Flash type electronic memories are the preferred format in code storage at complex programs running on fast processors and larger media files in portable electronics due to fast write/read operations, long rewrite life, high density and low cost of fabrication. Scaling limitations of top-down fabrication approaches can be overcome in next generation flash memories by replacing continuous floating gate with array of nanocrystals. Germanium (Ge) is a good candidate for nanocrystal based flash memories due its small band gap. In this work, we present effect of silicon dioxide (SiO2) host matrix density on Ge nanocrystals morphology. Low density Ge+SiO2 layers are deposited between high density SiO2 layers by using off-angle magnetron sputter deposition. After high temperature post-annealing, faceted and elongated Ge nanocrystals formation is observed in low density layers. Effects of Ge concentration and annealing temperature on nanocrystal morphology and mean size were investigated by using transmission electron microscopy. Positive correlation between stress development and nanocrystal size is observed at Raman spectroscopy measurements. We concluded that non-uniform stress distribution on nanocrystals during growth is responsible from faceted and elongated nanocrystal morphology.