Business, Enterprise, Hardware

Analysis: Windows 3.1 Déjà Vu & Jumpin Jack Flash

Microsoft Windows 3.1 was released in March of 1992. The release turned a DRAM memory sales depression into a hockey stick bonanza nearly overnight as adopter?s bought up additional memory modules required to make 3.1 perform decently. The aftermarket module makers suddenly became very important mass merchandisers for the memory manufacturers. That was the last time anyone in the memory business can remember whistling or humming "What a Difference a Day Makes"…, maybe until just recently.

OCZ Results – Surprising uptick in Corporate Use
OCZ?s recent operating results got my attention. Not so for the earnings report [they still lost money] but for the eye snagging 265% month to month Solid State Disk sales increase. Several other solid state disk suppliers are also reporting recent strong sales increases. One item that stood out in the conversations with the independent SSD manufacturers is the bit multiplier factor inherent in SSD sales. Prior to supplying SSD?s they sold DRAM memory modules which at best sold 4 GBytes of memory per end user application. Each SSD sold represents 128 to 256 GBytes sold on an end user application basis, a multiplying increase of 32 to 64 times. SSD manufacturers were quick to find that volumes involved greatly improved their purchasing negotiations with semiconductor memory suppliers and their operating margins. To top it off OCZ announced this week a manufacturing expansion in Taiwan that will take the company to 140,000 units a month!

Word on the street has it that Windows 7 is being installed with SSD drives in the corporate IT notebook computer space giving old technology a solid performance kick and saving IT department?s loads of money. Seems that maybe OCZ has fallen on a good thing and is making hay while the Sun doth shine.

Samsung Galaxy
Flash is in heavy demand - and Smartphones rose to #2 spot when it comes to NAND Flash consumption [Picture: Nokia N8 Motherboard]
Flash is in heavy demand – and Smartphones rose to #2 spot when it comes to NAND Flash consumption [Picture: Nokia N8 Motherboard]

Speaking with Samsung representatives on the Galaxy smartphone at CTIA?s 2010 Fall Exposition led to a discussion of the phone?s storage requirements. 16/32 G Bytes soldered on the main board with expansion to a maximum of 32 G Bytes via a microSD removable flash card. Though not the same bit usage numbers as note/netbooks the smartphone volumes are around 3 times as much placing them in the number two slot for flash consumption.

SSD inside Apple's MacBook Air comes in an unusual format with a proprietary SATA connectorOn Wednesday this week Apple Computer Inc. announced the MacBook Air 2 which contains a selection of solid state disk drives only. Apple decided to drop the hard and optical drives for solid state only.  It only seems natural that Apple would next claim an "iPhone App" for the new Mac Book which would really muddy the water, but that?s reserved for a later report.  The sudden increase of flash content in the new MacBook Air raises a very interesting aspect of using solid state disks and that?s "Instant ON". It would have been nice to be a fly on the wall at Apple HQ?s to overhear the argumentation that the company went through in making the new Mac "Spinless", but now it?s done and the market will decide.  I think they made the right call for the device?s target market. 

Instant ON
Instant ON creates a very real and obvious piece of differentiation from Wintel PC?s which are incapable of this feature currently.  This probably won?t stop attempts at mimicking the feature [that will most likely rely on the inclusion of some form of a solid state system disk drive for accelerating the system boot sequence and begs for an industry standard].  Leaving hard drives behind is still a stretch but I believe the force has been disturbed and that the MacAir2 is the beginning of what eventually will be the norm.

Supply & Demand
The point of all this is that the demand for NAND flash memory is ramping while memory manufacturers remain unconvinced that it will last and are maintaining, or in some cases, ramping down capital equipment expenditures. Complicating the picture is that the memory producers are switching over from 50-40nm down to 30-25nm geometries. The increase in the number of devices per wafer start may be able to keep up with the accelerating demand but what is unclear is what the market price will be? Flash is around $1 per GByte currently and is expected to fall to around $0.50 if an oversupply situation develops as expected by several analysts in mid 2011. This favors SSD suppliers ahead of the cost curve that have volume purchase arrangements with cost protection covenants.

Sweet spot for NAND Flash is coming ahead of us - are the analysis correct and we're about to enger the "golden era" of solid state storage?
Sweet spot for NAND Flash is coming ahead of us – are the analysis correct and we’re about to enger the "golden era" of solid state storage?

A contrary opinion to the above market explanation is that the worldwide production increase is insufficient to maintain the increase in demand rate resulting in a tightening of flash supply on a worldwide basis. Vertically integrated suppliers like Samsung would most likely insure that their Cell Phone divisions remain in supply [though they publicly deny that this would ever be the case]. Apple most likely would maintain supply [they are the number one flash user in the world at present]. The number of major flash suppliers is five and has resulted in a far less volatile pricing environment than experienced formerly with DRAM. The probability that they exhibit market synchronicity is also much higher. And all make their own branded solid state drives.

The end point under consideration is who?s getting a lead on the market nuances? Small fast and attentive drive makers or is it the large vertically integrated flash producers? Or is it large users like Apple who pursue the proprietary play?