The market for mobile phones’ onboard memory is undergoing transformation and commoditization, threatening incumbent companies and opening opportunities for small, nimble companies with a competitive differentiator to their product, according to Yankee Group analyst John Jackson.
Carriers and handset vendors are exploring how much memory is sufficient for various phone categories such as camera phones, music phones, multimedia devices and smart phones to function as they are intended and marketed, while increasingly employing memory card slots to accommodate consumers who wish to store more content.
“There’s a clear trend toward including external memory in the box for retail customers, but not a particularly high density or expensive one,” Jackson said. “Clearly the carriers are keen to pass on some of the memory-cost burden to the end-users. It’s not a back-handed thing to do. Let the consumer `dimension’ the handset however they feel like. If they value a gigabyte of memory, they can go out and buy it. A logical remedy to how much onboard memory is enough is the user-defined model.”
Limiting the discussion to storage memory known as Flash memory-as opposed to executable memory that stores command codes-Jackson said two basic “flavors” are competing in the market today: NOR and NAND. NOR means “Not Or,” and NAND stands for “Not And,” which refers to the way a gate is opened or closed on a chip.
“There’s been a lot of innovation in the field of Flash memory, marked by what you would call `religious wars’ over what kind of Flash is optimal and what mix of Flash is best-suited to do what,” Jackson said. “For instance, Intel (Corp.) has historically been dominant in cell phone memory, with StrataFlash. They’ve done well, historically. The big guys out there are Intel, Toshiba, Samsung (Electronics Co. Ltd.) and Infineon (Technologies AG). Then you have smaller and, in some cases, complementary vendors such as Spansion (Inc.), M-Systems.”
Think of NOR as a compact disc that allows instantaneous retrieval of material, regardless of its location, Jackson explained.
Think of NAND as a VHS tape that typically has to wind through a linear process to get the requested information. NOR is more expensive.
“So if you can make NAND behave like NOR, you’ve got a competitive advantage. And that’s essentially what Spansion, M-Systems and Samsung have done with innovative architectural advancements,” Jackson explained.
Going forward, the amount of onboard storage on every handset likely will continue to increase without a significant cost increase thanks to price erosion in the memory market, according to Jackson.
That’s good news for the consumer and a boon to the carriers and vendors who create and manufacture devices, but doesn’t necessarily bode well for the memory vendors, who see their innovations becoming commoditized in part due to their own success, the analyst said.
At the same time, no one configuration is likely to become dominant. Memory can reside onboard, on external memory cards or sticks, or on the subscriber identity module, or SIM.
“From a volume perspective, it will continue to be a robust market,” Jackson said. “From a value perspective, the picture is far less clear. In fact, the incumbent memory vendors regularly wrestle with these lines of business. It becomes difficult to make money. The rumors surrounding the fate of Intel’s communications group extend to its memory group.
“Having said that,” Jackson continued, “some of the smaller companies have come up with extremely innovative architectures that can create competitive advantage.”
