Denali NAND update

View from Silicon Valley

Denali NAND update

April 5, 2007

Denali Memory Update 2007-1Q

Denali continues to quietly and calmly put out rational info on the condition of the memory market. Their last "update" included some of the same pablum cranked out by industry cheerleaders but also some details you won't find anywhere else.

Here are a few foils extracted from their 20-page presentation:

In short, Denali says memory now matches it's peak share of the semi business in 2000. You may recall the CY00 memory market was richly profitable. Micron, Samsung, et al recorded all-time-high profits.

The CY06 memory market, however, is shipping with much lower profit margins. The quarterly reports from memory-dependent suppliers released over the next few weeks should be very "interesting"...

HOLY COW!

Denali's December, 2006 forecast predicted nearly 25% revenue growth but by March, 2007 they changed to a ~-16% revenue decline!

When do you suppose SIA, or any of the other industry cheerleaders, will get arond to admitting how far things have fallen?

Denali goes on to say...

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· Chaotic market evolution

o Rose from nothing in just a few years… 1999

§ Era of high profits seems gone; very fast growth remains

§ NAND: >$1,000/GB to $5 /GB in under seven years

o Standards weak, industry and vendors go own ways

§ Also, common definitions and specs lacking

§ ONFI addresses only a part of problem

§ …Could not be more different than DRAMs

o SLC to MLC to QuadBit: muddies spec issues

§ Finding match between product and application

§ Surfacing NEW applications (specs) as prices plummet

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NAND Flash summary

MB growth maintains at 150 -200% y-o-y
- This is faster growth than DRAMs, ever!
- SLC to MLC transition was ~easy, now more wafers needed to continue MB growth expansion
- Some Quadbit NAND flash available this year…
Price today leave little room for profit
- Very elastic market… waiting for SSD, HHD, digital-camcorder and any other high volume applications
- Had to separate 1Q07 seasonality from fundamental supply overshoo
Sill lots of investment in manufacturing: >$6 -$7B /year

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We hope you enjoyed this snapshot of Denali's review of the memory market.

You won't find this info anywhere in the mainstream press.

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The above is not intended as advice to buy, sell or hold any stock, bond, real estate nor any other financial product or service. Buy and sell at your own risk (as we do ourselves).