The Week In Storage: WD Buys SD, Drops Anyway; NAND Boom Or Bust

This week in storage was a somewhat quiet affair, as all of the major storage vendors are holding new product announcements prior to Computex, which takes place at the end of the month. We are going to have a full complement of reporters on hand for the show in hot and humid Taipei, so expect the news deluge to begin soon.

WD and SanDisk are hearing wedding bells as the MOFCOM Chinese regulatory agency approved the Western Digital acquisition of SanDisk. Both companies have multiple products from their previous marriages, and there are a few SSD overlaps, so the situation will get dicey as WD slices out redundant products. The companies manufacture inherently dissimilar products, for the most part, so the axes will likely swing hardest in many of the support roles, such as marketing and HR.

In either case, WD's investor friends are not particularly impressed with the acquisition, as evidenced by the plummeting stock price during the process (it's now trading at a four-year low). WD has lost more than 60 percent of its value in the last year, and Bank Of America downgraded the company due to reduced NAND pricing. (Poor WD...first it loses value on reduced HDD sales, so it buys its way into flash, then loses value due to reduced NAND prices.)

Samsung announced that it is bringing an incredible amount of storage to hand-held devices with its new 256 GB EVO Plus MicroSD card. Suddenly, my meager 128 GB MicroSD card feels inferior to the well-endowed EVO Plus, as does SanDisk's competing 200 GB Ultra MicroSD card. The EVO Plus serves yet another example of the performance and density advantages provided by 3D TLC NAND in comparison to planar (2D) NAND.

The SanDisk 200 GB Ultra does not have a sequential write speed listed in its specifications. Usually, when a key specification is missing, it means the company would rather not talk about it because it is horridly slow. SanDisk does note, however, that the Ultra's "write speed is lower" in comparison to its read speed, but the lack of a listed specification tells me all I need to know.

Meanwhile, the prodigious Samsung is thrusting its extra 56 GB of capacity into SD slots with 95/90 MBps of sequential read/write speed. Now if Samsung would just reduce its $249.99 price to a sane level...

Phison Predicts NAND Drought In Midst Of NAND Flood

The burning question around any computer component is whether we should buy one today or wait until prices go down. In the case of SSDs, according to Phison, prices are headed the other direction.

Khein-Seng Pua, the Company Chairman of Phison, predicted a looming third-quarter NAND shortage in the Chinese Economic Daily News. Pua indicated that the transition to 3D NAND is not progressing smoothly for several of the large NAND fabs, which will ultimately lead to an industry-wide shortage.

Phison is a well-known SSD controller manufacturer, but few know that it actually builds the entire SSD for several of the third-party SSD vendors. Companies such as Corsair, Patriot, PNY, and others buy the complete SSD from Phison and then sell it under their own brand.

To fuel its manufacturing efforts, Phison maintains a large supply of NAND, which is currently valued at NT$9.27 billion (~$284 million USD), so it is keenly aware of NAND market trends. It appears the company is building up its NAND stockpile, which was valued only at $160 million USD at the end of 2015.

SSD prices, which are largely driven by the price of NAND, are currently at historic lows. The price of a 256 GB SSD has fallen from roughly $125 last year to sub-$60 this year, so it is clear that there is an abundance of NAND on the market.

The low SSD prices are the result of the declining smartphone and desktop PC markets, which weaken demand. The depth and extent of the decline varies depending upon the analyst firm that is reporting them, but all foresee a continued desktop PC slump for the remainder of the year, along with uncharacteristic single-digit growth numbers for the mobile phone market.

Many analysts contradict the Phison predictions, and instead foresee an increasing oversupply as 3D NAND from other fabs, such as Intel/Micron 3D NAND and SK Hynix 3D NAND V2, come to market. When 3D NAND does take hold, it will magnify the amount of capacity shipped due to its increased density, and pouring more capacity onto a market that is already swimming in NAND should only intensify the oversupply condition.

Samsung certainly believes there is a pending possibility for an oversupply situation, as evidenced by its February 2016 announcement that it postponed the expansion of its 3D NAND fab in Xi'an, China. SanDisk is also rumored to have its 3D BiCS NAND very close to shipping, but the company has been quiet during its pending (now final) acquisition by WD. Speaking of NAND oversupplies, Bank Of America just downgraded WD due to weak NAND ASPs.

However, the 3D NAND transition has been painfully slow, and most fabs are still not shipping 3D NAND in volume. We also have yet to see any 3D NAND-powered products from third-party SSD vendors, which we expect to see teased at Computex, but it is unlikely that many will be available in the near term.

Many of the fabs are transitioning their NAND bit output to 3D and have not increased 2D NAND output, which Khein-Seng Pua contends will open a window of opportunity for the NAND drought. If his predictions come to fruition, there will be a sudden increase in SSD prices across the board, and some cite an increasing price gap between 2D TLC and MLC as a sign that there is already an MLC NAND drought brewing.

If there is not an impending drought, as the industry at large tends to believe, then Phison has a stockpile valued over a quarter of a billion dollars that will lose value rapidly as 3D NAND continues to dilute the average selling price. If a drought materializes, then Phison made a particularly wise investment that will pay big dividends.

Such is life in the NAND game. If one were to believe the Phison predictions, and just happen to have a lot of skin in the game, the time to buy an SSD is now.

Paul Alcorn is a Contributing Editor for Tom's Hardware, covering Storage. Follow him on Twitter and Google+.

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