAND flash joint venture, combining Micron's production capacity with Intel's financial resources and multi-level cell technology, which packs twice as memory capacity on one chip as conventional single-level cell technology. Continued...
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