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Tablet-Driven Economy

Talking about the distribution of nonvolatile memory among different device categories, Samsung envisions dramatic changes in the driving forces of the market. In this year memory cards and USB flash drives begin to lose their leading position.

Smartphones, SSDs and tablet PCs are the new demand-boosting factors. With Apple's endorsement, tablet PCs have given rise to a whole new segment in the computer industry and promise to grow threefold, from 3% to 9%, among the key NAND flash consumers. SSDs will also grow impressively from 6 to 10%. Smartphones will increase their share by 4%, which is quite a lot, too.

Overall, a total of 9.5 billion gigabytes of NAND flash will be produced in 2010, which is 74% more than in 2009. That’s not the biggest annual growth in the last decade, though. This memory type made its biggest leap in 2005 – 245% in one year! – to leave NOR flash behind in terms of production volumes.

The expectedly high demand for tablet PCs and the growth of the smartphones’ share are the consequence of the rising popularity of social networks and wireless communication devices. For example, the Facebook social network grew from 250 to over 500 million active users over only one year from 2009 to 2010. The daily number of its users has increased from 120 to 200 million. The number of photographs posted on the site’s pages has increased, too, from 1 to 3 billion. In 2009 there were 10 million monthly updated videos, but now this number amounts to over 12 million. Interestingly, 120 million users have mobile access to the site whereas one year ago mobile Facebook users were only one fifth of that number.

The numbers are indicative of a significant growth of transferred multimedia data and of the ongoing shift towards mobile devices. Notebooks are not necessary and even redundant for consuming the informational noise generated by social networks whereas smartphones and tablet PCs are quite enough. Both these categories of mobile devices utilize flash memory. You won’t find HDDs in smartphones, you know. However, it is necessary to quickly increase the amounts of memory in such devices to keep up with the customers’ growing demands.

The important role of social networks in the regular exchange of Internet traffic is indicated in a study conducted by Morgan Stanley Research. As the diagram shows, the number of users of various Web communities exceeded the number of registered email users in July 2009. And it is as far back as November 2007 that the total time Internet users spend communicating in social networks exceeded the time they spend on email.

By the way, these diagrams provide some ground for analysts to predict a death of email communication in the next few years. By the end of the next half a decade email will remain only as a work tool in business applications and will account for but a very small share of an average user’s time and traffic.

According to Cisco Visual Networking Index, the average monthly traffic is 21,367 petabytes in 2010 (1 PB equals 13.3 years of Full-HD video). With a predicted average annual growth rate of 40%, the monthly amount of traffic will have exceeded 600,000 petabytes (or 600 exabytes) by 2020. By 2040, the monthly traffic will be as huge as 500 zettabytes. We will only have yottabytes left for measuring as we haven’t invented larger measurement unites as yet. We need a new unit, adds Samsung jokingly.

Driven by Apple’s will, tablet PCs may sell 15 million units in their first year on the market. This will largely be Apple’s iPad since most competitors won’t be in time to release their alternatives even by the Christmas season, yet we are still looking forward to such products as the Samsung Galaxy Tab, ASUS Eee Pad, Dell Looking Glass, HP Slate, Motorola Everest and Cisco Converj. The total sales of tablet PCs are going to increase to 50 million units in 2011 and to 80 million units in 2012. The diagram from iSuppli shows the sales growth and the amount of flash memory used, indicating that the amount of that memory is growing up at a faster rate than the number of tablet PCs. The diagram from Forrester Research shows the share of tablet PCs on the USA personal computer market.

We guess these data are going to be roughly the same for other developed markets, i.e. for Western Europe and Japan. You can see that there is now a fourth element in the PC market starting from 2010. And this element is now only growing by itself but also eating up the shares of the older PC categories. Analysts from Goldman Sachs Research predict that in the years of 2010 and 2011 about 60% of all tablet PCs sold will be demanded for their own sake whereas 40% will be bought to replace notebooks and netbooks. More specifically, 95% of those replacement tablet PCs will replace netbooks and 5% of them will replace notebooks. The PC market will shrink by 7 million systems as the result.

In 2011, the percentages will change: 50% of the buyers of tablet PCs will prefer them to netbooks and 20% of the buyers will prefer tablet PCs to notebooks. The resulting 20 million systems will add to the market of flash memory which remains the only reasonable technology for tablet PCs and is not used much in netbooks or notebooks. An increase in tablet PC sales by 3.7 times will provoke a 5-fold increase in flash memory consumption because of the ever-growing amounts of digital content.

Another notable contributing factor to the growth of the flash memory market is the market of electronic readers. Although some people argue that the Apple iPad is going to kill the e-reader as an independent class of products, this market is expected to develop at its own rate and consume its share of NAND flash, increasing the amount of onboard memory per device.

The average annual growth of e-reader sales is expected to be 70% in the next few years. The online shopping site Amazon already sells more electronic texts than hardcover books, expecting to outperform the conventional paper in every type of publication during the year. The Amazon Kindle is popular because the e-reader itself is priced close to its manufacturing cost whereas the manufacturer collects its profit by selling texts.

Finally, there are smartphones which will also show a steady sales growth of about 36% annually in the next two or three years. In fact, the mobile phone market at large has been expanding only through smartphones in the last two years while the sales of ordinary mobile phones stay at the same level. The average amount of integrated NAND flash memory in this year’s smartphones is 5.9 gigabytes. This number is going to increase to 9.5 gigabytes in 2011 and to 13.3 gigabytes in 2012, etc (data from Forward Insight). Considering that users often expand their smartphone memory with memory cards, this category of devices is increasing its consumption of flash memory at a high rate, too.

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