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TheStreet Open House

Flash Seeks Four-Bit Harmony

Flash memory is standard fare in digital cameras and MP3 players.

But the chips could soon become even more pervasive, spreading to a whole new crop of electronic devices as the next generation of flash technology takes root.

Two companies are racing to bring competing versions of 4-bit flash memory to market. M-Systems (FLSH) and Saifun (SFUN - Get Report), both based in Israel, say their technology will be available next year, and they project rapid industry adoption.

The technology promises to bolster the fortunes of flash memory suppliers, whose double-digit sales growth rates have made it the star of the semiconductor industry.

But the debut of 4-bit flash may not be the cakewalk its proponents expect, with everything from performance to manufacturing issues threatening the technology's ability to develop.

"I'm going to take a wait-and-see attitude," says Jim Handy, a flash analyst at market researcher Semico Research. "I'm not going to build my forecasts around those chips hitting the market. On the other hand, I do believe that there's a strong need and a very strong motivation around the suppliers to make this technology work as soon as they can."

The benefits of 4-bit flash are apparent.

Flash memory, which retains data even when the power is switched off, is increasingly being integrated into consumer electronics devices.

Today's flash memory chip consists of numerous cells, which can store either a single bit of data per cell (single-layer cell) or two bits of data per cell (multilayer cell). Because 4-bit technology retains twice as much data on each cell as does 2-bit technology, the result is a flash chip that can store twice the amount of digital music, photos, etc.

Four-bit flash also promises to significantly reduce the cost per bit of producing chips, enabling companies to sell flash memory at a discount. M-Systems contends that manufacturers that license its 4-bit flash technology, called x4, can reduce their production costs by 30%.

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