Prices for Intel Corp.’s flash memory chips, a vital component in cell phones, will rise 20 per cent to 40 per cent on Jan. 1, said an Intel spokesperson Tuesday.

Intel is fanning out to its customers and informing them of the price increases, the Intel spokesperson said. Any long-term pricing agreements will remain intact, she said.

The basic economic principle of supply and demand is at work in the flash memory market, she said.

“This is a good indicator of industry growth, especially in cell phones, which have higher density requirements,” she explained.

Advances in flash memory density will lead to increased prices over the next few years, said Senior Vice-President and General Manager Ron Smith during an Intel Wireless Communications and Computing Group conference call last week.

Flash memory allows devices to store data without a constant electrical current, making it ideal for small devices such as cell phones and personal digital assistants. As demand for cell phones has continued to increase, flash memory firms such as Intel and rival Advanced Micro Devices Inc. are poised to capitalize on the growing market for the technology.

AMD predicted a strong fourth quarter in its flash memory business based on growth of high-end phones during its analyst call last month.

Sales of mobile phones are rising as new models with color screens and Internet capability hit store shelves in time for the upcoming holiday season. Strong third-quarter sales of cell phones caused market researcher Dataquest Inc. to ramp up its prediction for full-year 2002 sales in a report released Tuesday.

More memory is required to run the colour graphics and games found on some of the newer models, which is satisfied by denser memory modules that can fit more memory into a similar space. Cell phone manufacturers can purchase different packages of flash memory from Intel or AMD depending on the requirements of their phones.