Replacing Hard Disk Drives with Solid State: A Challenging but Opportune Prospect for Vendors

As NAND flash prices continue to plummet, vendors are piling into the solid state disk (SSD) market in hopes that SSDs will supplement or even replace hard disk drives in computers. But analysts differ on how, when, and where SSDs will catch on in mainstream computers.

SSDs consist of NAND flash chips packaged with a controller designed to manage the flow of data between the drive and the computer. They have been around for 15 years, but were expensive and limited to markets willing to pay a premium for high reliability and ruggedness, said Jim Handy, Director of Objective Analysis, a market research company.

For the last couple of years, NAND suppliers have been heavily promoting the adoption of NAND beyond the consumer market – where devices such as personal media players and digital cameras use small amounts of the memory for storage – and specifically for the computer market. That’s because the cyclicality of the consumer market causes extreme volatility in NAND pricing, noted Handy. “In consumer electronics, [most of] the sales are in the fourth quarter, and that means a price collapse every January,” he explained. “Semiconductor companies don’t deal well with that kind of cyclicality.”

But high prices and technological barriers have stymied wide-scale adoption. The cost per gigabyte of NAND flash is still about 10 times that of hard drives, according to analysts.

And SSDs have been limited by a lack of controllers and interface designs robust enough to handle and prioritize data processing in PCs, Krishna Chander, Senior Analyst for Storage Systems at iSuppli Corp said.

There are signs of progress. NAND prices have been falling by 40% a year, a rate that in a few years is expected to make it more competitive with hard drives. And vendors are making progress in developing better controllers and interfaces. Most recently, Intel in September introduced SSDs aimed squarely at replacing hard disk drives in computers. The products feature controllers that Intel designed specifically for the PC architecture, according to Kishore Rao, Product Line Manager for high performance SSDs at Intel.

A miniscule market with too many vendors
Analysts’ estimates of the size and growth of the SSD market are all over the map. Some are fairly skeptical. Handy put the total market for SSDs this year at fewer than 700,000 units, rising to perhaps 8 million units by 2013. ISuppli, on the other hand, predicts shipments of 3 million units this year, rising to 88 million units by 2012, according to Chander.

One thing all analysts agree on, however, is that there are too many SSD suppliers. Some 50 to 70 companies now provide SSDs, but many of them are small “mom and pop” outfits that buy third-party NAND flash and controllers and then assemble them into SSDs, said Handy. The most significant SSD players are those that also manufacture their own NAND flash, including Samsung, Toshiba, SanDisk (through a joint venture with Toshiba), Micron, Intel (through a joint venture with Micron) and Hynix.

“In the mainstream SSD segments, it’s necessary to be vertically integrated and have access to your own fab in order to have the cost structure and the knowledge to make these products,” said Don Barnetson, Senior Director of Marketing at SanDisk, which has access to half of Toshiba’s flash production.

Most analysts believe that consolidation is inevitable and is indeed already starting. Recently, Samsung launched an effort to acquire SanDisk. “In five to six years you probably won’t see so many suppliers,” said Walker Blount, VP of Storage Systems of Web-Feet Research. “There will be a lot of alliances and consolidation.”

Most promising markets
Analysts describe three emerging markets for SSDs: ultra low cost notebooks, standard notebooks and PCs, and enterprise servers.

SSDs are ideal for ultra low cost notebooks such as Asus’ Eee PC and Intel’s Classmate. These notebooks carry retail prices of around $300, requiring BOM (bill of materials) costs below $100. Because hard drives have a floor cost of about $50, manufacturers are using SSDs instead. With SSDs, they can incorporate about 8 GBs of memory for about $20, Handy said.

But Handy said he doubts this is the best market for SSDs because of its very low cost and low volume. The most optimistic forecasts expect ultra low cost notebooks will make up 10 percent of the notebook market next year, he said. If 100 million notebooks ship, that would mean 10 million ultra low cost units. If SSD makers are only selling $20 worth of flash into each system, that amounts to only $200 million–small potatoes in a NAND flash market that’s more than $17 billion, Handy said.

Blount, on the other hand, said he expects strong growth for SSDs in the both the low cost and traditional notebook markets. He estimated that by 2012 30 percent of traditional notebooks will have SSDs. While consumer notebooks may need 300-plus GB hard drives to store videos and music, business notebooks don’t require as much storage, he noted.

“In 2012, you could see SSDs of 256 GBs for less than $200,” Blount said. “In combination with lower power consumption, faster performance, faster launch of applications, and increased robustness, that’s a powerful argument for having an SSD in a notebook.”

Indeed, one of Intel’s new SSDs is specifically aimed at corporate computers, as well as high-end consumer PCs. Despite a price of $595 (in low quantities) for 80 GBs, SSDs are attractive to enterprise IT departments because of their lower cost of ownership, said Intel’s Rao. He reported that Intel’s studies show that over the two- to three-year life of the average corporate notebook, companies can save about $400 by replacing hard drives with SSDs. Intel expects that 8 to 10 percent of the corporate and high-end consumer market will adopt SSDs in 2009, reaching more than 35 percent in 2011.

But the most lucrative market for SSDs, in terms of profit margins, could be enterprise servers. The servers used in data centers require very high speed drives for fast access, especially in applications such as transaction processing. Today, hard disk drives that are designed to deliver such speed can cost $1,000, Handy said, and a typical data center may use hundreds of them. What’s more, these hard disk drives are often configured in ways that waste most of the disk space in order to increase the data access times.

“That’s the market where people are really excited about SSDs right now,” Handy said. In this market, the cost of SSDs is already competitive, even advantageous. “You can replace 15 $1,000 hard disk drives with one $10,000 SSD,” he remarked. “It actually saves money.”

Electronic Business, a sister publication of EM Asia