Flash memory prices tumbling says Intel

Memory chip prices are dropping twice as quickly as expected, according to Intel chief executive, Paul Otellini.

Flash memory prices tumbling says Intel

Intel’s forecast for price erosion on NAND flash memory from the fourth quarter to the first quarter was 27%. The actual figure it observed is 53%.

The result of that pricing erosion was a “substantially lower product margin” and higher inventory write-downs.

Intel cut its gross margin forecast for the current first quarter earlier this week, citing weaker pricing on NAND flash memory, used in cell phones and digital music players.

That portion of the chip industry has been hit by over-capacity, some slowing demand among consumers, and intense price competition among Intel, its joint-venture partner Micron and Asian chip makers.

Intel now expects a first-quarter gross margin of 54%, plus or minus a point, versus a previous forecast for 56%, plus or minus a couple of points.

Otellini also reaffirmed the chip maker’s plans for what he called an aggressive plan to move into what it sees as a rapidly growing market for PCs – both desktop and notebook – costing as little as $250.

“While we’ve gotten more efficient in the core business, we’ve put more investments in where we think the growth of the company is going to come from,” says Otellini.

The company announced it had picked “Atom” as the name for a new class of microprocessors aimed at the market it has dubbed netbook PCs, as well as emerging consumer devices.

Intel aims to have Intel chips spanning the digital market from so-called mobile internet devices all the way to high-end computer servers that form the backbone of corporate networks.

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