Samsung expects NAND price to fall less than forecast

Samsung Electronics Co, the world's biggest maker of memory chips, said prices for semiconductors used to store pictures and songs in handheld gadgets will fall less than expected this year, helped by rising demand.

Prices decline by 40 percent as demand for NAND flash chips, used in cameras and cellphones, will outstrip supply in each quarter this year, Lee Woung-moo, a Samsung vice president of marketing, said in an interview on Tuesday.

The company in April said prices would fall 50 percent as Samsung and its rivals increase production of the chip.

Shares chipmakers fell on Tuesday after Merrill Lynch & Co. predicted higher production by South Korea-based Samsung, Infineon Technologies AG, and other manufacturers will drive the industry into a glut.

Lee the company has delayed making more advanced chips to avoid excess supply.

He said producers won't over-expand to meet demand, which is forecast by market researcher Gartner Inc to rise 35 percent to US$9.4 billion this year. Samsung earlier projected the NAND shortage would end in the third quarter.

NAND, unlike the dynamic random-access memory chip that is mainly used in computers, can store data after the power is turned off and is typically used in handheld devices such as digital still cameras, mobile phones, USB drives and MP3 players.

Samsung's billion in NAND sales in the first quarter accounted for 59 percent of industry revenue, followed by Toshiba Corp's 24 percent, according to El Segundo, California-based market researcher ISuppli Corp.

"Samsung can control worldwide supply and demand balance and rapidly move the market by increasing density and decreasing cost," Nam Hyung-kim, a chip analyst at ISuppli, said in an e-mail.

"Samsung could control prices," he said.

Demand NAND will probably rise more than anticipated during the third quarter as companies such as Cingular Wireless LLC, the largest US mobile phone operator, and No. 2 Verizon Wireless ask handset makers to provide them with models that have more memory to store songs and pictures, Lee said.

Camera are also boosting their demand for memory as picture-quality resolution improves, he said.

"Things are good, for us and our competitors," said Lee, who's in charge of flash memory marketing at Samsung.

"There were substantial shortages in April and May and we were only able to meet 75 percent to 80 percent of customer orders," he said.

Samsung the shortage of NAND to continue next year as bit-growth in demand will more than triple, outpacing the increase in supply, which will more than double, Lee said.

Samsung, which said in April it plans to spend about 1 trillion won (US$995.8 million) on NAND facilities this year, will probably increase investments on the chip next year, Lee said, declining to specify an amount.