Two firms battle over market for digital-camera film.

Toshiba America Electronic Components Inc. has a fight on its hands.

The Irvine-based unit of Japan's Toshiba Corp. is squaring off over memory cards used to store photos in digital cameras. Its rival is digital film market leader SanDisk Corp. of Sunnyvale. At stake is the growing digital film market.

By 2002, memory-card shipments for digital cameras are projected to reach 25 million worldwide, up from 2 million last year, according to Framingham, Mass. market researcher International Data Corp. Digital camera shipments are set to grow from 2.7 million last year to 28.1 million in 2002.

"This market will explode," said Jackie Traeumer, product marketing manager for Toshiba America Electronic Components. "It's tied to digital cameras."

The digital film battle already has claimed one victim: Intel Corp. In August, the chip giant dropped efforts to land its Miniature Card product in digital cameras. But other contenders are stepping up with digital film products, including IBM, Sony Corp. and Iomega Corp.

In digital cameras, memory chips take the place of film. Depending on the resolution, one megabyte of memory can hold up to 20 photos.

Toshiba's digital film offering is SmartMedia, which was co-developed with South Korea's Samsung Group. At about the size of two postage stamps, SmartMedia cards come in capacities of 4, 8 and 16 megabytes. A 32-megabyte version is due by spring.

SanDisk's digital film offering is the matchbox-sized CompactFlash, which comes in two types offering up to 48 megabytes and 220 megabytes of storage. Early next year, SanDisk plans to release CompactFlash with twice the storage space of its current top-capacity cards. Other companies also produce CompactFlash under license from SanDisk.

Toshiba and SanDisk aren't exactly equal rivals. For the six months ended Sept. 30, SanDisk had sales of $63 million. Toshiba, a maker of computers, consumer electronics and semiconductors, had $11 billion in sales for the same period.

Still, Toshiba is the underdog in digital film, analysts say. This year, SanDisk and other CompactFlash makers are projected to ship 2.5 million digital camera cards worldwide, compared with 1 million SmartMedia cards, IDC said.

"The potential of this market is huge," said Nelson Chan, SanDisk marketing vice president. "We are setting the standard."

Toshiba officials concede that SanDisk is ahead but argue that the digital film market remains up for grabs. "There's still a long way to go before the war is over," Traeumer said.

Selling a consumer product like SmartMedia is a shift for Toshiba America Electronic Components. TAEC's core business is behind-the-scenes components such as semiconductors, electron tubes and liquid-crystal display screens.

"We've never had to deal with the consumer market," Traeumer said. "It's a different type of product. We have a small marketing group in the U.S. We are working with our counterparts in Japan about increasing our market awareness. Of course, that takes resources."

Analysts differ on how the digital film market will shake out. IDC analyst Ron Glaz sees CompactFlash in a dominant 86 percent of digital cameras by 2002. Nearly 70 percent of cameras today use CompactFlash, he noted. "It's really not a battle anymore," Glaz said.

Alan Niebel, an analyst with Phoenix-based Semico Research Corp., isn't so sure. He gives the edge to CompactFlash, but says it will hold only at about half of the digital film market in 2002. He sees SmartMedia grabbing 20 percent. SmartMedia has a foothold in Asia, where most digital cameras are made, he said.

Meanwhile, there is IBM's coin-size Microdrive, which offers 340 megabytes of storage and is due in mid-1999. In September, Sony released its Memory Stick, which looks like a chewing gum stick and offers up to 32 megabytes of storage. And Iomega hopes to land its 40-megabyte Clik disk in digital cameras.

SmartMedia's appeal is price, Traeumer said. Along with Toshiba's digital cameras, SmartMedia is used in models from Olympus Optical Co., Fuji Photo Film Co., Philips Electronics NV and others. Typically, SmartMedia cards go for $15 less than comparable CompactFlash products, which have electronic controllers built in. While SmartMedia's lack of a controller means extra work for camera makers, Toshiba contends that is what keeps SmartMedia prices low.

"CompactFlash is going to start losing market share to SmartMedia because of price," Traeumer said.

SanDisk's strategy is to lure camera makers from SmartMedia. In August, Minolta Co. switched one of its cameras from SmartMedia to CompactFlash. But Toshiba's Traeumer said other digital camera makers are looking at SmartMedia.

"We don't have Kodak. We don't have Polaroid," she said. "But they are constantly taking to us about SmartMedia. It's not a done deal."

SanDisk also has to contend with CompactFlash's success. The company competes with ambitious rival makers of CompactFlash, including Sunnyvale-based Silicon Storage Technology Inc., Fremont-based Lexar Media Corp. and Santa Ana-based SiliconTech Inc., which broke off from Simple Technology Inc. in May.

Competition and falling CompactFlash prices have affected SanDisk. Third-quarter sales were down 11 percent to $32 million while profit was down 63 percent to $2.5 million.

Toshiba faces challenges, too. The company is wrestling with economic woes in Japan and falling chip prices worldwide. Sales for the six months ended Sept. 30 were down 12 percent, while net income went from $167 million a year ago to a loss of $47 million.

Toshiba has a stake whatever way the digital film war goes. The company sells memory chips to various CompactFlash makers. Still, the company is betting its track record of cornering chip markets through mass production and aggressive pricing will win the day for fledgling SmartMedia.

"Performance, cost and density all are critical," Traeumer said. "We will be able to keep the price down. It's possible there could be two standards."