Blaming a shortage of flash memory, Taiwanese IC design houses offering USB controllers said they expected business to decline along with falling USB flash disk and card reader shipments, according to DigiTimes. IC design companies like ALi and Genesys Logic projected that their fourth-quarter sales could drop 5-10% from the previous quarter. ALi president Chin Wu said he expected the short supply of flash, which started in mid-2003, to last through the fourth quarter.

Faraday Technology, a semiconductor intellectual property (SIP) provider, also projected slow sales through year-end, saying it had been hit in USB 2.0-related products.

Earlier, the companies had expected sequential sales growth during the second half, the traditional peak season for the PC-related industry.

According to Genesys Logic, the supply of flash memory has become even tighter recently because of the recovery of the handset market. Currently, major flash makers, including Intel, Advanced Micro Devices (AMD) and Samsung Electronics, are rationing their supplies to customers. If the situation worsens, some second-tier memory card manufacturers may lose their supply entirely, Genesys Logic said.