Key NAND Flash manufacturers such as Samsung, Hynix and Toshiba have been adding capacity while undertaking node shrinks to both boost unit output and reduce costs to retain profit margins. IM Flash Technologies, a Joint Venture operation between Intel Corp and Micron Technology, plan to aggressively ramp two 300mm fabs to compete in the NAND market. IMFT is also considering a third fab that is expected to be built in 2007 to add further capacity in 2008. Other memory manufacturers such as Powerchip Semiconductor are also ramping dedicated 300mm facilities to produce NAND.

SanDisk, though regarded as a ‘captive' chip manufacturer, is the joint manufacturer partner with Toshiba. Currently, the partners are ramping one of the largest 300mm fabs so far built, Fab 3, which has a monthly capacity of 110,000 wafer start per month when fully utilized by the third quarter 2007. The partners are also scaling MLC NAND devices aggressively to remain at the leading edge to obtain the cost benefits dictated by such high annual price declines.

However, SanDisk's Chairman and CEO, Eli Harari, said during a conference call with analysts to review third quarter results that if 60 percent price declines continue, he expects some of his competitors to stop capital investments to increase capacity as the profit margins would have disappeared.

"Pricing for NAND in the annual 40 percent to 45 percent, maybe 50 percent price decline, is very healthy for the creation of new markets and I would say certainly in the 40 percent range sustainable from the point of view of technology migrations," remarked Harari in response to an analysts question. "60 percent is not sustainable long-term. You cannot have 60 percent price reductions every year."

Harari therefore remains "modestly optimistic" about 2007 as he feels some competitors will think twice before committing to further NAND capacity. Time will tell!