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Seagate Point of View NAND Flash Supply Market

Seagate says billions of dollars in investment needed for SSDs to fully replace US$30B HDD business.

 

Storage Capacity Growth Continues Unabated 

One exabyte (EB) of storage capacity equals one million terabytes (TB), or one billion gigabytes (GB). Hard disc drive manufacturers shipped close to 100EB into the laptop PC market in 2011.1 That is a massive amount of storage capacity. The average capacity of a notebook hard drive in 2011 was forecast to be 412GB and expected to grow to 447GB in 2012.1 Laptop users clearly want more capacity, not less.

NAND flash memory is the storage component of solid state drives (SSDs). Conventional wisdom in some circles of the storage marketplace is that in the coming years SSDs will begin to replace hard disc drives in significant numbers of laptops, desktop PCs, enterprise servers and storage solutions. However, the reality is that SSDs and hybrids actually complement hard disc drives and grow overall global TAM and demand for storage.

In 2011, the entire NAND flash memory industry produced about 21EB of data storage, but only about 12% of that went into SSDs.2 This resulted in the production of about 23 million SSDs, or the equivalent of less than 9% of the laptop hard drive units shipped in 2011. NAND flash memory production capacity is forecast to grow to 36EB in 2012. That is about 6.5% of the total data storage capacity produced by HDDs in 2011. Only about 2.5EB of that flash was used in SSDs, representing only about 0.5%; the balance of that flash was consumed in smartphones, tablets, memory cards and other consumer electronic devices.

Enterprise, client and consumer markets have significantly different NAND endurance and data retention requirements. As NAND continues to scale to a smaller cell size to drive down its cost per GB, its write endurance and data retention continue to suffer. At the 21nm process node, which is the density that the major fabrication plants are transitioning to in 2012, raw MLC NAND write endurance has degraded to about 3,000 cycles. In order to use this type of medium in any compute application, very sophisticated controllers are required. If we assume (best case) that all SSD designers are capable of delivering designs that can use 21nm MLC flash, then one large fabrication plant — at a cost of over US$10 billion3 – could produce about 7.5EB per year. To build and ramp up a fabrication plant like this to full production takes two to three years. But US$10 billion is just for the cost of the fabrication plant. It does not include the NAND, operations, fabrication plant depreciation and other significant costs.

Can NAND Flash Makers keep up with Business Storage Demand?

Assuming that all additional NAND could be used for SSDs, that US$10 billion investment would produce enough flash memory to serve just 5.5% of the 135EB laptop storage market demand projected for 2012. In other words, spending US$10 billion to buy 5.5% of the notebook storage market share, or less than US$1 billion in revenue, is simply not viable. By extrapolation, in order to serve the entire laptop PC storage market forecast in 2012, a US$180 billion investment in NAND flash memory fabrication plants would be required. And to supplant the entire HDD market, that investment would grow to about US$750 billion.

Worldwide installed fabrication plant capacity is expected to grow from 21EB in 2011 to 36EB in 2013, a staggering 71% increase2 — but only 16% of that NAND, about 6EB, is forecast to go to SSDs. Even at that impressive 70% growth rate, with the vast majority of the NAND going to consumer devices, the gulf between NAND flash memory production capacity for SSDs and demand for laptop, desktop and enterprise storage will continue to widen.

Whatever portion of production capacity a large fabrication plant might devote to NAND flash for SSDs, the return on investment would be difficult to justify given the relatively small available market for laptop, desktop and enterprise SSDs. Any additional capacity would be better justified in serving the market for smartphones, tablets and other consumer products for one chief reason: NAND makers can maintain much higher yields and lower prices for consumer-grade NAND because its performance and reliability specifications are much less stringent than the requirements for enterprise, laptop or desktop devices.

The upshot is that hard disc drives will continue to serve the bulk of the laptop, desktop and enterprise markets for many years to come, as makers of solid state drives will remain overstretched to meet the ever-growing demand for storage.

While the bulk of worldwide demand for NAND flash is for consumer products such as MP3 players, mobile phones and cameras, Seagate believes that there is ample flash to support the opportunities it sees for enterprise and hybrid solid state storage.

Footnotes

1 Model of the World, Seagate Technology, December, 2011.
2 Forecast: NAND Flash Supply and Demand, Worldwide, 1Q10–4Q12, 4Q11 Update, Gartner, 8 December 2011.
3 All figures in USD

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