Mobile memory firms warned 'integrate vertically or be left behind'

The market analyst says the mobile market is heading for 25.7% growth this year, with revenue expected to reach $16.4billion, up from $13bn last year. It reports that after 2012, the mobile memory space will decelerate gradually, as the market becomes saturated and average selling prices decline. IHS anticipates that revenue will contract to $17.6bn by 2015. The largest product segment in the mobile memory market in 2011 is forecast as NAND flash, with $8.8bn in revenue. Mobile DRAM will be the second largest portion of the market at $5.7bn, with NOR anticipated to reach $1.9bn. The figures reveal a declining sales of lower end mobile handsets, primarily a NOR based segment. However, both NAND and DRAM represent memory products used in devices such as smartphones and tablets. Michael Yang, analyst at IHS said that semiconductor suppliers with NAND and DRAM in their portfolios are in a strong position as they can make multichip memory packages consisting of flash memory stacked with DRAM that offer higher margins. Yang said: "In effect, such companies - like South Korean electronics giant Samsung Electronics and US based Micron Technology, both of which also make NOR become powerful one stop shops, supplying a full suite of memory products in house for the various electronic devices made by both companies." Yang believes that engaging in this model of manufacturing – vertical integration – allows companies to make greater cost savings by sourcing materials from within. "Vertically integrated firms also can offer clients a more complete line of products than if their customers sourced separately from individual sellers," added Yang. According to Yang, some companies in the memory space are merging to pool resources and produce fuller product offerings. "Last year's tie up between Kingston Technology and Phison Electronics exemplified just such a consolidation," Yang noted, "and other NAND and DRAM manufacturers with healthy balance sheets must act to form joint ventures with viable partners in order to compete creditably with the likes of Samsung and Micron."