e.Digital Corporation (fka EDIG)

[sricket]

By Mike Musgrove
Washington Post Staff Writer
Sunday, March 30, 2003; Page H07

http://www.washingtonpost.com/wp-dyn/articles/A45149-2003Mar28.html

Flash memory is cheaper than it has ever been, which has to please owners of digital cameras, MP3 players, handheld organizers and universal-serial-bus key-chain drives, all of which rely on flash memory to store data. But here's the bad news: As with everything else in the technology industry, that also means flash memory is now as expensive as it's going to get.

Consider the going rate for memory storage cards, the removable modules used in digicams and many other portable electronic devices. In 2000, these cards cost an average of $1.10 per megabyte, according to the Gartner research firm. In 2001 the average price dropped to 50 cents. Last year that price dropped to 30 cents, and Gartner expects the price to go down to 20 cents this year.

On average, the Stamford, Conn., firm says that flash memory prices drop about 30 percent every year -- and that it sees no reason to expect that trend to level out. Flash memory is now a $2 billion-a-year market -- 6,500 terabytes, at the current exchange rate.

"Flash" refers to the way this kind of memory stores data even when the power is off, unlike the cheaper "volatile" memory used in desktop or laptop computers.

"It's good old semiconductor economics, that's all it is," said Richard Gordon, a Gartner analyst. "It's all Moore's Law-driven," he said, referring to the computer-industry maxim that costs will continue to decrease even as microchip density increases exponentially.

In the case of removable flash memory, this price plunge has continued even as the memory-card market has remained splintered into four major, incompatible categories: CompactFlash cards, SmartMedia, SD Cards (and their closely related predecessor, MultiMedia Cards) and Memory Sticks.

There's no major technological difference between one and the next, although their sizes and shapes vary. Prices are dropping for each kind at similar rates. Why so many formats? It's partly a matter of engineering, partly a matter of industry politics and partly a matter of cost. Big, high-end digital cameras, for example, tend to use CompactFlash because it offers higher capacity than other formats, though it is also slightly bulkier.

No such market fragmentation prevails in the market for USB key-chain drives. The lower cost of flash memory has many in the business seeing these devices -- which plug into the USB ports standard on all new computers and are small enough to fit on a key-chain -- as the logical successor to the floppy disk. They only make up 5 percent of the removable solid-state memory market now, but the memory industry anticipates increased demand for these tiny gadgets.

"About 150 million PCs will be sold in 2003 and every one has a USB port on it, so we think this is going to grow like crazy," said David Klenske, director of product marketing at Lexar Media. "This product was initially only sold in geeky computer stores; now we're seeing it in mass retail by summer."

But even as prices drop, users may not wind up spending less. Klenske said that as memory gets cheaper, people tend to buy more instead of spending less. Lexar's most popular memory-card size tends to be whatever is in the neighborhood of $50 that year. In 2001, 32-megabyte cards were its biggest sellers, but 128MB cards top the charts now.

To some extent, consumers need that extra space. Increasingly sophisticated gadgets need more storage; digital cameras, the biggest drivers of flash-memory sales, now take pictures with higher resolutions and use correspondingly larger file sizes.

For now, though, ever-cheaper memory seems to be maintaining a lead over memory-hungry hardware. A couple of years ago, according to Eastman Kodak, a typical digital-camera user would tote a camera with a resolution of 2 million pixels and a 32MB card, good for 53 shots. Today the average camera's resolution is up by 50 percent, to 3 million pixels, but the average storage card has doubled to 64MB -- enough for 80 pictures.