Solid-state drives (SSDs), with faster access times and lower power consumption, are replacing or complementing hard disk drives (HDDs) in communications and consumer electronics equipment. Will they eventually render HDDs obsolete in the enterprise market? Let’s take a closer look.
The main issue with the widespread use of SSDs is their high cost. SSDs cost around $2 per gigabyte versus $0.10 to $0.20 for HDDs. This does not make them feasible for use in commercial applications or for heavy use, and they are therefore more prevalent in high-end mobile computing devices. Added to this, there are security issues associated with using SSDs. They also have lower capacity, but that is expected to change — drives of 1 TB have already been released for enterprise and industrial applications.
In a recent report, IDC said that it expects SSD vendors to achieve capacity and price points that make these drives an attractive solution in the PC and enterprise markets, especially for data centers. HDD technology has been around for more than 50 years, and SSD presents a great value proposition for the storage industry that leading HDD vendors are looking to capitalize on.
Seagate (NASDAQ:STX), which manufactures about 60% of the world’s enterprise HDDs, recently launched its own enterprise SSD. Western Digital, through its acquisition of Silicon Systems, is one of several HDD manufacturers entering the SSD market. Seagate believes that SSD will not compete against HDDs but will rather expand the overall storage market. This sentiment is shared by IDC’s Jeff Janukowicz, who says that the cost per gigabyte would have to come down before SSD gains traction in the enterprise market.
Even Intel has been pushing into the SSD market. From just 0.5% market share in 2007, it now has about 7% share. The EE Times recently reported that Intel is in fact looking to dominate this market. Samsung is the current leader, followed by STEC and SanDisk (NASDAQ:SNDK).
SanDisk, like Samsung and Intel, has an edge in the SSD market because it is vertically integrated. It sells Flash to the top 10 mobile handset makers and is the No. 1 maker of NAND Flash memory cards used in devices such as digital cameras.
SanDisk has recently dropped its patent lawsuit against NAND Flash device maker A-Data Technology and would be dropping cases against other NAND Flash device and controller chip makers that have become its customers.
SanDisk’s 2009 revenue was $3.15 billion, up 11%, and net income was $415.3 million compared to a loss of $1.98 billion last year. The company reported a strong fourth quarter with revenue increasing 44% y-o-y and 33% q-o-q to $1.24 billion and net income of $339.5 million. It ended the quarter with $3.02 billion in cash. Q3 coverage is available here.
SanDisk recently raised its first quarter revenue guidance to a range of $925 million to $1 billion and said that it expects to ship 1 billion units over the next two years. It has shipped 1 billion units over the past three years but believes the industry will grow on a much larger scale as the mobile Internet becomes ubiquitous. The stock is currently trading around $34 with market cap of about $8 billion. It hit a 52-week high of $34 on March 8.
Seagate, with annual revenue of $9.8 billion, in January reported 33% growth in second quarter revenue to $3.03 billion, gross margin of 30.5%, and net income of $533 million compared to a loss of $2.8 billion last year. It ended the quarter with about $1.9 billion in cash. Q1 coverage is available here.
Seagate said that it expects revenue of about $2.9 billion to $3.1 billion and EPS of $0.88 to $0.92 for the third quarter. The stock is currently trading around $20 with market cap of about $10 billion. It hit a 52-week high of $21.45 on March 1.
The SSD market, which currently has a revenue of less than $1 billion, is expected to reach $10.8 billion by 2013. This is still only a fraction of the current HDD market, and SSDs have a long way to go before they can wipe out HDDs.