Strong Flash Demand to Exceed Supply, SanDisk Chief Tells Investors
SanDisk’s forecast for flash memory -- driven by mobile devices, PCs, enterprise storage and removable cards and drives -- envisions a total available market of $38 billion by 2016, up from $26 billion last year, said CEO Sanjay Mehrotra on the company’s 2012 Investor Day webcast Wednesday. But while demand growth is continuing, capacity isn’t growing at the same pace, which should lead to a “favorable pricing environment” near term, Mehrotra said.
Technology is becoming more complex, Mehrotra said, as flash scaling is becoming “more and more challenging” due to shrinking cell sizes. The 43nm technology process, which began production in 2009, had a 10-quarter run, while 24nm technology is expected to last for 14 quarters, he said, extending the life cycle by a year. Reduced gigabyte growth from each generation and longer life cycles are leading to “shallower cost reductions,” he said.
In addition, 2D NAND flash is approaching its end-of-life scaling, Mehrotra said, while 3D NAND technologies are not in production. In the interim, the increased investment required for technology transitions, along with uncertainties on returns on investment, are causing manufacturers to limit spending on capacity expansion, he said. From 2012-2013, the industry saw the lowest amount of wafer capacity additions ever for NAND, he said. Capacity expansion from 2012-2013 was 6-7 percent and for 2014 capacity will remain “very moderate,” he said. Strong flash demand for mobile devices, PCs, removable memory and the enterprise market will be “greater than what the industry will be able to supply for the foreseeable future,” Mehrotra said. The trend lines will lead to the “healthiest-ever industry fundamentals for flash,” he said, bringing on an “extended period of stability."
While smartphones and tablets are fueling the growth in SanDisk’s NAND embedded flash drive business, there’s growth ahead from desktop and notebook PCs as well, Mehrotra said. Flash memory attach rates in PCs will grow from 8 percent in 2012 to more than 50 percent by 2016, he said. In Q1, solid-state drives (SSD) represented 20 percent of SanDisk sales, he said, and the company is targeting 25 percent revenue share from SSDs by 2014. Small form factors, high reliability and low-power requirements will drive growth of flash storage in the PC category, Mehrotra said, especially as consumers become more accustomed to lightweight designs and fast access time they experience with tablets. Flash has enabled smartphones, tablets, and PCs to become thin, small, light and efficient in battery operation, and will be used in the future for new applications including smart TVs, set-top boxes, connected home products, wearable electronics and computational photography, he said.
Combined sales of smartphones and tablets will double from 2012 to 2016, when more than 1.5 billion smartphones and tablets will be shipping annually worldwide, Mehrotra said. Applications including Instagram, Facebook and iMovie are fueling the need for more local storage in smart devices, he said.
Flash is also riding the thin and light PC wave through hybrid drives that are a lower cost alternative to SSDs, Mehrotra noted. He cited SanDisk’s collaboration with Western Digital, announced Tuesday, on hybrid storage devices using iSSD flash memory from SanDisk using its 19nm technology and Western Digital’s 2.5-inch solid-state hard drive. Called WD Black, the 500GB drive requires half the volume of a standard notebook drive, Western Digital said, but delivers the capacity of a hard drive with the speed, data throughput and responsiveness of flash. The hybrid drive is currently shipping to OEMs, the companies said.