In 2003, Intel, the world's largest supplier of flash memory chips, decided to raise product prices in a bid to deal with the potential downturn and oversupply in the segment. The plan backfired, and within a year, Intel found itself in the fourth slot behind Samsung, Spansion and Toshiba.

At around the same time, something more crucial was brewing on the sidelines. While Intel focused on its forte—NOR memory technology, which is traditionally used for code storage and considered a sweet spot in cellular handset design—the soaring popularity of digital cameras and USB drives boosted demand for the rival NAND memory chips.

Then came the defining moment: Apple Computer's launch of its NAND-based iPod Nano MP3 player. The advent of Nano as a replacement of the miniature HDD-based iPod Mini was truly a milestone for the memory industry at large.

So far, NAND and NOR memory technologies have coexisted by catering to relatively different tasks: NAND is considered suitable for storing data, while NOR is frequently used as bootstrap memory or to hold a program.

But such boundaries are blurring with the emergence of new products at the crossroads of digital media convergence. High-end camera phones and handheld game consoles are just two examples. NAND flash vendors are aggressively finding new venues of storage in notebooks, small form factors and entertainment PCs with no small help from Microsoft.

At least two features that Microsoft has built into its upcoming Vista operating system would call for NAND flash memory use. Moreover, Samsung has already started offering a 32Gbyte NAND flash as solid-state disk (SSD) for notebook computers.

Another significant possibility is the use of NAND flash as an external memory device. Some people are even talking about NAND flash as a hybrid device with HDDs.

In a NAND vs. NOR scenario, NAND flash products are clearly stealing the show, and testament to this is the fact that Intel, one of the pioneers in the NOR flash arena, has joined hands with Micron to form a joint-venture firm that will produce NAND memory chips. IM Flash Technologies LLC will manufacture 72nm chips in volume for its parent companies.

And Intel is not alone in its catch-up bid. Infineon acknowledges that it is in catch-up mode, while Japan's Elpida seems to be making up its mind. Elpida, which sells DRAMs, may have good reasons to enter into the flash business after Renesas' exit from the flash memory market last year.

At a time when Samsung, Hynix and Micron continued to convert excess DRAM capacity to gain market share in NAND flash, Renesas, whose core focus is now on microcontrollers and SoCs, couldn't devote enormous production resources to this competitive market.

NAND flash is undoubtedly the new wunderkind of the semiconductor industry and we probably owe it to the rise of digital consumer applications. But as some silicon giants gear up for huge production capacity, industry observers are expressing fears of a NAND flash glut similar to the DRAM oversupply saga we saw a few years ago.

Will ghosts of the DRAM oversupply fiasco return to haunt the flash boom? After all, it's DRAM vendors like Samsung, Hynix and Micron who are benefiting from the roaring flash market. And the NAND market has many of the DRAM market's characteristics.

In retrospect, however, unlike DRAM chips—which more or less relied on the PC market—flash demand is distributed among differentiated product portfolios, and that could give it some kind of safety net.

For now, the digital consumer segment shows no signs of slowing down and we can safely say that 2006 is going to be the year of NAND flash.

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