Axiom has discussed how DRAM components for the most popular applications were encountering a shortage. The same can now be said about flash memory but more specifically, NAND flash memory. Supply and demand tells us that when demand is higher than supply, either a shortage occurs or prices increase. Just like a popular toy during the holidays, enterprise buyers understand that a newly released IT appliance can be temporarily constrained and incur a spike in price. What is more difficult to digest is how a mature technology with a declining component cost trend is now encountering a 20 to 30 percent cost premium. Unless you stay on top of every flash memory update, this sudden cost increase and product shortage couldn’t come at a worse time. Let’s take a closer look at the NAND Flash market and review the underlying reasons for the current state of inflation. It should be briefly noted that several leading NAND flash manufacturers are reporting that the shortage will continue through 2017 and even impact through Q1 2018.
The NAND Flash market is dominated by several manufacturers: Intel, Micron, Samsung, SK Hynix, and Western Digital with their SanDisk and Toshiba partnership. (More details to come in future articles regarding the developments surrounding the Toshiba Semiconductor company sale).
The current state of the market is due in large part to several suppliers miscalculating their projected forecasts or failure to bring new component technologies to market as planned. As these larger suppliers encounter production delays, misjudge volume demand, and provide inaccurate forecasting, the remaining manufacturers just can’t fill in the production shortfalls.
Currently, several manufacturers have failed to reach their projected production yields and under-produced mobile application and enterprise-class NAND. Just one miscalculation in either area can cause a ripple in the market. Combining low product output with the incorrect product mix is wreaking havoc on the NAND Flash market.
As mentioned earlier the NAND flash market has been in a constant state of flux. The constant consolidation of suppliers that produce the majority of the NAND flash components leaves very small room for error. The merging of 6 major players in 2014 to 4 in 2017, places a growing and almost ubiquitous technology in the hands of a few manufacturers.
NAND Flash memory is a versatile component with several valuable attributes. As non-volatile storage, its ability to store data without constant power is one of its most popular features. Historically used for general storage, the applications for NAND flash have evolved with the computing market. Initially utilized in MP3 players, digital memory cards, and USB devices, NAND flash has evolved beyond consumer electronic storage. Before flash, there was no low-power, non-volatile storage that could be designed in multiple applications. NAND flash continues to be a game changer as it moves from consumer SSDs and mobile storage to the data center and large enterprise storage arrays. Looking at flash we can see the growth in usage as the ubiquitous fix-all for low latency storage and a flexible memory component. It is indisputable that NAND Flash has become an integral part of our daily lives. Our ability to connect with others via social media through our smartphones that in turn are communicates with data centers or enterprise servers for information demonstrates just how irreplaceable and significant NAND has become.
NAND flash has truly become a victim of its own success. As a growing number of OEMs design and adopt flash technology, the ability to manage the product mix and increase storage capacity becomes much more complex. The increasing, almost insatiable demand for speed and capacity requires high performance, low latency storage that only NAND flash can provide. As we see with consumer electronics, nothing in the world or IT industry is static. Flash memory requirements continue to change rapidly and history has shown that the technology will continue to evolve and keep pace with the market requirements.
Simply stated, projections are never perfect. Even with comprehensive roadmaps and careful production planning, all things can’t be predicted or flawlessly forecasted. The recent forecasting errors provide a stark reminder. Many are asking why and how several manufacturers could be so wrong? To be fair, Monday morning quarterbacks have the benefit of hindsight. Most manufacturers got it wrong but it wasn’t just missed projections that caused the upward trend in pricing. The unexpected demand for desktop SSD requirements played a factor as well. As the manufacturers ramped production for desktop demands, their need rapidly diminished. The availability of consumer desktop and notebook SSDs were abundant, therefore the availability of enterprise-class flash drives and mobile flash suffered. The product mix debacle was difficult and by itself might have been manageable, however as one of it just further compounded the issue.
The demand for higher density and lower cost components with smaller form factors has reached the scalability threshold. The basic science is that standard NAND flash has reached their saturation point. While the ability to shrink the wafer die on 2D or planar flash to smaller nanometers becomes more difficult, many NAND flash manufacturers are focusing their efforts on designing 3D NAND. The result, manufacturers adopting 3D NAND flash to accommodate higher memory storage capacities. Vertical stacking or 3D technology allows for more bits of data to be stored on each chip. This reduces the cost per bit and increases the capacity in a compact space. To facilitate the wafers for next-generation 64-layer and higher NAND requires a tremendous amount of capital resources and time. Until the leading manufacturers are able to improve their production yields for 64-layer 3D NAND to SSD storage products the market supply will continue to be constrained.
Until 3D NAND production and test yields improve, the shortage of necessary components will persist. In turn, IT organizations will have to delay much-needed upgrades or fight to increase IT spends.
As the leading manufacturers of flash components continue to develop more efficient and cost-effective approaches to storage, we will see technological innovations, market consolidation, and the growing platform adoption of NAND flash. The NAND flash transition from 2D to 3D, MLC to TLC, and 64-layer densities and beyond will be eclipsed by greater product breakthroughs. These innovations will continue to propel the flow of information but will not be immune to product shortages and higher component costs.
One suggestion is to partner with a supplier that provides platform-connected solutions. One that also offers flexible sourcing channels to provide NAND storage solutions even during the most constrained inventory conditions.
Providing the cornerstone products for IT organizations challenged to move at the speed of business, Axiom provides cost-effective solutions that help lower the IT cost with complete upgrade confidence.