Even Google Can't Save the Flash Market

SAN FRANCISCO -- Even the hand of Google(GOOG Quote) may not be enough to lift the flash memory industry out of its doldrums.

The search engine giant has reportedly begun integrating flash-memory chips into its servers, replacing some of the slower magnetic hard drives used for data storage.

The move would appear to be a major endorsement of so-called solid-state hard drives, a product on which much of the flash industry's hope of salvation is riding. But for all Google's size and influence, its newfound taste for flash won't wash away the negative economic conditions currently roiling the flash market, say analysts.

"It's a positive from a technology adoption standpoint, but you can't really look at it as an impact to the NAND flash market," says American Technology Research analyst Doug Freedman.

For one thing, he says, the market for back-end, corporate servers is just not large enough to alter the unfavorable supply-demand balance currently weighing on the flash business.

Prices of flash memory chips have been in freefall for more than a year, as a glut of the chips have flooded the market. While demand for flash chips is reasonably robust -- thanks to the popularity of Apple's(AAPL Quote) iPods, which use flash chips to store digital music -- it has not been sufficient to keep pace with the massive silicon output from companies like Samsung, Intel(INTC Quote) and Toshiba/SanDisk(SNDK Quote), which manufacture flash memory through a joint venture.

Many of the flash makers are banking on new products to help demand catch up with the current oversupply. And solid-state hard drives are at the top of the list.