Samsung has started producing its first NAND Flash memory chips using a 70nm process, opening the way for a fall in memory card prices.

The 70nm process is one stage up from the 90nm technology commonly used to make many kinds of chips including NAND flash at the moment. It means chips are smaller, faster, and less expensive. Samsung will be able to produce 50 to 60 percent more chips from a single wafer.

Nearly a third of all the company's NAND flash production will be on the 70nm process by the end of the year, according to a Samsung spokeswoman.

Samsung had nearly a 60 per cent share of the NAND chip market at the end of March, while Toshiba was the second biggest supplier with about a quarter of the market. Both companies are aggressively expanding production using more advanced technology and Samsung's move in particular will force down chip prices, he said.

Samsung is planning to raise its production from about 240,000 wafers per month to as high as 290,000 by the end of the year.

At the moment the production of NAND flash chips is roughly equal to demand. But the increased production of lower-priced chips by Samsung should lead to an oversupply of chips toward the end of the year, said Kim Soo-Kyoum, program director for semi-conductor research at IDC.

Prices for 2GB NAND chips, a common type of NAND chip, could halve from today's price to about $7 per chip by December. This price could halve again by the end of next year as more makers produce even more chips, he said.

The lower chip prices could lead to memory cards retailing for about a fifth less at the end of the year compared to what they cost now.