Flash Flood: The Growing Market For Memory Cards In

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Flash Flood: The Growing Market for Memory Cards in Consumer Applications September 2001 Brian O’Rourke Group: Converging Markets & Technologies Phone: (480) 609-4527 E-Mail: [email protected] File Under: Multimedia Tab: Miscellaneous Report No. MM0113MI Cahners In-Stat Group 1101 S. Winchester Blvd., Bldg N • San Jose, CA 95128 • Tel: 1.800.527.0288 • Fax: 480.483.0400 6909 E. Greenway Parkway, Suite 250 • Scottsdale, AZ 85254 275 Washington St. • Newton, MA 02458-1630 www.instat.com • [email protected]  Copyright Cahners In-Stat Group 2001. All rights reserved. Reproduction in whole or in part is prohibited without written permission from Cahners In-Stat Group. This report is the property of Cahners In-Stat Group and is made available to a restricted number of clients only upon these terms and conditions. The contents of this report represent the interpretation and analysis of statistics and information that is either generally available to the public or released by responsible agencies or individuals. The information contained in this report is believed to be reliable but is not guaranteed as to its accuracy or completeness. Cahners In-Stat Group reserves all rights herein. Reproduction or disclosure in whole or in part to parties other than the Cahners In-Stat Group client who is the original subscriber to this report is permitted only with the written and express consent of Cahners In-Stat Group. This report shall be treated at all times as a confidential and proprietary document for internal use only. Cahners In-Stat Group reserves the right to cancel your subscription or contract in full if its information is copied or distributed to other divisions of the subscribing company without the written approval of Cahners InStat Group. Authentic Copies of this Report Feature a Red Color Bar Table of Contents: List of Tables ........................................................................................................ii List of Figures..................................................................................................... iii Executive Summary............................................................................................. 1 Methodology ........................................................................................................ 3 Introduction.......................................................................................................... 4 Memory Card Formats........................................................................................ 6 CompactFlash ................................................................................................... 6 SmartMedia ....................................................................................................... 6 Memory Stick .................................................................................................... 7 MultiMedia........................................................................................................ 9 Secure Digital .................................................................................................. 10 Secure MultiMedia......................................................................................... 11 Secure CompactFlash..................................................................................... 12 Microdrive....................................................................................................... 12 Competing Technologies............................................................................... 13 PocketZip.................................................................................................. 13 DataPlay ................................................................................................... 13 MiniDisc ................................................................................................... 15 Memory Card Applications............................................................................. 16 Digital Still Cameras ...................................................................................... 16 Portable Digital Music Players ..................................................................... 17 Handheld PCs/PDAs .................................................................................... 17 Digital Camcorders ........................................................................................ 18 Mobile Phones ................................................................................................ 19 Notebook PCs ................................................................................................. 19 Ink Jet Printers ................................................................................................ 20 Memory Card Readers .................................................................................. 21 Other ................................................................................................................ 21 Video Games............................................................................................ 21 Desktop PCs............................................................................................. 21 Automotive .............................................................................................. 21 Forecast ................................................................................................................ 23 By Memory Card Type .................................................................................. 23 By Application ................................................................................................ 28 © 2001 Cahners In-Stat Group – MM0113MI – Confidential i List of Tables: ii Table 1. Memory Card Slot Penetration in Digital Still Camera Market (000s) ................................................................................................ 16 Table 2. Memory Card Slot Penetration in Portable Digital Music Player Market (000s).................................................................................... 17 Table 3. Memory Card Slot Penetration in Handheld PC/PDA Market (000s) ................................................................................................ 18 Table 4. Memory Card Slot Penetration in Digital Camcorder Market (000s) ................................................................................................ 18 Table 5. Memory Card Slot Penetration in Mobile Phone Market (000s)...... 19 Table 6. Memory Card Slot Penetration in Notebook PC Market (000s)....... 20 Table 7. Memory Card Slot Penetration in Ink Jet Printer Market (000s)...... 20 Table 8. Memory Card Reader Market (000s)................................................ 21 Table 9. Memory Cards in Other Markets (000s)........................................... 22 Table 10. Memory Card Unit Shipment Forecast by Card Type (000s)........... 23 Table 11. Memory Card Revenue Forecast by Card Type ($000s) .................. 24 Table 12. Price per Megabyte Forecast by Card Type ($) ................................ 25 Table 13. Total Megabytes Shipment Forecast by Card Type (000s) .............. 26 Table 14. Average Megabyte per Card Shipped ............................................... 27 Table 15. Memory Card Slot Forecast by Application (000s).......................... 28 © 2001 Cahners In-Stat Group – MM0113MI – Confidential List of Figures: Figure 1. Memory Card Unit Shipment Forecast by Card Type (000s)............. 2 Figure 2. Memory Stick Roadmap: 2000 – 2005 ............................................... 8 Figure 3. Memory Card Unit Shipment Forecast by Card Type (000s)........... 24 Figure 4. Memory Card Revenue Forecast by Card Type ($000s) .................. 25 Figure 5. Price per Megabyte Forecast by Card Type ($) ................................ 26 Figure 6. Memory Card Total Megabytes Shipment Forecast (000s).............. 27 Figure 7. Memory Card Slot Forecast by Application (000s).......................... 29 © 2001 Cahners In-Stat Group – MM0113MI – Confidential iii iv © 2001 Cahners In-Stat Group – MM0113MI – Confidential Flash Flood: The Growing Market for Memory Cards in Consumer Applications Executive Summary A memory card refers to any small, portable memory device that is used across multiple consumer applications. While SmartMedia and CompactFlash are the most recognizable names in memory cards, the last two to three years have seen a number of new formats enter this market. From flash formats such as MultiMedia, Secure Digital, and Memory Stick to magnetic media such as Microdrive, the market for memory cards is both larger and more crowded than it has ever been. In 2000, over 36 million cards were shipped, for total revenue of over $1.6 billion. The markets for memory cards have spread well beyond the original application of digital photography, to PDAs, mobile phones and portable digital music players. These new applications will cause substantial growth in the memory card market. But it may be a bumpy ride. The last year has been a volatile one for flash memory chips, the basis of most memory card formats, leading to rapidly falling prices. Though unit shipments will be up substantially in 2001, revenues are expected to fall slightly. Nevertheless, as the flash situation stabilizes, and as new memory card formats are established, this market will see substantial growth in both unit shipments and revenues between 2000 and 2005. The forecast for memory card shipments can be seen in Figure 1. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 1 Figure 1. Memory Card Unit Shipment Forecast by Card Type (000s) 120,000 100,000 Units Shipped (000s) 80,000 Microdrive Secure MultiMedia Secure Digital MultiMedia Memory Stick SmartMedia CompactFlash 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group 2 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Methodology This report is part of Cahners In-Stat Group’s Multimedia Service. Cahners In-Stat Group is comprised of industry experts covering topics in many high technology markets including semiconductors, computers, communications, multimedia, and e-commerce. Our research methodologies for this report include the following: • Telephone and e-mail interviews with memory card suppliers and users. • Analysis of product literature and financial statements from product vendors. • Background research on memory card technology, including magazines, journals, newspapers, and web searches. • Analysis of previous Cahners In-Stat reports, and consultation with other Cahners In-Stat analysts. All forecasts represent worldwide figures. All revenue totals are in current US dollars. Please note that some of the numbers in this report may not calculate exactly due to rounding. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 3 Introduction Memory cards were introduced in the mid-1990s with the development of the SmartMedia and CompactFlash formats for the digital still camera market. Camera makers were looking for a very small, portable, reasonably inexpensive alternative to internal memory or PCMCIA cards (also called PC cards). The two flash formats proved successful, and the memory card market has expanded into other areas. New memory card formats have evolved as well, both flash and non-flash types. Today there are two categories of memory card: 1.) Flash – Solid-state formats that include: CompactFlash, SmartMedia, Memory Stick, MultiMedia, Secure Digital, and Secure MultiMedia. 2.) Magnetic – includes IBM Microdrive, which is a high density, self-contained miniature disc drive that fits in a CompactFlash Type II slot . Among flash formats, CompactFlash, SmartMedia, Memory Stick, and MultiMedia cards are incompatible. Secure Digital and Secure MultiMedia are based on the MultiMedia format, and are backwards compatible with MultiMedia, but are not compatible with each other. This report concentrates on memory cards for consumer applications. There are a number of industrial applications for memory card technologies which are not covered in this report. PC cards are not included in this report because they have become increasingly rare as a storage medium in consumer applications. They are still seen in a few high end digital still cameras, and occasionally as a storage technology in notebook PCs. However, PC cards have been supplanted by the memory card technologies in this report in consumer applications to the point where there are simply too few PC cards in consumer applications to justify a forecast. In addition there are PC card adaptors that allow any memory card technology to be used in a PCMCIA slot, which further reduces the market for PC cards. This report emphasizes removable memory cards that emphasize operation across multiple consumer devices, from digital cameras to music players to handheld PCs. The report does not forecast for 4 © 2001 Cahners In-Stat Group – MM0113MI – Confidential other types of portable memory, such as Iomega PocketZip, DataPlay, or Sony MiniDisc. However those techlogies are discussed in the Memory Card Format section of this report, under the Competing Technologies heading. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 5 Memory Card Formats CompactFlash CompactFlash, along with SmartMedia, were the first mass consumer applications of memory cards. SanDisk developed the CompactFlash standard in 1994 with input from Canon and Kodak, as a format for the digital still camera market. The format employs a 50-pin parallel connector. CompactFlash comes in two types. Type I is a very small removable data storage system. The Type II specifications adds additional card functionality, including a magnetic disc drive capability, like that found in the IBM Microdrive. Type II also includes the specification for input/output cards such as Ethernet, serial, fax modem, digital phone cards, Bluetooth, and 802.11(b). CompactFlash also has a built-in PCMCIA interface, which allows CompactFlash cards to replicate PCMCIA cards with the aid of an adaptor. Type II slots are larger than Type I, and Type II devices use more power than Type I. There are about 30 manufacturers of CompactFlash cards, and over 100 suppliers. The highest capacity currently available in a Type I card is 512 MB, while the highest capacity for Type II is the 1 gigabyte IBM Microdrive. Digital still cameras are still the highest volume application for CompactFlash cards by far. Though dominated by SmartMedia slots in its early years, digital still camera suppliers are increasingly turning to CompactFlash slots. Kodak, Canon, Nikon and HewlettPackard are digital still camera vendors who include primarily CompactFlash slots in their devices. PDAs and handheld PCs are a very rapidly growing segment for CompactFlash cards. CompactFlash slots can be found in the expansion sleeves available with the Compaq iPAQ Pocket PC line. SmartMedia The SmartMedia removable flash standard was introduced in 1996 by Toshiba as the Solid State Floppy Disk Card, or SSFDC. A NAND-type removable flash memory card, it was designed for use in digital still cameras and portable electronics devices. The SSFDC name was changed in July 1996 to SmartMedia. 6 © 2001 Cahners In-Stat Group – MM0113MI – Confidential In July 1996, the world's first digital camera to employ SmartMedia, the DS-7, was introduced by Fuji. Digital still cameras accounted for the vast majority of SmartMedia cards shipped in 2000. Many digital still camera vendors, including Olympus, Toshiba, and Fuji, include SmartMedia slots. While SmartMedia has the lowest cost of manufacture of any removable flash format available, it has no controller, which makes it an inflexible format. Once it is initialized for a certain type of device, it can only be used for that type of device. For example, it cannot be used in a digital still camera, and then in an MP3 player. In addition, it can also only accommodate 2 dies per card, which limits the capacity ceiling. Currently, the highest capacity SmartMedia card is limited to 128MB by the SmartMedia standards body, the Solid State Floppy Disk Card Association (SSFDCA). In addition to digital still cameras, SmartMedia cards were the leading memory card format for portable digital music players in 2000. Photographic inkjet printers are another application for SmartMedia cards. The SSFDCA is administered exclusively by Asian companies, most of whom sell digital still cameras, including Fuji, Olympus, and Toshiba. Memory Stick Sony’s Memory Stick development began in December 1997. Sony developed Memory Stick as a network-centric format that would allow the same card, without the need for reformatting, to be used in multiple devices, including digital still cameras, digital camcorders, handheld PCs and PDAs, and notebook and desktop PCs. In addition, Sony has a secure format, called Magic Gate. For forecasting purposes, Memory Stick and Magic Gate are both considered under Memory Stick. Digital still cameras were the primary application for Memory Stick technology in 2000. Memory Stick was first used in CyberShot digital still cameras, and has recently been designed into new entries in Sony’s Mavica line. Other popular applications for Memory Stick include digital camcorders and PCs. Sony digital camcorders with the capability to take single shots use Memory Stick cards to store those images. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 7 There are a substantial number of companies that have signed up with Sony to employ Memory Stick technology, including Motorola, Fuji, Sharp, Alpine, Real Networks, IBM and NTT DoCoMo. These companies’ products will be seen first in Japan, and afterwards in the US. This will be a big test for Sony. While Sony has quickly integrated the Memory Stick into its own broad consumer electronics line, it remains to be seen how successful it will be integrating it into other companies’ products. This is especially true when considering that there are multiple established flash memory formats with open standards bodies that compete with Memory Stick. Sony’s roadmap for Memory Stick can be seen in Figure 2. Figure 2. Memory Stick Roadmap: 2000 – 2005 2005 2004 2003 2002 2001 2000 0 250 500 750 1,000 1,250 1,500 1,750 2,000 Megabytes Source: Sony Corporation Future applications for Memory Stick include car stereos, mobile phones, and GPS/personal navigation systems. In early 2000, GM and Sony announced a partnership to promote Memory Stick for applications within vehicles in GM’s e-vehicle initiative. Initial applications could be in Auto PCs and various entertainment products. 8 © 2001 Cahners In-Stat Group – MM0113MI – Confidential On August 2, 2001, Samsung Electronics announced that it has agreed to cooperate on developing memory card products in partnership with Sony Corp. of Japan. The two companies signed a memorandum of understanding to strengthen technology cooperation for the Memory Stick. MultiMedia The MultiMedia standard grew out of a joint development between SanDisk Corporation and Siemens AG (now Infineon Technologies AG), and was introduced in November 1997. Siemens had a readonly memory (ROM) technology that both companies agreed would make a good flash technology. The molded package has a seven pin serial interface. The format initially targeted the cell phone market. Partners announced upon the format’s introduction included Nokia, Ericsson and Motorola. The first rewritable MultiMedia card came out in 1999. The MultiMedia standard was developed for cell phone applications. When the format was created, it was expected to accommodate small data storage applications, including e-mail, still images, etc. Now, music is seen as a high growth application, particularly digital music players on mobile phones. PDAs are another rapidly growing application for MultiMedia cards. In addition, a majority of digital camcorders with memory card slots sold in 2000 had MultiMedia slots. Canon, JVC and Panasonic all market multiple digital camcorders that have MultiMedia card slots. Future applications for MultiMedia cards include digital cameras, voice recorders, GPS navigation devices and more. The maximum density MultiMedia card available in mid 2001 is 64MB. A 128MB card should be available in the 4th quarter of 2001, with a 256MB card available in 2002. A 1GB MultiMedia card will be available in 2003 or 2004. In August 2000, SanDisk announced that it would supply Compaq with its MultiMediaCard for storage of compressed music files in Compaq’s iPAQ Personal Audio Player PA-1. Beginning in September 2000, two SanDisk 32-megabyte (MB) solid state MultiMedia cards were provided with each PA-1. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 9 In September 2000 Siemens launched the SL45, the first smartphone with built-in MP3 player and exchangeable memory. The SL45 was available in Europe, South East Asia and South Africa in December 2000. While MultiMedia is expected to grow over the course of this forecast, the format will begin to be cannibalized by the Secure Digital standard, a secure MultiMedia standard which is backwards compatible with it. The price per megabyte of the two formats is similar, and Secure Digital offers security that MultiMedia does not have. Secure Digital In 1999, SanDisk co-developed the Secure Digital Standard with Toshiba and Matsushita. Like the Secure MultiMedia format, the Secure Digital format is backward compatible with MultiMedia. Secure Digital cards have built-in copyright protection and a 9-pin bus for 25 MHz data transfer speed. It is important to distinguish between those devices with MultiMedia slots, and those with Secure Digital slots. While Secure Digital cards are backwards compatible with MultiMedia slots, only Secure Digital slots can take advantage of that format’s security capabilities. Palm’s new handhelds, the m500 and m505, have Secure Digital slots. Panasonic has announced a digital still camera and MP3 player, and Toshiba has announced an MP3 player with Secure Digital slots. Secure Digital slots can be found in Toshiba notebooks in Japan. There are not many applications for Secure Digital in the United States right now, but twelve applications are planned for release by Christmas, with 50 – 80 applications planned worldwide. Applications for Secure Digital focus on music, particularly digital audio players, including other devices that add audio player functionality, such as digital still cameras, PDAs, or cell phones. While Secure Digital cards are optimized for music playback, they can store images or act as a hard drive or floppy disk, just like nonsecure flash formats. Secure Digital cards were shipped only in sample quantities in 2000, but began shipping in volume in the first quarter of 2001. 10 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Secure Digital is expected to be the most successful secure format over the course of the forecast in this report. Secure Digital is also expected to begin to cannibalize sales of MultiMedia cards over the next two years. Secure MultiMedia Secure MultiMedia is a copyright protected version of the MultiMedia format that is compatible with MultiMedia. Within Secure MultiMedia, , there are two formats: E-commerce and Keitaide. The E-commerce card is being promoted by Infineon, and is not yet available on the market. It uses a Public Key Infrastructure (PKI) format, similar to the format used in smart cards. The card is intended for e-commerce transactions on mobile phones. It will have an on-board encryption engine, and will perform like Smart Cards in Europe, as debit cards, and to transfer money at kiosks. The digital rights management is still to be determined. Nokia, Ericsson, and Motorola are all involved with the development of the format. Infineon expects an advanced wireless E-commerce module to be available for phones and PDAs for mobile commerce applications by mid-2002. Others claim an e-commerce-based Secure MultiMedia device will not appear until well into 2003. The other Secure MultiMedia format is a result of the Keitaide consortium, which includes Hitachi, Fujitsu and Sanyo, who want their format to be accepted as a secure MultiMedia format primarily based around music. The Keitaide card is a MultiMedia card with 4 or 5 additional commands to enhance security. In September 2000, Hitachi announced the development of 32- and 64megabyte Secure MultiMedia cards. The Secure MultiMedia Card specification was approved by the MultiMedia Card Association in June 2001. The non-proprietary specification is backward compatible with existing MultiMedia cards, and is based on Infineon’s PKI-based format, and applications will include access over cell phones and PDAs to corporate databases, banking information and entertainment content, as well as allowing stock trading, ticketing and auctioning. It is unclear where this approval leaves the Keitaide format. It is doubtful whether the Secure MultiMedia Card will succeed. There is confusion in the market regarding the secure and non© 2001 Cahners In-Stat Group – MM0113MI – Confidential 11 secure versions. Secure Digital, which is also backward compatible with MultiMedia cards, is a rival secure format that is already in the market, there is only one version of it, and it can be used in secure or non-secure applications. Secure CompactFlash Secure CompactFlash uses the same technology scheme as Secure Digital, called Content Protection for Recordable Media (CPRM), but is more resistant to hacking than Secure Digital. There is a very small additional cost over CompactFlash for 1 MB of key data that secures the card. The secure format does not prevent copying. The Secure CompactFlash format was approved by the CompactFlash Association in May 2001. Secure CompactFlash cards are optional and are completely backward compatible with existing CompactFlash cards. Secure CompactFlash can be implemented on any type of CompactFlash memory card, whether a CompactFlash card or a Microdrive. It is unknown at this time when Secure CompactFlash cards will be available. This format is not forecast separately in this report. Instead, it is included in the CompactFlash forecast. Microdrive IBM’s Microdrive format is a miniature version of a disk drive that fits in a CompactFlash+ Type II slot. The CompactFlash Type II slot is an extension to the Type I slot, but thicker to accommodate the Microdrive. In addition to being thicker, the Microdrive requires more power than the Type I standard provides. The Microdrive was introduced in June 1999, in response to requests from digital still camera manufacturers who needed more affordable higher capacity storage media than was available from portable flash formats. The first product, in June 1999, was a 340MB drive that sold for $499, or $1.33/MB, which was about 2/3 less than the price of flash cards at that time. In 2000, IBM came out with an upgraded Microdrive of 1 GB. Hard drives perform better than Flash, with better write speed and faster retrieval of files. However, since it is not a solid state device, like flash memory cards, it is not as shock resistant. And battery life is much less than with flash cards. 12 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Digital still cameras were by far the largest application for Microdrives in 2000, especially by professional and avid amateur photographers who have greater storage needs. PDAs/Handheld PCs were another prominent applications with CompactFlash Type II slots included in the Casio Cassiopeia and the HP Jornada. Future applications may include MP3 players and digital camcorders. Competing Technologies PocketZip In August 2000, Iomega announced that its Clik line of storage products had been re-branded as PocketZip. Iomega is targeting PocketZip as a low cost alternative to flash cards. The magnetic PocketZip disks and drives are targeted at various consumer devices, including a USB card reader that allows PocketZip disks to download information to a PC, and Iomega’s HipZip Digital Audio Player. Currently, PocketZip disks are available in 40MB densities. Iomega announced the development of a 100MB PocketZip disk in February, but they are not planning to bring it to market until they get OEM agreements in place. Iomega also has plans to make PocketZip a format for pre-recorded content. In January 2001, the company announced an agreement with I-Jam Multimedia L.L.C. to distribute pre-recorded content on 40MB PocketZip disks for distribution at outlets such as Tower Records, Wherehouse Records, Musicland, Borders and on the Internet at MediaBay.com. Iomega has experienced severe corporate problems in 2001, including the resignation of the company’s CEO and massive layoffs. The company is also having trouble finding the partners required to make PocketZip an accepted format in the storage field. With a number of open flash standards, and the huge price drops of flash cards in 2001, in addition to its own corporate problems, there is much doubt over whether Iomega can make PocketZip a viable format in either rewritable or pre-recorded formats. DataPlay DataPlay was founded in November 1998 to develop a custom micro-optical engine to plug into all devices, whether portable or © 2001 Cahners In-Stat Group – MM0113MI – Confidential 13 fixed. Some possible applications for DataPlay disks include digital still cameras, games, handheld PCs/PDAs and USB peripherals. The DataPlay format is suitable both for recording and prerecorded media. Since its primary focus is on pre-recorded media, the company reached agreements with many music content providers, including EMI, BMG and Universal. DataPlay is focusing on OEM developers in their business plan. The have 62 OEM partners, including Samsung, Toshiba, Olympus, Sonic Blue and Casio. Optical is the best format for pre-recorded media since it is easily recordable and masterable, an advantage for working with prerecorded media. The mastering process with DataPlay disks allows the media to be stamped out in high volume, like a DVD or CD. It is also secure. While it handles pre-recorded media well, it can still be used as a blank media for user recording. It is a write-once media, while flash cards can be written to many times. However, DataPlay costs significantly less per megabyte than flash cards. Music will be the primary application for DataPlay at launch. Mobile phones are also a potential application, especially as web browsing becomes more common, and capabilities such as MP3 players are added. These capabilities will create a need for greater storage. Digital still cameras will be another prominent application for DataPlay disks and drives, along with USB readers. DataPlay’s business model is a razors and razor blade model. They want as many of their micro-optical drives in as many devices as possible. DataPlay will sell engines to consumer electronics suppliers, or they will license the engines for a small royalty. DataPlay was originally scheduled to release its media disks in the fourth quarter of 2001. However, citing production delays, it announced in August 2001 that it will release both pre-recorded and blank disks in the first quarter of 2002. DataPlay will face formidable competition in launching its line of media. Substantial competition will come from flash cards, whose prices have fallen dramatically in 2000, as well as rewritable CD and DVD technology. CD-R disks, in particular, are currently available for under 25 cents when purchased in bulk. 14 © 2001 Cahners In-Stat Group – MM0113MI – Confidential MiniDisc Sony’s magneto-optical MiniDisc format went through a product transition in 2000 from a primarily pre-recorded to a recordable media. MiniDisc is an audio only, not a data application. The device records from the PC, radio, portable or home CD player, or through an external microphone. It is connected to a PC via a USB cable. The MiniDisc player converts any digital format, including WAV, MP3, or WMA to Sony’s ATRAC III digital format. The 2.5-inch discs are $2 - $3 apiece, and can play from 74 to 80 minutes uncompressed. With MiniDisc Long Play, up to 5 hours of music can be recorded. MiniDisc is a real time transfer technology. The security system does not allow a copy to be made of a copy. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 15 Memory Card Applications Digital Still Cameras Digital still cameras are the largest market for memory cards. Indeed, they were the reason that small, portable flash card formats like CompactFlash and SmartMedia were created. These media are ideal for digital still cameras. In addition, the first application for Memory Stick technology was digital still cameras. Flash media is particularly convenient for this application. It is affordable, small, and easy to load and unload. It is the establishment of flash technology in digital still cameras that allowed it to springboard into the multiple applications seen in this section. SmartMedia made the biggest early impact in this segment, with many Japanese digital still camera suppliers adopting the format. However over the last few years, CompactFlash has had more design wins, and in 2001 is expected to pass SmartMedia in terms of cameras slots shipped. PCMCIA cards, while once popular in high end digital still cameras, are now seen rarely in this market. Memory Stick is doing relatively well, based on the strength of Sony in the market. But Sony will have to prove over the next few years that it can convince other companies to adopt the format. Penetration of memory card slots in digital still cameras is already quite high. On a percentage basis, it is not expected to increase much more over the length of this forecast, since memory card slots are not expected to be put into low end digital still cameras. But on a unit basis, the digital still camera market is expected to continue to be the largest market for memory cards for the next five years. Table 1 shows the penetration of memory card slots in the digital still camera market. Table 1. Digital Still Cameras w/ Removable Storage Percentage Memory Card Slot Penetration in Digital Still Camera Market (000s) 2000 12,100 10,500 86.8% 2001 18,800 16,500 87.8% 2002 25,000 22,100 88.4% 2003 31,000 27,500 88.7% 2004 34,600 31,000 89.6% 2005 41,000 37,200 90.7% CAGR 27.6% 28.8% Source: Cahners In-Stat Group 16 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Portable Digital Music Players Portable digital music players refer to the class of solid state audio players that use various types of digital storage formats, including MP3, AAC and WMA, to play audio in the form of digital audio files. Perhaps the greatest challenge for discrete portable digital music players is the technology’s inclusion in a number of other portable consumer electronic devices. Mobile phones with MP3 players have come onto the market over the past year, with models available from Ericsson, Nokia and Siemens, among others. In addition, MP3 players in Handheld PCs and PDAs are becoming increasingly common. Portable digital music players have internal storage, and an increasing number have memory card slots as well. SmartMedia was the dominant format of memory card for music players in 2000, followed by MultiMedia and CompactFlash, with Memory Stick a distant fourth. Memory cards penetrated about 10% of portable digital music players in 2000. This is expected to increase sharply over the length of the forecast. Table 2 shows the penetration of memory card slots in the portable digital music player market. Table 2. Portable Music Players w/ Removable Storage Percentage Memory Card Slot Penetration in Portable Digital Music Player Market (000s) 2000 2,900 290 10.0% 2001 4,800 1,200 25.0% 2002 6,900 2,400 34.8% 2003 8,600 4,300 50.0% 2004 10,100 6,200 61.4% 2005 14,100 10,500 74.5% CAGR 37.2% 105.0% Source: Cahners In-Stat Group Handheld PCs/PDAs Handheld PCs/PDAs refers to small, portable devices that perform tasks such as scheduling, and include address books, as well as basic computing functionality, and in some cases, web browsing and e-mail. Several prominent manufacturers in this category, including Compaq, Hewlett-Packard, and Palm have introduced models that have memory card slots. Palm’s recently released m500 and m505 PDAs accept Secure Digital cards. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 17 There are also applications for ROM cards in this market. Infineon currently produces an Infineon brand MultiMedia ROM card to provide pre-recorded content like location cards, dictionary/thesaurus, game cards, restaurant guides and maps for PDAs. ROM cards are much cheaper than fully functional flash cards, and so are enjoying some success in this market. MultiMedia card slots lead in this market, but Secure Digital, Memory Stick, CompactFlash and SmartMedia slots can all be found. Table 3 shows the penetration of memory card slots in the handheld PC/PDA market. Table 3. Handheld PCs/PDAs w/ Removable Storage Percentage Memory Card Slot Penetration in Handheld PC/PDA Market (000s) 2000 6,600 1,600 24.2% 2001 7,300 2,800 38.4% 2002 8,500 3,500 41.2% 2003 10,300 4,900 47.6% 2004 12,800 7,200 56.3% 2005 17,000 12,100 71.2% CAGR 20.8% 49.9% Source: Cahners In-Stat Group Digital Camcorders Digital camcorders are rapidly increasing market share at the expense of traditional analog camcorders. They allow the user the capability of downloading video directly into a computer for editing, and often allow the ability to take single shots, like a digital still camera. Digital camcorders with single shot capability often have memory card slots so images can be stored on cards. Memory cards that actually record video, rather than store single shots off digital camcorders, are dependent upon two things: the development of much higher capacity memory cards in the multiple gigabyte range, and the continuing development of better video compression technologies. Table 4 shows the penetration of memory card slots in the digital camcorder market. Table 4. Digital Camcorders w/ Removable Storage Percentage Memory Card Slot Penetration in Digital Camcorder Market (000s) 2000 6,400 1,100 17.2% 2001 8,400 1,800 21.4% 2002 10,200 2,700 26.5% 2003 12,300 5,900 48.0% 2004 13,800 8,500 61.6% 2005 14,500 10,600 73.1% CAGR 17.8% 57.3% Source: Cahners In-Stat Group 18 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Mobile Phones Two types of mobile phones currently have memory card slots: high-end phones and phones with MP3 capability built-in. Two examples of high-end mobile phone are the Nokia Communicator 9110 and 9120, which combine mobile phone and PDA functionality. More common in the future will be phones that include built-in MP3 players, including models recently introduced by Siemens, Nokia, Sanyo, and Ericsson. It is no surprise that the MultiMedia card format, which was created for this application, dominates the mobile phone space. Memory cards allow more information to be loaded into the phone, for applications such as restaurant guides and maps. Table 5 shows the penetration of memory card slots in the mobile phone market. Table 5. Mobile Phones w/ Removable Storage Percentage Memory Card Slot Penetration in Mobile Phone Market (000s) 2000 402,000 50 0.0% 2001 465,700 150 0.0% 2002 603,600 400 0.1% 2003 752,100 1,400 0.2% 2004 889,400 3,800 0.4% 2005 997,700 7,700 0.8% CAGR 19.9% 173.8% Source: Cahners In-Stat Group Notebook PCs Sony has Memory Stick slots in four of its five Vaio Notebooks currently marketed in the United States. Toshiba also includes SmartMedia slots in some of its higher end Satellite Notebook PCs. Flash slots are not generally seen in notebook PCs because they are not practical. Notebook PCs already have PCMCIA card slots, so PC manufacturers usually do not want to add the cost of another slot. And PC card adaptors that allow other memory cards to be used in a PC card slot are relatively inexpensive. Table 6 shows the penetration of memory card slots in the notebook PC market. © 2001 Cahners In-Stat Group – MM0113MI – Confidential 19 Table 6. Memory Card Slot Penetration in Notebook PC Market (000s) 2000 24,500 1,100 4.5% Notebook PCs w/ Removable Storage Percentage 2001 26,600 1,300 4.9% 2002 30,600 1,500 4.9% 2003 36,900 1,900 5.1% 2004 44,200 2,400 5.4% 2005 52,400 3,100 5.9% CAGR 16.4% 23.0% Source: Cahners In-Stat Group Ink Jet Printers Ink jets are a growing field for memory card slots, specifically photographic ink jets. Memory card slots provide a way to bypass the PC when printing pictures. Instead of printing a file off the PC, the card is placed directly in the printer. The printer generally has an LCD screen, allowing the user to choose which picture to print. The following companies currently market photographic ink jet printers with memory card slots: • Hewlett-Packard • Kodak • Polaroid • Fujifilm • Lexmark Photographic ink jet printers are a growing market for memory cards, outpacing the growth of the ink jet market as a whole. Table 7 shows the penetration of memory card slots in the ink jet printer market. Table 7. Ink Jet Printers w/ Removable Storage Percentage Memory Card Slot Penetration in Ink Jet Printer Market (000s) 2000 58,000 280 0.5% 2001 57,300 340 0.6% 2002 62,000 370 0.6% 2003 68,300 480 0.7% 2004 75,000 600 0.8% 2005 81,500 730 0.9% CAGR 7.0% 21.1% Source: Cahners In-Stat Group 20 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Memory Card Readers USB memory card readers work very well for desktop PCs. About the size of a mouse, they cost as little as $20 and are plug and play. There are also readers that connect to the parallel port or IEEE 1394 port. They generally are a single chip design that simply shows up as an extra drive on the PC. Table 8 shows the forecast for memory card reader unit shipments. Table 8. Memory Card Reader Market (000s) 2000 1,800 Readers 2001 2,100 2002 2,600 2003 3,200 2004 3,800 2005 4,500 CAGR 20.1% Source: Cahners In-Stat Group Other Video Games Sony markets an 8MB flash memory card for its PlayStation 2 console, as well as a non-flash memory card for PlayStation and PSOne consoles. The PlayStation 2 memory card comes ready with Sony’s MagicGate data encryption technology. However, these cards are compatible only with PlayStation consoles, and thus are not considered for the purposes of this report. Desktop PCs Sony includes Memory Stick slots in some of its Vaio Slimtop desktop models. Memory card slots are not generally seen in desktop PCs because they are not practical. The PC market is a very price sensitive one and PC manufacturers generally do not want to add the cost of another slot, particularly when inexpensive memory card readers (see above) are available. Automotive Sony is pursuing automotive applications for Memory Stick. There are applications for Memory Stick that are now just emerging in Japan, including car stereos, mobile phones, and GPS/personal navigation systems. And at CES 2000, GM and Sony announced a partnership to promote Memory Stick for applications within vehicles in GM’s e-vehicle initiative. Initial applications could be in Auto PCs and various entertainment products. GM has plans to © 2001 Cahners In-Stat Group – MM0113MI – Confidential 21 use Memory Stick within the car to capture, receive, and playback navigation, data and entertainment downloaded from the Internet and other devices. Table 9 shows the forecast for Other unit shipments. Table 9. Memory Cards in Other Markets (000s) 2000 Other 300 2001 425 2002 600 2003 780 2004 1,000 2005 1,270 CAGR 33.5% Source: Cahners In-Stat Group 22 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Forecast The forecast for memory cards can be seen in the tables and figures below. The forecast includes all types of memory cards, whether based on flash memory, magnetic, or optical drives. Forecasts are divided by memory card type and application. By Memory Card Type Unit shipments by memory card type can be seen in Table 10 and Figure 3 below. SmartMedia and CompactFlash have been the dominant memory card formats for the last 5 – 6 years, based on their early development for digital still cameras. CompactFlash is scheduled to pass SmartMedia for the first time in unit sales in 2001. SmartMedia’s share of the market will decline over the length of the forecast due to lower density availabilities and less flexibility compared to other formats. Sony’s Memory Stick media is expected to grow over the course of this forecast, as will Secure Digital, a format that is backwards compatible with MultiMedia, which should begin to cannibalize MultiMedia sales over the next few years. Microdrive is a mini disk drive system developed by IBM that should do well in high-end digital still cameras. Table 10. CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive Total Memory Card Unit Shipment Forecast by Card Type (000s) 2000 12,500 13,800 5,500 4,200 0 0 500 2001 16,500 15,500 8,200 5,000 4,000 0 660 2002 21,500 17,000 11,000 5,800 6,800 100 870 2003 24,900 18,500 14,400 6,400 10,100 400 1,100 2004 27,500 18,000 17,800 7,000 16,700 900 1,500 2005 29,600 17,700 22,700 7,500 25,400 1,500 2,000 CAGR 18.8% 5.1% 32.8% 12.3% 58.7% 146.6% 32.0% 36,500 49,860 63,070 75,800 89,400 106,400 23.9% Source: Cahners In-Stat Group © 2001 Cahners In-Stat Group – MM0113MI – Confidential 23 Figure 3. Memory Card Unit Shipment Forecast by Card Type (000s) 120,000 100,000 Units Shipped (000s) 80,000 Microdrive Secure MultiMedia Secure Digital MultiMedia Memory Stick SmartMedia CompactFlash 60,000 40,000 20,000 0 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group The forecast for memory card revenue can be seen in Table 11 and Figure 4. Rapidly falling prices for the various media is expected to cut into profit margins substantially over the course of the forecast. In just the past year, falling flash chip prices have led to significant price erosion of the flash-based formats, as seen in Table 12 and Figure 5. Table 11. Memory Card Revenue Forecast by Card Type ($000s) 2000 $450,000 $520,260 $332,750 $157,080 $0 $0 $142,500 CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive Total 2001 $422,400 $411,060 $367,360 $120,000 $65,600 $0 $148,500 2002 $532,770 $418,880 $376,200 $134,444 $119,952 $2,750 $167,475 2003 $578,178 $414,400 $414,720 $135,168 $181,800 $10,800 $181,500 2004 $613,800 $369,360 $532,576 $138,880 $331,328 $29,232 $213,300 2005 $653,568 $354,000 $605,636 $158,700 $573,024 $50,400 $209,000 CAGR 7.7% -7.4% 12.7% 0.2% 71.9% 163.7% 8.0% $1,602,590 $1,534,920 $1,752,471 $1,916,566 $2,228,476 $2,604,328 10.2% Source: Cahners In-Stat Group 24 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Figure 4. Memory Card Revenue Forecast by Card Type ($000s) $3,000,000 $2,500,000 Revenue ($000s) $2,000,000 Microdrive Secure MultiMedia Secure Digital MultiMedia Memory Stick SmartMedia CompactFlash $1,500,000 $1,000,000 $500,000 $0 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group Table 12. CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive Price per Megabyte Forecast by Card Type ($) 2000 $1.50 $1.45 $2.75 $1.70 2001 $0.80 $0.78 $1.60 $0.80 $0.82 $0.75 $0.50 2002 $0.59 $0.56 $0.95 $0.61 $0.63 $1.25 $0.35 2003 $0.43 $0.40 $0.60 $0.44 $0.45 $0.75 $0.25 2004 $0.31 $0.27 $0.44 $0.31 $0.32 $0.58 $0.18 2005 $0.23 $0.20 $0.29 $0.23 $0.24 $0.40 $0.11 CAGR -31.3% -32.7% -36.2% -33.0% -26.4% -31.6% -31.9% Source: Cahners In-Stat Group © 2001 Cahners In-Stat Group – MM0113MI – Confidential 25 Figure 5. Price per Megabyte Forecast by Card Type ($) $3.00 $2.50 Price per MB ($) $2.00 CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive $1.50 $1.00 $0.50 $0.00 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group The forecast for total megabyte shipment by storage type can be seen in Table 13 and Figure 6. Secure Digital is expected to grow very rapidly, and to emerge as a competitor to the CompactFlash format. Memory Stick will also grow rapidly, with its strong position in Sony consumer electronic products. Table 13. CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive Total Total Megabytes Shipment Forecast by Card Type (000s) 2000 300,000 358,800 121,000 92,400 0 0 190,000 2001 528,000 527,000 229,600 150,000 80,000 0 297,000 2002 903,000 748,000 396,000 220,400 190,400 2,200 478,500 2003 1,344,600 1,036,000 691,200 307,200 404,000 14,400 726,000 2004 1,980,000 1,368,000 1,210,400 448,000 1,035,400 50,400 1,185,000 2005 2,841,600 1,770,000 2,088,400 690,000 2,387,600 126,000 1,900,000 CAGR 56.8% 37.6% 76.8% 49.5% 133.7% 285.5% 58.5% 1,062,200 1,811,600 2,938,500 4,523,400 7,277,200 11,803,600 61.9% Source: Cahners In-Stat Group 26 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Figure 6. Memory Card Total Megabytes Shipment Forecast (000s) 14,000,000 12,000,000 MB Shipped (000s) 10,000,000 Microdrive Secure MultiMedia Secure Digital MultiMedia Memory Stick SmartMedia CompactFlash 8,000,000 6,000,000 4,000,000 2,000,000 0 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group The forecast for average megabytes per card shipped can be seen in Table 14. Most flash formats are expected to roughly mirror each other in average density. An exception is Microdrive, which will be much higher. Table 14. CompactFlash SmartMedia Memory Stick MultiMedia Secure Digital Secure MultiMedia Microdrive Average Megabyte per Card Shipped 2000 24 26 22 22 2001 32 34 28 30 20 380 450 2002 42 44 36 38 28 22 550 2003 54 56 48 48 40 36 660 2004 72 76 68 64 62 56 790 2005 96 100 92 92 94 84 950 CAGR 32.0% 30.9% 33.1% 33.1% 47.2% 56.3% 20.1% Source: Cahners In-Stat Group © 2001 Cahners In-Stat Group – MM0113MI – Confidential 27 By Application Table 15 and Figure 7 show the forecast for memory card slots by application. It needs to be emphasized that the forecast is for slots, not memory cards shipped, in each application. The forecast represents the potential market for memory cards. Digital still cameras are currently the largest market for memory cards, and will remain so for the duration of the forecast. Although digital cameras will dominate over the forecast period, portable digital music players and mobile phones will exhibit the highest grow rates, at over 100% CAGR. Handheld PCs/PDAs are a rapidly growing market for memory cards, especially with Palm’s introduction this year of two new models with Secure Digital slots. Digital camcorders will be a growing market, as new models add digital still camera capability, and add the capability to store those images on memory cards. Most Sony Notebook PCs, as well as a few Toshiba models, have memory card slots. Readers are a popular application since they allow various types of memory cards to transfer data into desktop and notebook PCs, usually through a USB port. Table 15. Memory Card Slot Forecast by Application (000s) Digital Still Cameras Portable Dig. Music Players Handheld PCs/PDAs Digital Camcorders Mobile Phones Notebook PCs Ink Jet Printers Readers Other 2000 10,500 290 1,600 1,100 50 1,100 280 1,800 300 2001 16,500 1,200 2,800 1,800 150 1,300 340 2,100 425 2002 22,100 2,400 3,500 2,700 400 1,500 370 2,600 600 2003 27,500 4,300 4,900 5,900 1,400 1,900 480 3,200 780 2004 31,000 6,200 7,200 8,500 3,800 2,400 600 3,800 1,000 2005 37,200 10,500 12,100 10,600 7,700 3,100 730 4,500 1,270 CAGR 28.8% 105.0% 49.9% 57.3% 173.8% 23.0% 21.1% 20.1% 33.5% Total 17,020 26,615 36,170 50,360 64,500 87,700 38.8% Source: Cahners In-Stat Group 28 © 2001 Cahners In-Stat Group – MM0113MI – Confidential Figure 7. Memory Card Slot Forecast by Application (000s) 100,000 90,000 80,000 Units Shipped (000s) 70,000 Other Readers Ink Jet Printers Notebook PCs Mobile Phones Digital Camcorders Handheld PCs/PDAs Portable Dig. Music Players Digital Still Cameras 60,000 50,000 40,000 30,000 20,000 10,000 0 2000 2001 2002 2003 2004 2005 Source: Cahners In-Stat Group © 2001 Cahners In-Stat Group – MM0113MI – Confidential 29 Click below to find more Mipaper at www.lcis.com.tw Mipaper at www.lcis.com.tw