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Intel plans flash memory price hike

The chipmaker says demand for cell phones and other gadgets is putting a strain on supply, and plans to hike prices up to 40 percent.

Intel plans to raise prices for flash memory technology by as much as 40 percent on Jan. 1 in response to increased demand.

The Santa Clara, Calif.-based chipmaker said Monday that demand for flash memory--used to store information in handhelds, cell phones and other devices--is rising as equipment makers add new features, such as digital cameras and color screens. Intel spokesman Tom Beerman said the company plans to raise prices on Jan. 1.

High-performance flash chips that can store the most data will see prices jump around 40 percent, Beerman said. Yet the company expects price hikes ranging from 20 to 40 percent across the product line, he added.

The hikes are "driven primarily by demand for cell phones," Beerman said. "There is supply, but it is tightening."

Major equipment makers doubled the amount of flash memory they included in cell phones in the third quarter this year, compared to the same quarter the year before, according to Intel.

The pricing increase could also help Intel rival Advanced Micro Devices, the second-largest manufacturer of processors with flash memory. AMD has increased its market share for flash memory in the cell phone market, according to Bertrand Cambou, vice president of memory products at AMD. By 2003, AMD will claim 40 percent of the market for flash memory in cell phones, he predicted.

"This (flash) is the fastest growing segment of the industry," Cambou said at the company's analyst meeting in November.

An AMD representative was not immediately available to comment on possible flash price hikes.

The price increase might not be so dramatic as initially perceived, said Dan Scovel, an analyst with Needham and Co. Supplies are tightening, but amid a competitive market, Intel's projected price increases won't be easy to achieve.

Flash memory in cell phones acts in a similar way as do hard drives and memory in computers. It stores data, but also juggles data and calculations on applications that are running in a device. Cell phone makers have been steadily increasing the amount of flash used in phones as advanced features become more popular.

In May 2000, flash memory supplies were strained from an increase in demand for the technology in cell phones, MP3 players and other devices. Sales for flash memory, in turn, were expected to jump from $4.5 billion to $10 billion worldwide, according to research reports at the time. Soon after, however, a market crash and technology purchasing slowdown eventually resulted in increased flash memory supplies.

Prices have been stable over the past month, according to Grant Johnson, an analyst with Converge, which tracks spot market pricing. Flash memory ranges in price from around $7 to around $17 for 128-megabit chips.

"The flash market has been lackluster at best following the amazing revenue growth of 1999 and 2000. We are expecting the fourth quarter of this year and first quarter of next year to finally show some positive signs," Johnson wrote in an e-mail to CNET