By Mayumi Negishi and Rhee So-eui - Analysis
TOKYO (Reuters) - Japan's Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz), fresh off a losing format battle for high-definition DVDs, is now training its sights on the NAND memory chip sector, targeting the No. 1 spot in the potentially lucrative market for new laptops which will increasingly use storage based on flash memory.
The timing is opportune, since the current leader in NAND and the world's biggest maker of memory chips, Samsung Electronics Co (005930.KS: Quote, Profile, Research, Stock Buzz), is busy pouring resources into wiping out the opposition in the dynamic random access memory (DRAM) market.
Toshiba, the world's No. 2 NAND maker, is also in a good position to make its bid for the top as third-ranked Hynix Semiconductor Inc (000660.KS: Quote, Profile, Research, Stock Buzz) has cut output, and as an Intel-Micron (INTC.O: Quote, Profile, Research, Stock Buzz) (MU.N: Quote, Profile, Research, Stock Buzz) joint venture in Singapore has run into a six-month delay before it can start production.
Toshiba, with partner SanDisk Corp (SNDK.O: Quote, Profile, Research, Stock Buzz), has long coveted the NAND crown, which would give it early access to, and even some control over, new product launches by major NAND buyers.
Solid state drives (SSDs), which use NAND, are seen as the next replacement to hard drives. SSDs consume less power, generate less heat, boot up faster, and have longer battery life than existing hard drives, and have been used in a new crop of sleek laptops, such as Apple Inc's (AAPL.O: Quote, Profile, Research, Stock Buzz) MacBook Air and Lenovo's (0992.HK: Quote, Profile, Research, Stock Buzz) X300.
"It's not a matter of waiting for demand for NAND to double. We will make demand double by offering SSDs at a more attractive price than Samsung or Hynix," Toshiba Corporate Senior Vice President Shozo Saito told the Reuters Global Technology, Media and Telecoms Summit.
Toshiba plans to build two NAND flash memory factories in 2010, aiming to catapult production capacity to a potential 810,000 wafers a month, more than triple current capacity.
But analysts warn this strategy might cause Samsung to aggressively defend its No. 1 position, which may result in a supply glut for the rest of the year.
RAMP UP
Samsung, which does not unveil its NAND capacity, has said it will be "careful" with the NAND market in the absence of a clear killer applications.
Instead, the South Korean company is concentrating its efforts on cementing its leadership in the DRAM market by churning out chips at a much higher rate than the industry average and starving out cash-poor rivals.
For Toshiba, a victory in SSDs would make its defeat to Sony Corp's (6758.T: Quote, Profile, Research, Stock Buzz) Blu-ray camp for home videos easier to swallow. Once people start watching movies via downloads, storing them in flash chips, it would by-pass the need for a DVD player altogether, Toshiba President Atsutoshi Nishida has argued.
"Solid state drives will replace optical discs as storage for data, movies, and music. It's just a matter of time," Saito said.
Flash memory would also make PCs faster and lighter while saving power, but they currently cost ten times more than conventional hard drives. NAND's use is still mainly limited to flash-storage cards, MP3 players and USB (universal serial bus) flash drives.
"The important thing is to be prepared to ramp up quickly. The timing in which we actually install the equipment to begin production will depend on market conditions," Saito said. "We're not crazy, you know." Continued...
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