Hwang, however, had a different revolution in mind -- the revolution in data storage through NAND flash-memory chips. The Nano uses flash chips rather than a hard-disk drive to store its 1,000 songs, and Samsung, the world's biggest maker of flash chips, has a contract to supply most of them. Using the less bulky flash chips -- which don't run on mechanical parts and retain data even when a device's power is cut off -- made the Nano's ultra-thin shape possible. It will replace the bigger, hard-drive-driven iPod Mini.
The Nano is just one of dozens of digital devices that are expected to switch over to NAND memory. Sales of the chips have quadrupled in recent years, from $2.3 billion in 2002 to a projected $10.1 billion this year, and Samsung boasts some 60% of the market. In the future, the fingernail-size flash chip will carry not only thousands of music files but also even larger types of files, such as movies. Patients will swallow a pill containing a tiny NAND memory chip and a radio transmitter to store and send out data on their health to their doctors. To show its commitment to this market, Samsung announced on Sept. 29 a hugely ambitious $33 billion program to expand its chipmaking capacity. "Flash memory will eventually replace all mobile storage devices -- film, tapes, CDs, and hard-disk drives. And that would be in the fairly near future," Hwang predicts.STILL TOO PRICEY
Hwang may be overstating it. Sure, Samsung researchers have been doubling the capacity of their flash products every year since they introduced a 256-megabit chip in 1999. But the high cost of flash chips means that in mobile devices hard drives will play a role for years. Indeed, tech experts contend Apple was able to replace the iPod Mini with the Nano at a reasonable cost only because Samsung gave it a great deal. According to market researcher iSuppli, Apple is paying Samsung $54 for each two gigabytes of memory, a hefty 40% discount from going rates. Apple and Samsung will not discuss details of their contract.
Meanwhile disk-drive makers, including Hitachi GST in San Jose, Calif., and Seagate in Scotts Valley, Calif., aren't giving up. The newest drives are lighter, more powerful, and less costly. The Nano, says chip analyst Takeo Miyamoto at CLSA in Japan, "won't mean the instant termination of micro drives." Toshiba, the No. 2 NAND chip maker, remains fully committed to hard drives.
Still, there's no doubt that flash chipmakers are seeing explosive growth. The chips are in widespread use in the manufacture of digital cameras, and there is growing demand for them from makers of music players, USB drives, camcorders, game consoles, and, especially, mobile phones. "As phone makers pack in multiple functions requiring huge data storage, phones will drive up the need for the chips," reckons Kim Soo Kyoum, semiconductor program director at research firm IDC.
One potential future market is in notebook PCs. On Sept. 12, Samsung unveiled a prototype notebook that contains a 32-gigabyte flash drive. That's only half the capacity of most current notebooks, and the flash chips cost more. But with NAND capacity doubling every year and prices falling by 50% a year -- both steeper curves than are occurring in hard drives -- Samsung expects many business users to carry flash notebooks by 2008.
As use of NAND chips accelerates, Samsung won't be the only one to benefit. Korea's Hynix Semiconductor, America's Micron Technology, and Germany's Infineon have all shifted production into flash. And by committing a big portion of its flash chips to the Nano, Samsung has created a shortage in the overall NAND market. That means more profits not just for Samsung, but for its rivals as well. By Moon Ihlwan in Seoul, with Ian Rowley in Tokyo