We sat down with Kevin Chen, the Vice President of Adata, during Computex 2016 to discuss the trends and market forces that are driving the company and the industry at large. Adata produces a range of products that includes DRAM, SSDs, USB, memory cards and external storage devices, but our discussion focused on its flash-based products.
Not every meeting we have at a tradeshows is staffed by high-level product experts, but occasionally we get a chance to speak to the cream of the crop. In those meetings, though, we find that company representatives are forthcoming and more open to sharing insight and opinions on various market forces.
Our recent discussions with Adata's Kevin Chen, like previous conversations we have had with him, provided us with insight into the inner workings of the industry. Chen is relaxed and personable, and his unrestrained responses to our questions are refreshing.
Adata is a third-party SSD manufacturer that utilizes more SSD controllers and flavors of NAND than any other company that we are aware of. The NAND fabs are the engines that pull the third-party SSD ecosystem down the track, and Adata utilizes flash from Micron, Toshiba, SK Hynix and Samsung. (If you're keeping track, this represents every major NAND supplier.) SSD controllers also play an integral part, and Adata offers Marvell, SMI, Seagate, Realtek and Maxiotek SSD controllers with its products.
Adata is experiencing a solid growth trend; the company's channel grew 65-70 percent last year, and the it projects a 40-50 percent growth trajectory per year for the next three years.
This broad spate of both NAND and SSD controller partners gives Chen a unique view of the market and emerging trends. We asked Chen why the company utilizes so many products, and if he foresees any overlaps. He indicated that Adata tailors the wide range of SSD controller and NAND pairings to address a wide range of workloads, such as mainstream and gaming use-cases, but that any potential overlap merely provides the customer with more choice.
Industry Transition To 2D TLC NAND
The industry transition from 2D MLC to 2D TLC flash is well underway. Chen noted that last year, the company sold 80-85 percent MLC NAND, whereas this year the mix has changed radically to 70-75 percent TLC NAND.
TLC enables a lower cost structure, which meshes well with the OEM and mainstream markets, but Adata does not target it for segments that require the best performance (such as gaming). Chen indicated that consumers have embraced TLC NAND because it has proven to provide enough endurance and performance for the majority of applications.
Adata is one of the few third-party SSD vendors that purchases NAND in wafer form; most simply procure the finished packages. Adata processes the wafers itself, which allows it to bin the flash die and assure that it adheres to its rigorous quality standards. The company indicated that the wafer processing and binning capability provides it with cost and quality benefits, and Chen noted that 2 to 5 percent of the die that are sold as "SSD grade" do not meet Adata's SSD requirements. Chen feels that the ability to control the NAND binning process provides Adata with an advantage over competitors, particularly when it comes to TLC NAND, which encounters more reliability challenges.
Transition To 3D NAND Beginning
Chen is bullish on the industry transition to 3D NAND. Adata will introduce its first 3D NAND SSDs in July 2016, but Chen noted that the fabs are experiencing growing pains as they grapple with the 3D NAND manufacturing process. Some NAND vendors are not providing 3D NAND wafers yet due to lower quality that stems from manufacturing difficulties as the process matures. As a result, Adata is buying and binning 3D NAND packages for the time being, but it will transition to 3D NAND wafer processing as wafers become available.
There have been industry reports of a looming NAND shortage in the second half of this year, and we have followed the topic closely. The difficulties with 3D NAND are common knowledge in the industry; many attribute difficulties during the transition to 3D NAND, which have most fabs one to two years behind schedule, as one of the key reasons that a shortage is looming. Some predict that prices will increases during the shortage, but Chen expects Adata's pricing to stabilize, as opposed to increasing, as a result of the shortage.
Other sources have also indicated that Apple is buying a tremendous amount of NAND as it prepares for the iPhone 7, which increases the base amount of storage from 16 to 32 GB and the maximum storage capacity to 256 GB. Apple is known to be a NAND vacuum of sorts when it ramps production for a new device, which adds additional supply pressure.
Chen indicated that the Adata strategy of using a pool of NAND vendors allows it to provide the most cost-competitive products and maintain a diversified supply. Adata produces its own SSDs, but it also assembles SSDs for OEM customers and other third-party SSD vendors, who merely resell the Adata SSDs under their branding. This increases the challenges associated with assuring the company has enough NAND, and the company has also increased its own NAND stockpile in anticipation of higher prices later in the year.
Chen cited 3D TLC and MLC NAND as the leading trends for the coming year, along with an increased commitment to PCIe 3.0 x4 SSDs in both M.2 and U.2 (2.5") form factors. Adata is expanding its NVMe offerings over the next year as the ecosystem continues to develop. The company is also experiencing solid growth trends in industrial automation, manufacturing and assembly, networking, security, and points of sale.
Chen also commented that DRAMless SSDs, which usually employ TLC NAND and no DRAM package, are going to be more common as OEMs increase adoption of the emerging "HDD replacement" segment. Endurance becomes more of a concern with DRAMless SSDs, and some vendors may choose to lower warranty periods to one year to 18 months, but Chen noted that Adata will continue to provide a three-year warranty.
One area of considerable pride for Chen is the company's automated manufacturing process and rigorous quality control procedures. Adata's multi-layer quality assurance system employs heat ovens that help ensure quality (reliability, data retention) and allow the company to provide its OEM customers with quarterly quality control reports. I have been inside several SSD production facilities, and I have not encountered this capability elsewhere outside of the actual NAND fabs.
The company's Suzhou, China plant generates 500,000 finished products per month, and its Taipei facility produces 100,000 finished products per month. Adata has outstripped its production capabilities in recent months, so the company is doubling its automated line at its Suzhou facility to deal with the increased demand. Adata also touts the fact that its Suzhou facility has achieved the highest level of accreditation (AEO) from Chinese authorities, a mark only 16 of more than 4,000 facilities in the Suzhou Industrial Park have achieved.
Adata is one of several SSD vendors that are in the midst of explosive growth as SSDs continue to steal the performance and client markets away from HDDs. Many of the third-party SSD vendors are experiencing more pressure as the SSD market commoditizes, which reduces margins and profits.
Adata hopes that its investments in wafer production (along with diversified supply), IC sorting and binning, retention testing, quality control and automated production lines will assure its relevance in the 3D NAND era. If its growth trends are any indication, the company is headed in the right direction.