Hard disk versus Flash MP3 players

June 10, 2005 The global love affair with the portable digital music (aka MP3) player continues to flourish with more players, larger capacities and cheaper prices, all the while fueled by more of the population exploring digital music and podcasts, and encouraging and showing their friends to try them. For those not entirely clear on what podcasting is, podcasting allows online audio content to be delivered via RSS, the same XML format used to syndicate Web sites and blogs (Gizmag has an RSS feed and we’re intending to begin podcasting before the end of the year). The term "podcasting" combines the words iPod and broadcasting, though an iPod is not required and any MP3 player or computer will suffice. For a great overview of Podcasting, see Joel Gehman’s Rich Media Insider column entitled “Podcasting Demystified” and BusinessWeek’s special report entitled “The Lowdown on Podcasting.”

If you’ve noticed a proliferation of smaller, cheaper flash memory-based MP3 player siblings of larger Hard Disk Drive (HDD) MP3 players (usually with a mini or junior added to the name), it’s because flash memory has in recent times got MUCH cheaper. But while HDD MP3 players are now approaching 100GB, it’s the flash players that are emerging as the stronger growth segment.

Today, the large majority of MP3 player manufacturers are offering product lines that use two different memory formats - hard disk drives (HDD) and Flash memory. Sales of HDD and Flash-based MP3 players have been booming due to increased availability of products and the popularity of downloading music online. Over the next year, vendors will continue to increase hard drive space; however Flash memory is emerging as the stronger growth segment.

Flash memory comes in two different types: NOR Flash and NAND Flash. NAND Flash is distinguished from NOR Flash memory by its smaller cell size and lower cost per bit. It is the preferred type of Flash memory for digital cameras, USB memory, and portable audio players. Therefore, we will refer to NAND Flash memory in this analysis.

There have been significant advancements in Flash memory capacities this year; and as a result, Apple and other MP3 player vendors are now offering 1 GB Flash-based MP3 players. In fact, Flash-based MP3 players made up 63% of all 2004 MP3 player shipments worldwide. Flash-based MP3 players can be expected to capture a greater share of the MP3 market in 2005, as well.

A large portion of the Flash-based MP3 player growth can be attributed to the fact that leading Flash memory manufacturers are using Multi-Level Cell (MLC) technology for the recent crop of products. As a result, the price-per-megabyte for Flash memory is falling significantly. This is because MLC technology involves storing multiple bits of information on a single memory transistor.

Storing two bits per memory cell instantly doubles the density in the same space, and lowers the price-per-megabyte. In comparison, Single Level Cell (SLC) technology allows for only one bit of information on a cell. MLC technology will provide higher capacities, higher data storage capabilities and the best price-per-megabyte (Mbyte). It is important to note that NAND Flash is typically bought by the megabyte. Therefore, as the chip capacity progresses, the key factor for vendors is price-per-Mbyte. Many HDD suppliers are wondering how the competitive landscape will change as prices for Flash memory drop and capacities increase. In general, hard disks have a lower price-per-Mbyte at high capacities, but have fixed costs that make them more costly at lower capacities. Therefore, analysts such as In-Stat believe the two memory formats will always co-exist. Customers who require 20 to 60 GB of capacity in their digital audio players are music enthusiasts who require large amounts of memory to store enormous music libraries. They want all their music with them at all times; therefore they will require higher-capacity HDD players. On the other hand, there will be a wide audience that is price-sensitive and does not require loads of memory space, especially first-time MP3 player buyers. These customers will turn to lower-priced, Flash-based MP3 players.

At least that’s the theory. If you wish, or have a business need to understand the finer points of this burgeoning marketplace, In-Stat's Digital Audio and MP3 player report (IN0502148ID) is due to be published later this month and will contain far more detailed information on the digital audio player market and offer five-year forecasts for shipments and revenue, consumer survey information, and a detailed discussion of market trends.

All in all, In-Stat believes Flash memory will remain the larger segment in memory technology this year because prices are falling rapidly and densities are increasing. In addition, Flash memory is smaller and consumes less battery power so it is reasonable to conclude that Flash memory will be the primary memory used in MP3 players that are priced aggressively and that require low power consumption.

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