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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 $30B HDD business.

Storage Capacity Growth Continues Unabated 

One exabyte (EB) of storage capacity equals 1 million terabytes (TB), or 1 billion gigabytes (GB). Hard disk drive manufacturers shipped close to 100EB into the laptop PC market in 2011.1 That’s 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 disk drives in significant numbers of laptops, desktop PCs, enterprise servers and storage solutions. However, the reality is that SSDs and hybrids actually complement hard disk 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 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 fabs are transitioning to in 2012, raw MLC NAND write endurance has degraded to about 3000 cycles. In order to use this type of media 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 megafab—at a cost of over $10 billion3–could produce about 7.5EB per year. To build and ramp up a fab plant like this to full production takes two to three years. But remember, $10 billion is just for the cost of the fab. It does not include the NAND, operations, fab depreciation and other significant costs.

Can NAND Flash Makers Keep Up With Business Storage Demand?

Assuming all of the additional NAND could be used for SSDs, that $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 $10 billion to buy 5.5% of notebook storage market share, or less than $1 billion in revenue, is simply not viable. By extrapolation, in order to serve the entire laptop PC storage market forecast in 2012, a $180 billion investment in NAND flash memory fabs would be required. And to completely supplant the entire HDD market, that investment would grow to about $750 billion.

Worldwide installed fab capacity is expected to grow from 21EB in 2011 to 36EB in 2013, a staggering 71% increase2—but only 16%, about 6EB, of that NAND 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.

No matter what portion of production capacity a megafab 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 to serve 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: Hard disk drives will continue to serve the bulk of laptop, desktop and enterprise markets for many years to come, as makers of solid state drives remain overstretched to meet ever–growing demand for storage.

While the bulk of worldwide demand for NAND flash is for consumer products such as MP3 players, cell phones and cameras, Seagate believes there is ample flash to support the opportunities Seagate 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, December 8, 2011.
3 All figures in USD

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