Revenues for the global NAND flash-memory market dropped 7% in 2012, according to an IHS iSuppli Data Flash Market Tracker Report. NAND industry revenue fell to $19.7 billion last year, down from $21.2 billion in 2011. The main culprit was the ultrabook: disappointing ultrabook sales negated the impact of surging demand from Apple Inc. for its iPhone line. However, revenue is expected to rebound this year, rising to $22.4 billion, and then continuing to expand over the next few years (see the figure).

In 2012, iPhones consumed 10.5% of the total NAND flash supply; all other smartphones combined used 10.4%. The iPhone had an average density of 24.5 Gbytes, a 19% increase over 2011—this represents the highest amount of embedded NAND flash among all smartphones, according to the report.

Source: IHS iSuppli Research, January 2013

Tepid Uutrabook sales had a negative effect on the flash-memory prospects of cache solid-state drives (SSDs). Ultrabooks experienced some success in consumer computing, but adoption has lagged and an incremental increase in demand fell way below expectations. SSDs grew in 2012, but, again, the ultrabooks’ marginal showing diminished expectations for expansion.

Microsoft’s delayed Windows 8 launch (Oct. 26) also put a dent in the NAND market, since it left little time to generate interest among consumers as well as the corporate sector. It led to a substantial third-quarter decline in PC shipments, as consumers waited out the new operating system. Moreover, high inventories of older Windows 7-based PCs remained in the supply chain well into the fourth quarter.

These issues prompted the NAND industry to slow production midway through 2012. Taking such action to prevent what would have been a disastrous year, and a move to stabilize pricing in August, led to a minor rally in October. All in all, though, the second half of last year was weaker than expected, blunting growth that ultimately resulted in the contraction of revenue.

To gird against these problems going forward, NAND flash manufacturers must continue to tightly manage their supply for the first half of 2013, says IHS iSuppli. That’s because the first six months of the year are traditionally the weak period for the industry. In addition, as the market moves away from low-margin flash cards and universal flash drives toward higher-value applications, NAND flash players will increasingly depend on a smooth transition from acting solely as pure-play sellers to providers of complete solutions.

IHS iSuppli says the NAND industry’s fate—in the near and intermediate term—rests on the support of three pillars of demand: smartphones, tablets and SSDs. Historically, smartphones drove demand for NAND flash bit. Though growth is slower than previous boom years, it’s not expected to recede significantly anytime soon. Tablets have become a relatively new player in the NAND realm, and demand is expected to increase as other tablet manufacturers and operating systems start competing with Apple’s iPad. And SSDs, despite making up a sizable portion of NAND demand, are still in their nascent stage. Suppliers continue to wait for the tipping point when consumers fully embrace the new drives.

According to the IHS iSuppli report, robust growth is expected in 2013, balanced with technology advances and production expansion. The second half of this year is forecast to be healthy, boosted by increased demand throughout the NAND landscape.

For more information about the report, visit www.ihs.com.