Big Growth Seen In Solid-State Drives, But Hurdles Remain
1:58 PM ET 8/8/08 | Dow Jones
NEW YORK (Dow Jones)--A revolution is coming in computer memory, and some are starting - cautiously - to handicap the horserace.
Hard-disk drives, the spinning memory units currently in almost every desktop and notebook computer, remain the overwhelming choice today for long-term memory storage. But a new technology developed from flash memory, the chips that store data in most cell phones and MP3 players, looks to be nearly ready to compete with hard disks and, according to some estimates, could control a fifth of the total PC market in under five years.
That flash-based technology - called solid-state drives, or SSDs - allows for more lightweight laptops and offers benefits in reliability and power consumption. However, hurdles involving cost, performance and developing an industry standard remain before the technology can gain widespread adoption. Some say it's only a matter of time.
The solid-state drive is "the big disruptive technology that is going to take the notebook and PC to the next level," said Jim Elliot, a vice president in Samsung Electronics Co.'s (005930.SE) memory division.
Samsung, the world's largest memory maker by revenue, and chipmakers like Sandisk Corp. (SNDK) and Japan's Toshiba Corp. (6502.TO) are pushing to bring costs and performance in line with current technology. Memory chipmaker Micron Technology Inc. (MU) also has been touted as an early SSD leader.
However, those companies are also feeling the effects of the otherwise oversupplied market for flash memory, known as NAND, which has contributed to Micron and Sandisk losing more than half their value over the past year.
As for the companies that might be SSD pure plays, Silicon Motion Technology Corp. (SIMO) and Marvel Technology Group Ltd.(MRVL) are mentioned frequently because they are considered leaders in creating a chip seen as key to improving the price and performance of SSDs.
By some estimates, the SSD market is expected to grow at a staggering pace. Research firm iSuppli Corp. expects revenue to soar to more than $10 billion in 2012 from around $312 million in 2008, with the number of units shipped increasing to more than 90 million in 2012 from under 2 million this year. While other analysts believe these numbers might be a little high, few deny the market will soon be in the billions of dollars.
Early adopters include Apple Inc.'s (AAPL) MacBook Air, which offered an SSD drive option, but with a hefty price tag. Compared to a traditional spinning hard drive, the SSD cost an additional $1,000.
That's way too much for the benefits in performance, reliability and power consumption that SSDs currently provide. Flash memory makers recognize that to bring SSDs to the masses - or at least to PC makers - costs need to drop considerably.
"Consumers right now are saying they are faster than a hard drive," Gartner analyst Joseph Unsworth said, but "we're going to need costs to come down."
Moving to Multi-Level
The SSD in the MacBook Air and several others on the market contain what is known as single-level cell, or SLC, flash memory. SLC flash memory is larger, more reliable but also more expensive than the multilevel cell, or MLC, flash used in cell phones, MP3 players and other handheld devices.
For SSDs to be more broadly adopted, the industry needs to switch to the cheaper MLC memory. But to do so, the memory capability and lifetime of MLCs must be improved.
Progress is being made. For example, Samsung said earlier this year it developed a 256 gigabyte multilevel cell SSD - the largest on the market - and began mass producing 64 gigabyte and 128 gigabyte SSDs, memory capacities it believes will satisfy the requirements of business users and computer enthusiasts.
Micron Technology also has pushed forward in the SSD space, and Baird analyst Tristan Gerra highlighted it as a company with a leading SSD technology.
"For the patient investors, that's a name you could hold onto all the way until SSD starts ramping, as a long-term pick," Gerra said.
Sandisk and Toshiba also are making inroads, with Sandisk recently touting growth prospects in the ultra low-cost PC space.
Notebooks generally are the main entry point for SSDs. The drives could potentially grab 35% of the notebook market by 2012 - up from just 1.1% this year. With the global shift from desktop PCs to notebooks, iSuppli believes that will represent over 22% of the total PC market.
For drives with MLC flash to catch up ultimately with traditional hard drives, improvements are needed in the key chip, known as the controller, which manages data flow.So far, none of the companies making controllers has been able to combine performance with low cost.
"The guys that are showing performance in the controller space, aren't necessarily doing it at a price point that will work," said Doug Freedman, an analyst at American Technology Research.
Weak NAND Market
The problem with betting on the SSD market at this time is that it leaves investors vulnerable to the weak NAND flash memory market, which has been in an oversupply situation for some time. Micron and other NAND flash makers have watched their profits and share prices fall because of the oversupply conditions.
Attempts to call a bottom in the NAND market have foundered, but some analysts believe SSD demand will be the next pick-me-up for the struggling market, similar to the flash-based iPod in 2005. And, they believe, whomever has the leading SSDs will be well-positioned for the rebound.
"Initially the companies that do the best are the ones with the best technology, because (the market) doesn't get commoditized right away," Baird's Gerra said.
There's still a large disparity in technologies and a dominant player with an industry standard has yet to emerge - also keeping computer manufacturers from widespread adoption.
"There will be opportunities for SSD only because the ramp for SSDs will exceed existing supply. At that time, you are going to see profits generated," Gerra said. |
