Companies that provide portable storage such as SanDisk and Lexar Media havein their fortunes since the second quarter of last year, as consumers snap up devices from .
Competition is coming in the form offrom companies such as and Cornice. Major players such as Samsung and Apple Computer have already come out with mini hard-drive music players. Samsung even has a portable video player with a hard drive.
SanDisk, Lexar Media and other companies are seeing a significant rise in shipments of removable flash memory cards, as sales of digital cameras and cell phones mushroom.
Although the companies face concerns about an increased supply of flash memory and how that will affect prices, analysts believe that there is still a lot of room for growth.
"The outlook through 2007 is promising," said Joseph Unsworth, an analyst at research firm Gartner. "Applications such as digital video cameras and mobile phones will increasingly leverage flash cards...providing growth opportunities for the industry in the long term."
SanDisk and Lexar, among the leaders in the flash memory card market, are set to report their fourth-quarter and year-end results later this month, capping a year that saw shares increase about threefold for both companies. Lexar ended 2002 trading at $6.27 and closed Thursday at $17.08. SanDisk finished 2002 trading at $20.30 but jumped in 2003 and closed Thursday at $67.81.
And while these hot companies have cooled off recently because of concerns about an increased supply of flash memory and how it will affect prices, analysts believe that there is still a lot of room for growth.
The worldwide flash memory card market generated $1.7 billion in revenue in 2002, and research firm IDC estimates that that total increased by more than 100 percent in 2003.
Digital cameras have been the most significant catalyst for growth of removable flash memory cards, because consumers must have at least one card. Generally, they opt for higher capacities, which allows them to take more pictures before having to download images to a PC or swap to a new card. Cameras made up about 60 percent of worldwide demand for cards in 2003.
Camera shipments are expected to increase 27 percent to about 55 million this year from 43 million worldwide last year, according to IDC. By 2007, shipments are projected to reach 81 million.
In fact, digital cameras are becoming so popular that photography company Eastman Kodak said earlier this week that it will stop selling traditional film cameras in the United States, Canada and Western Europe. The company said that with sales of digital cameras expected to overtake film cameras for the first time this year, it is redefining itself to keep pace with the market.
Other camera makers have been changing their tactics as well, gradually phasing out the low-capacity 8MB cards; replacing them with 16MB cards that accompany cameras. Consumers generally purchase a new higher-capacity card, and the elimination of a card would help reduce the cost of cameras.
"More companies are not bundling cards with their cameras, and this will occur more frequently, as the market gets more competitive," said Chris Chute, an analyst at IDC. "This is a good balance for everyone--consumers and manufacturers."
Card capacity pickup
At the same time, card makers are increasing the capacity of their cards--across all formats. Although the tech industry is enamored with standards, portable flash card formats seem to be resistant. The current card types include Memory Stick, Secure Digital, CompactFlash, MultiMediaCard, xD-Picture Card and Smart Media.
At the Consumer Electronics Show (CES) in Las Vegas this year, SanDisk said it will. The Sunnyvale, Calif.-based company added that sometime in the first quarter, it will sell Memory Stick Pro Duo cards, which are roughly half the size of Memory Stick Pro cards. The company will sell 256MB cards for about $105 and 512MB cards for about $225.
Another product dependent on portable media that has helped boost the removable flash memory card market is cell phones, especially those with built-in digital cameras. Cell phones made up about 24 percent of worldwide demand for cards, according to IDC. These devices were less popular in the United States and Europe. But in Asia, a camera built into a phone is nearly a standard feature, according to Jim Handy of research firm Semico Research, and that essentially requires a card slot for storing or sharing photos.
Handy added that cameras in phones went from being able to take video graphics array-quality pictures to megapixel images.
He expects cell phones to become a bigger market for card makers in the United States, as manufacturers begin to add cameras to their phones,. Some manufacturers will come out with phone video cameras for the United States in the first half of the year.
Other categories that will help to boost the card market are mini digital camcorders and USB (Universal Serial Bus) drives.
Mini digital camcorders like the one thatthis year are expected to call for higher-capacity cards than cameras, because consumers are recording video instead of just still images.
The market for USB drives is just beginning to hit some significant growth, as consumers look to the readers as a replacement for floppy disk drives.