State of Telecom Industry in Pakistan

The trend to store more and more digital info and entertainment  — such as video, music and digital photos – on the handsets is creating a demand for more memory storage. Apple’s iPhone, with 8GB memory available, has accelerated the race. Flash memory is the term for chips that can store data even if a device is off (also called non-volatile memory). Flash memory is commonly used in usb drives, digital cameras and mp3 players and has replaced bulky and expensive solid-state drives.

The demand for memory in Pakistan is also high. A common use of such memory is to swap content offline. The word from blogistan (Pakistani blogosphere) is that this is how most of the “entertainment” circulates, either from person-to-person or from the street vendors.

According to iSuppli, a market-analysis company, the amount of available memory in cellphones is expected to surge tenfold in the next two years. This puts handset manufacturers in a difficult situation as they struggle to keep the costs down and profitability up. This is less of an issue for high-end phones with better margins.

As recently reported by Wall Street Journal: 

Flash is a popular option for handset makers because its thin profile and low power consumption make it ideal for increasingly smaller phone designs. The demand for more memory, however, leaves handset makers a few unsavory options, such as eating the costs, raising the product’s price or making consumers buy their own removable flash cards.

To keep costs down, handset makers have gone with the third option of making consumers buy their own removable flash cards. The companies argue the external memory is more flexible because users can swap out cards with different data.

“If we have to put in more memory, you have more cost,” said Muzib Khan, who heads up product management and engineering at Samsung Electronics Co.’s U.S. telecommunications unit. “That has to be translated into the price. If you can’t, it hits your bottom line.”

Nokia Corp. spokesman Keith Novak argued the increased efficiencies derived from mass production would keep costs under control. Many handset makers, meanwhile, have chosen to work on devices that combine some internal memory with an external slot. Mr. Novak added that in the long run, Nokia will be able to cram more gigabytes into the phone at the same or a cheaper price.

But in the near term, the price of a certain kind of flash memory called NAND looks to be on the rise. Prices for flash jumped 60% since May. It has benefited Samsung, among the world’s largest providers of flash memory.

Another alternative for handset makers is to raise the average selling price for their products that use flash, in effect making consumers pick up the slack. Other consumer-electronic-device makers have been wrestling with the problem. But most manufacturing executives say, for now, that is out of the question, given consumer expectations about their electronics.

“When is the last time you saw an electronics company raise prices?” said Greg Shoemaker, who heads up procurement for Hewlett-Packard Co., which uses flash memory in its cameras and USB-based data storage devices. “Electronics consumers don’t expect to pay more for performance; they expect to pay less,” he added.

Flash-based device makers say they can still digest the increased costs of the chips with little impact on margins, profit or what they charge consumers for what they make. Ultimately, the next few product-manufacturing cycles could weigh heavily on whether flash continues its rapid adoption or falls back into relative obscurity, say manufacturing executives.