Bad News For Your Gadgets: Toshiba, Sandisk Slash Flash Memory Production

Toshiba and Sandisk had plans to increase production of NAND flash memory chips as part of their Flash Alliance fab partnership, after both companies opened new 300-mm wafer fab plants last year. But the recession has taken two bites out of the market, and both companies are now scaling back plans radically.

As consumer spending dips, and purchases of devices like MP3 players with built-in flash memory, and gadgets like cameras that take add-on memory chips drop, the knock-on effect hits Toshiba and Sandisk, with both companies facing a temporary memory over-supply situation.

Toshiba announced a 30% cutback in production of chips, effective January, in an attempt to control the supply-side and stop the rot. Sandisk also plans to delay the second phase of its new Fab 4 300mm fabrication plant in Nagoya, Japan, in order to effect similar supply-side controls.

The fear is that prices will continue to fall in an attempt to tempt consumer purchases, and that would push the NAND makers into an impossible position.

The temporary over-supply of chips means potentially good news for consumers shopping for memory, but in the near term it’s a bad thing. Decreasing prices of flash memory, combined with developments in increasing the chip’s speed and capacity has been pushing the development of innovative and cheaper consumer gadgets. That means that spending on chip development is likely to become one of the first areas to suffer if the Flash Alliance has to trim spending.