The Spin on Data: Is there new movement in the SSD-HDD tug-of-war?

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ssdThe SSD-HDD tug-of-war is not yet decided, but clues to the outcome may lay in the data on device cross-over, consumer feature demands, cloud services, new chip designs for smaller NAND architectures, and new power efficiency demands, alongside the age-old pricing concern.

 

 

 

 


Two important industry variables, memory pricing and demand for rapid response electronics supporting memory intensive data, has many wondering if there might be new movement in the long-standing debate over solid-state drives (SSDs) versus hard disk drives (HDDs).  The debate looks to have shifted somewhat though.  With the simultaneous increase in cloud services, perhaps the better question now is, will either drive type be the answer for the intensive feature demands of the next generation of devices (from smart wireless devices (SWDs) to corporate computing solutions)?
 
The latest SSD-HDD question
The data storage device question itself appears simple enough on the surface: will 2011 finally see the long-foretold shift from HDD to SSD?  Why would now seem more likely than any other time?  Simple, tablets and smart phones are leading devices for consumer electronics (CE), and they are both based on NAND flash solutions for rapid boot up, low latency, power efficiency, and multimedia streaming data accessibility, to name a few leading features.  These features, coupled with anticipated lowered price points for SSDs (long a major hurdle for more widespread SSD adoption), all seem to point to SSD as the next generation data storage solution, finally.  Right?

Well, on the surface the answer to the SSD v. HDD questions seems to be at least a hedged 'yes' favoring SSDs.  After all, given the new market opportunities from popular SWDs and next generation NAND production architectures, pricing is forecasted to come down for SSDs (cf. this article on 20nm migration forecasted to improve SSD pricing and adoption by 150%).   Yet the general market consensus is not roundly supporting 2011 as the breakout year for SSDs.  If this isn't SSD's time, when will it be?  The likely (and honest) answer is a mixed bag. 

SSD v. HDD
The critical issue for data storage, particularly for the perseverance and prominence of HDD, rests in the health of the PC sector.  At the end of the third quarter (3Q10), the PC forecast was not inspiring, with estimates trending down as well as pricing drops due to pressure from the aggressive average sales price (ASP) throughout the industry (cf. Barclays Capital IT Hardware, Sept. 10, 2010, for a concise overview).  As we come to the end of 2010, there has been little change in the PC forecast.  While still a murky situation, stabilization in the PC market for 2011 is anticipated, meaning a return to normal supply-demand trends (in part based on demand returns due to new chipsets, notably from Intel).  With tablets and smart phones seen as strong growth leaders due to favorable adoption of the features these devices offer, the components (because of the user experience garnered) are similarly forecasted to see strong growth.  These devices, grouped under the newer category of smart wireless devices (SWDs), are based on NAND flash solutions, SSDs, as well as mobile DRAM.  Economies of scale point to the obvious trend, namely that SSD pricing will decline as volume increases.  This simple economic situation ought to be boosted by the recent adoption of an SSD-only data storage solution by Apple for its newest laptops, MacBook Air, which are designed with SSD-only data storage devices (cf. here and here for quick device overviews).  However, there is more to the debate than simple economies of scale.

The memory variable
DRAM pricing weakened over the past quarter and the broader PC market situation has only further pulled DRAM pricing down (cf. this detailed analysis in the most recent MarketWatch Quarterly).  Despite the DRAM price declines, which normally present ODMs and OEMs with an opportunity to increase memory content in PCs, there has been little interest in pursuing that strategy.  Rather, PC manufacturers have turned to reduced pricing, instead of increased memory, to entice purchases.  Why choose a reduced pricing strategy over additional memory, as is normally the case when DRAM prices drop?  The concern is that there may be a critical excess inventory situation for PCs in China and so reducing existing inventory is essential (cf. Credit Suisse:  Semiconductor and SPE sectors, Dec. 1, 2010).  The reason for this possible excess inventory is believed to have been the robust 1H10 for PCs followed by the grinding slow in PC consumption during 3Q10 (i.e., "Shipment growth for consumer notebooks was 90-100% YoY in 1H, but slowed to roughly 30% in Jul-Sep." ibid., Credit Suisse, p.1). 

Nevertheless, 1Q11 is forecasted to hold new demand drivers for HDD and notebook demand because of the co-occurrence of the Lunar New Year and Intel's Huron River platform.  Rather than resulting in a growth period, the new demand is forecasted to result in a stable shipment rate (as opposed to a loss) for the 1Q11 period.  Future growth opportunities for HDD and PCs are anticipated from the emerging markets and the related rise in demand (and purchasing power) for those new consumer and corporate segments.  This new demand, expected to emerge more strongly during 2H11, will support the HDD sector as price point remains an important driver, given HDDs will continue to price lower than SSDs. 

As prices remain favorable for increased memory capacity and data storage capacity continues to grow, notebook HDDs are forecasted to reach 500GB in 2011 and netbook drives should reach 320GB, according to a recent survey of Taiwan-based HDD manufacturers by DigiTimes on 11-24-10.  Notably, Western Digital recently modeled its 3TB HDD, as reported here by The Register.  However, while SSD remains at a higher price-point than HDD, the reduction in DRAM production presently and through the next forecasted quarter will translate into DRAM price rebounding and rises (estimated at 4-5% price increases by the same DigiTimes 11-24-10 article), translating into an increase in HDD prices – albeit still highly competitive in terms of pricing compared to SSDs, which currently track at roughly 10 times the price of HDDs, according to the same report in DigiTimes on 11-24-10. 

In response to the increased demand for SSD and NAND, there are many diversification strategies in play by memory manufacturers who have already switched lines away from DRAM and to NAND.  With these new NAND lines online and their numbers increasing, supply will naturally increase, leading to anticipated NAND ASP declines which will then translate into the needed SSD ASP declines (cf. this iSuppli report on NAND flash).  The growth rates for NAND, as cited by iSuppli , are considerable: "[c]onsumption of NAND flash in tablet devices will soar to 1.7 billion gigabytes in 2011, up from 428 million gigabytes in 2010."  These forecasts are dependant upon the continued strong demand for SWDs though, and that variable is tied to consumer confidence, unemployment rates, and global and regional economic conditions for 2011.

For HDD, memory pricing and the PC market situation are important variables that drive the HDD market: DRAM as a PC component (and feature sales strategy), and PCs as an end-product for the HDD.  With PC markets in question over both the Chinese inventory situation and unclear PC purchasing trends due to tablet and smart wireless device (SWD) penetration, one might believe that the answer to the SSD-HDD question tips in favor of SSDs.  However, there is an important market segment that is upwardly trending and that favors HDD growth: external and enterprise data storage solutions.  The external HDD market is experiencing growth and is taking advantage of the lower DRAM pricing and catering to the need for increased data storage capabilities.  For the corporate sector, there is a complimentary trend in enterprise data storage, with analysts anticipating "robust corporate demand […] for servers […]." (Credit Suisse: Japan Memory sector, Oct. 1, 2010, p. 3) 

External and enterprise storage solutions
The external HDD and enterprise data storage markets provide solid growth opportunities for the HDD sector, based on the continuously increasing demand for data storage and access.  Increases in data storage needs are a given across all industries and market segments, and therefore solutions for data storage and access provide real market opportunities.  However, this obvious growth sector may not be the golden egg for unit volume growth for HDD. 

The competing solution to external HDD?  Cloud services.  As data storage needs have exponentially increased for corporations and for consumers, growth in external HDD solutions and increased memory capacity in PCs has also increased.  However, the possibility of losing these important data to a hardware failure coupled with cost savings and anywhere access features, has promoted the adoption of cloud services that host data storage remotely.  For the consumer, these services are sometimes offered at no or little cost in order to induce other service purchases (e.g., photo and video hosting which are memory intensive).  For corporations, there are significant cost savings in personnel and equipment as well as off-site back-up solutions. 

The ability to access data whenever and from wherever one may be provides obvious benefits to both consumers and corporations.  The opportunity for growth in these cloud services for data storage is best underscored by the recent HP and Dell bidding war for 3Par (cf., this article as one example of the discussion from WSJ.com).  But these data do need to be housed somewhere, after all, and so the question begs, will the enterprise storage purchases by cloud services be enough to support the loss from small external drive storage devices?  Of course these server markets are dominated by SAS and SATA HDDs.  SSDs are forecasted to remain at below 20% market share at least through 2014, meaning that HDDs will not lose ground in the enterprise server market anytime soon, as succinctly presented in this iSuppli briefing, "due to [SAS HDD]'s low price and perfectly acceptable performance." 

To balance the opportunity found in enterprise servers, not everyone will move to the cloud, quite obviously, as there are still many unanswered questions and concerns, although adoption is increasing rapidly (cf. this recent commentary on cloud concerns in Manufacturing Business Technology).  Again the opportunity for a different type of 'hybrid' solution arises.  Not for a hybrid hardware solution, rather for a 'best of both worlds' solution: tiered storage solutions. 

Corporations are beginning to adopt tiered solutions, allowing them to meet their users' demands for rapid data access times offered by SSDs, over the latency issues of HDDs, by installing an SSD tier (at Tier 0) to compliment the existing HDD enterprise data storage solution which still handles the bulk of the data storage (cf. this recent report by iSuppli).  This tiered data storage approach offers the ability to reduce costs by only having a portion of the enterprise server be the more costly SSD and keeping the bulk of the server HDD.  Not only are latency issues resolved, but the SSD tier also is more energy efficient, thereby relieving some of the price pressure.

The impact from new devices
While the enterprise server market is less likely to be critically impacted by SSDs, market cannibalization from tablets continues to be cited as a primary cause for concern in declining PC forecasts (unit volume and pricing).  This, of course, then translates into concern for the health of the HDD sector.  Tablets and SWDs are based on a mobile platform design with SSDs (i.e., a 'smart phone design', see this recent MarketWatch Quarterly article for a detailed discussion).  Some of the features that have fostered the rapid adoption and success of tablets are based on the attributes of the mobile design base, namely, the rapid boot-up, multi-tasking, highly efficient power consumption and ability to seamlessly access and review various types of data (e.g., streaming video, photos, etc.).  This data handling ease and power efficiency is rooted in the NAND flash and SSD architecture that also leverages mobile DRAM and integrated chipsets.  Also important to the design functionality is the ability to access multi-media data (video, audio, and/or alphanumeric databases) seamlessly from remote locations, that is, through cloud computing. 

What is the impact on the HDD market?  These new SWDs do have a negative impact on the HDD market, firstly, as tablets and smart phones are SSD and NAND based designs; and secondly, because the advantages of SSDs are reaching more people through these new devices and these features are then desired from other devices, such as notebooks, digital media adapters (streaming video content), gaming devices, GPS and other portable media players (PMP) (cf. this report from iSuppli for a brief CE overview).

Is it a stalemate?
In many ways, the SSD-HDD debate may no longer require picking one or the other.  As user experiences and needs become more personalized, alternative solutions are being adopted to meet the different demands.  Together, these solutions cover the gamut of possible outcomes to the SSD-HDD debate and are each viable (though some more than others):

  • an opportunity for hybrid HDDs although their adoption is still quite in question (cf. here for a quick commentary and this briefing from WSJ.com on AMD's 'fusion' chips);
  • a stalemate, holding the present market division with HDD only loosing some of its roughly 98% market share to SSD shipments because of the continued lack of standards for SSDs and price points (cf. this call for SSD industry standards from EETimes and this flash standard put forth by Toshiba and Samsung this summer);
  • the ability of SSDs to (finally) gain market share based on the present lowered price points and growing acceptance of SSDs through SWD sales and the increased incorporation of SSDs in notebooks, such as in the new MacBook Air from Apple (cf. the debate here and here on HDD-SSD penetration for notebooks and SWDs between Apple and Seagate from The Register); and/or
  • a decline in HDD and a minor improvement in SSD market share with the bulk of data storage moving to cloud services held by data services companies (wherein new opportunities for enterprise data storage solutions increase, promoting HDD at the enterprise level and SSD with mobile DRAM (mDRAM) solutions for users, both corporate and consumer) coupled with tiered enterprise server solutions (a Tier 0 SSD supported by the bulk of data storage handled by HDD servers).

Where does this leave our forecasts?  You may have guessed it by now, change is afoot in the SSD-HDD tug-of-war, but it is not the sweeping and dramatic shift as we've seen this year ushered in by rapid smart phone proliferation and most notably, by the iPad's tablet revolution.  While the rapid growth in SWDs might on the surface seem to herald the pivotal moment for SSDs to finally take the lead, the broader industry data do not yet support that strong of a conclusion.  SSDs will, certainly, gain in market share alongside the SWD 'revolution' simply by virtue of their BOM status in these devices and the demands for the features they offer to users (cf. this article in the recent MarketWatch Quarterly for an overview of the SWD impact). 

For 2011, it is more likely that SSDs will see solid growth from CE and enterprise servers, and this will be at the cost of some market share for HDDs (cf. this iSuppli forecast).  While DRAMeXchange has offered predictions of 150% rise in shipments of SSDs for 2011 based NAND price reductions gained from next generation processes (cf. this article reporting on the 20nm opportunities from ElectronicsWeekly, and DigiTimes 10-27-10), it is important to note NAND pricing did not improve notably this year, even with the demand seen for tablets and smart phones (the top end-product drivers).

In sum, HDD still holds the greatest portion of the rope in this ongoing market share tug-of-war. There are some significant NAND hurdles in pricing to be overcome as well standards for SSDs to be more widely adopted for the battle to be called.  While the migration to 20nm for NAND holds a real answer to this price hurdle, the consumer and corporate purchasing power variable is the wildcard given the ongoing macro-economic concerns – meaning we will have to wait a bit longer for a more final resolution.

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