The global NAND flash memory market has been suffering from oversupply all year, keeping chip prices down, and a new factory built by Hynix shows why: companies have built too many new factories.

Hynix's latest factory is great news for users.

Anyone looking for new flash cards to store photos for digital cameras, USB flash sticks for portable data storage or want an iPod with more music storage space may see great prices in the back to school season or later this year.

Market researcher DRAMeXchange Technology in Taiwan predicted that low prices for NAND flash memory now will prompt product makers to lower prices on storage gear and build inventory, so that NAND flash prices may start to recover in the fourth quarter.

The price of mainstream NAND flash memory chips has slumped 80 percent since the third quarter of last year, DRAMeXchange said, making current prices attractive.

But NAND flash makers continue to increase output with new factories and by improving the technology on existing production lines, a situation that could keep NAND flash prices at depressed levels for longer than many people think.

Hynix on Thursday announced the completion of a new advanced chip factory in Cheongju, South Korea dubbed Fab M11, which will produce chips on 40,000 silicon wafers per month starting from September.

Hundreds or thousands of chips can be made on a single silicon wafer, depending on the size of the chip.

Two other factories at the same Cheongju complex are also in mass production. Output at the company's M8 factory stands at 140,000 wafers per month as of the end of June, while its M9 factory is at 100,000 wafers, said Seong-Ae Park, a Hynix representative.

Hynix's biggest rival in NAND flash, Samsung Electronics, is also building more production lines.

The world's largest memory chip maker has earmarked 7 trillion Korean won (US$6.47 billion) for new memory chip production lines this year, including NAND flash and DRAM. The figure is more than the 6.91 trillion won Samsung spent last year on new memory chip capacity, when NAND prices were strong, and shows the company is using its financial muscle to put pressure on smaller rivals.

"Big NAND makers like Samsung, Hynix and Toshiba may expand more aggressively this year despite the glut because they can hurt rivals and grab market share," said Kenneth Lee, chip analyst at Primasia Securities in Taipei.

The IDG News Service is a Network World affiliate.