SanDisk Expects 3D NAND to Reach Volume Production in 2016 as It Focuses on ‘Cost Leadership’

Strong demand trends and moderating supply trends are pointing to an “extended period of stability” for the NAND flash industry for the near future, said Sanjay Mehrotra, CEO of SanDisk, at the Sanford Bernstein investor conference in New York Wednesday. Demand trends for tablets, smartphones and ultrathin PCs are creating strong long-term trends for flash memory in the future while supply growth is being limited by increased complexity, lower bit growth from technology transitions and a lower rate of capacity expansion due to lower return on investment and higher capital expenditure costs.

SanDisk’s current capacity is about 2.5 million wafers per year in its Fab 3, 4 and 5 combined, Mehrotra said, and the company will not add more capacity this year, instead focusing on productivity enhancements at current facilities, he said. Mehrotra expects phase one of the Fab 5 transition toward SanDisk’s 1Y nanometer process technology to begin in the first half of next year, and the company will make a decision on the timing of construction of phase two later in 2013, he said.

While other NAND flash makers such as Samsung Semiconductor are planning 3D NAND introductions for later this year, SanDisk is projecting a longer-term transition to 3D NAND. Mehrotra expects competitors’ early introductions of 3D NAND to be high-cost solutions with a larger die size compared with SanDisk’s 1Y 19-nanometer die that produces the smallest chip size in NAND today. He cited SanDisk’s partnership with Toshiba on 3D NAND and the companies’ Bit Cost Scalable approach, and said SD and Toshiba are positioning 3D NAND for the future “once 2D NAND is not scalable anymore,” Mehrotra said. The companies are also partnering on 3D resistive RAM, which Mehrotra called the “eventual non-volatile memory technology” of the latter part of this decade and the decade to follow, which can scale below a 10-nanometer process, he said.

Mehrotra predicted SanDisk’s 1Y NAND process will deliver “lower cost than any other 2D NAND or 3D NAND” process next year and its 1Z node will be lower cost than other 2D NAND or 3D NAND solutions through 2015. SanDisk’s strategy is to focus on “cost leadership” and high-volume production that applies across a broad range of platforms, he said.

SanDisk’s timetable for 3D NAND is to deliver its first-generation 3D NAND product in second-half 2015 and gear up to volume production in 2016, Mehrotra said. “We'll bring it into meaningful production once it has a lower cost than the 2D NAND,” he said. Meantime, the company plans to scale its 2D NAND technology to drive a strategy of lower costs and return on investment for the industry.

Bit growth and technology complexity add to higher capital costs as NAND achieves higher density, Mehrotra said. The industry hasn’t seen today’s low levels of bit growth before, he said. Compounded annual growth rate of bit growth for the NAND industry was 72 percent from 2009-2012 and forecast to be 30-40 percent from 2013-2014, he said, due to technological complexity and cost.

Mehrotra said control expertise is necessary to take raw flash and turn it into “robust solutions” with controllers suitable for a wide range of industry applications. “With each generation, memory technology gets more complex and raw flash memory characteristics get weaker” resulting in a need for advanced error correction and defect management techniques, advanced programming and read mechanisms for the flash memory cells and new software techniques. “System expertise is key” to successfully scaling NAND memory, he said.

At the end of Q1, SanDisk held a net cash position of $4.3 billion, which the company has set aside for mergers and acquisitions and “strategic opportunities” that Mehrotra said would “further strengthen and diversify” and expand the company’s product offerings.