SSD demand triggers a tidal wave of growth for SanDisk
SanDisk Corp. ups the ante to 49 per cent for its 2014 gross margin target. The flash memory maker led the S&P 500 rankings on April 17 with a 9.3 per cent stock surge, following an announcement of a revenue jump propelled by an improved product mix of high-end enterprise and low-end mobile storage products.
The $1.51 billion in revenue Sandisk reported for the first quarter was just 1.3 per cent above analyst expectations, but its projected profit was 71 per cent higher than the same period last year at $1.44 per share, blowing away the $1.25 per share Wall Street expected.
The main reason for the big surprise was the increasing demand for solid-state drive (SSD) to replace or enhance hard drives in laptops and, most especially, in servers and high-performance storage devices in corporate datacenters.
Only 20 per cent of gross revenues came from the sale of enterprise SSDs during the fourth quarter of 2013, and only 10 per cent in 2012, according to Forbes.
Gradually dropping prices for all types of NAND flash storage helped boost sales of SSD overall, SanDisk CFO Judy Bruner said on a conference call with analysts.
That helped sales of SanDisk flash ships embedded in USB devices and smartphones, including the Apple iPhone 5 for which it supplies microSD cards, as well as raising the demand for SSDs.
Sales of SSDs for desktop and laptop computers grew 19 per cent during the first calendar quarter of this year, according to StorageNewsletter.com.
Sales of enterprise SSDs—designed for hybrid disc-and-flash storage or for all-solid-state-arrays, especially for performance-sensitive cloud-services companies—grew from 5.44 million units in 2012 to 9.52 million in 2013 and are on track to hit 13.8 million during 2014, according to market-analyst firm Trefis.com.
The August 2013 acquisition of Smart Storage Systems helped SanDisk keep up with the volume required in the growing market for NAND memory.
SanDisk took advantage of the shift and the increasing emphasis on cloud computing by introducing a new series of SSD-based products called CloudSpeed Serial ATA, which are based on high-performing 19nm process SATA SSDs designed to stand up to 10 full-drive writes per day, are guaranteed for five years, and come in sizes of between 100GB and 800GB per unit.
SSDs are not, as Samsung implies in its CloudSpeed press release, the future of storage in the cloud or datacenter, according to Jim Handy, director of analyst firm Objective Analysis, in an April 11 column for EETimes.
NAND-based SSDs provide memory, not storage, though speed- and price-comparison tests done by Objective Analysis in 2011 showed a GB of flash delivered a better performance boost than a GB of DRAM to servers already configured with enough memory to handle the workloads they'd been given.
The relatively slow performance of NAND-based SSDs should end their reputation as an enterprise performance-booster as soon as they're replaced by faster alternatives including 3D NAND, which probably won't ship in volume until 2017, Handy wrote in EETimes.
SanDisk has been spending admirably high amounts on research and development, however, not only to develop its own 3D NAND designs, but also more-advanced planar (2D) NAND ships it calls the "1Ynm" and "1Znm" generations of NAND chips. Handy expects these will help stretch out the useful life of NAND and make the transition to 3D NAND or something un-NAND-like altogether far more gradual, he wrote.
After years of spending most of its R&D budget on cost-cutting and efficiency measures—and actually reducing its capital expenditures during 2012 and 2013—SanDisk is expected to increase its capital spending by 86 per cent during 2014, according to ICInsights.
That $1.6 billion will put SanDisk among the 10 biggest spenders among semiconductor makers, but won't crowd Samsung and the $11.5 billion it plans to spend during 2014, according to the IC Insights report.
That extra spending got Samsung a workable 3D NAND product fast enough to start production in August of 2013, while SanDisk won't have a product on the market until 2015, according to MotleyFool.com.
Samsung's 24-layer, stacked-cell 40nm nodes are not as small or as efficient as the 19nm chips SanDisk is working on and that Micron Technology is close to debuting, according to MotleyFool.
The result is that SanDisk remains behind the technological curve compared to Samsung, but has nestled into several sweet spots in the storage market that are giving it remarkable success, especially for a company that was considered no more than an also-ran in the embedded-flash market just a few years ago.
SanDisk is no longer considered a chipmaker, in fact, but a storage provider, according to RBC analyst Doug Freedman, quoted in Reuters.
"And not just a storage company, but a high-quality storage company," Freedman said in the April 17 story about SanDisk's earnings. "There's a real differentiation in the market that is showing up between high-quality products and 'just ship it because somebody will use it.' "
- Kevin Fogarty
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