Horizon November 2017 Storage Market Brief
We have talked many times in past market briefs about the many exciting emerging technologies, including machine learning, IoT and AI, that are shaping our digital world. Data will be growing on an annual basis at 40%. We seemed to have reached a tipping point with an increased uptake in the utilization of tiered storage to manage the growing demands of data. Allowing storage solutions to benefit from the strengths of SSD and HDD, maximizing performance at the lowest cost possible. Increasingly, we are seeing PCIe and NVMe in the conversation, with NVMe emerging as offering the best throughput to handle hot data, while HDD as the most cost effective option for cold data. WD’s recent announcement of MAMR technology guarantees its seat at the storage table for years to come by continuing to significant cost advantage over SSD.
We came off of a weak third quarter, impacting on both HDD and SSD sales with some attributing weakness to the slow adoption of Intel’s Purley processor. With the exclusion of PCIe, Trend focus reported a surprising 7% drop in enterprise SSD unit sales in Q3. The combination of weak sales and 3D NAND moving into mass production resulted in a 20% drop in open market SSD pricing. Both Micron and Samsung are in full production with their 3D NAND, with Samsung 3D NAND expected to exceed 50% of their production volume in Q4. Toshiba 3D NAND production is expected to reach 30% in Q4 and Hynix will launch mass production of its 72-layer NAND flash in Q4.
Potential disruptors to the SSD supply are NAND supply, which are being diverted to support new smartphone product releases that, at this point, seem unlikely to have a measurable impact. The greater threat to NAND supply are rumors that Samsung, who have a 37% market share of the NAND market, is considering shifting capacity to support DRAM demand. But this is also unlikely to have a quantifiable impact.
Enterprise market conditions are improving, which are welcome after a soft Q3. SSD pricing has stabilized over the past month and should carry into December. However, as we approach Q1 2018, we expect to see downward pressure on 3D based SSD but expect MLC to remain stable and an increase in select instances.
PCIe’s 15.6 percent increase is reflective of the market transitioning to tiered storage, gaining momentum and becoming the interface of choice for the Purley platform. This resulted in an increase in open market activity for PCIe-based enterprise SSD. We also continue to see MLC-based SSD demand, with a significant uptick in demand for Intel’s S3520 series SSD, in advance of the series being obsoleted.
With market conditions improving, Seagate eased off of their aggressive pricing from Q3 pricing levels, with several storage array builders indicating that they have raised their large-cap drive pricing by 5–7%. Interestingly, one builder indicated that they were told they would not be affected due to special pricing agreements (SPA). Which seems to indicate that Seagate is using an accounting procedure that allows manufacturers to book revenue off booked price without having to include SPA. This allows them to increase pricing as a whole and to work with customers on an individualized level, as well as making price adjustments on an as need basis. This gives them wiggle room to manage the reported constrained supply situation that resulted from their grabbing market share for a high cap with aggressive pricing.
WDC/HGST’s focus is on moving customers to 12TB, in order to push their cost advantage and quality advantage. To round out their portfolio, WDC/HGST is reported to be reviving 8TB and 10TB air-based drives to better compete with Seagate and Toshiba. They feel that their technology gives them a cost advantage with better arm articulation increasing areal density, resulting in less platters and heads.
As we discussed in last month’s market update, Seagate and WDC/HGST are taking different paths to the next gen storage, with Seagate betting on HAMR while WDC/HGST have selected MAMR, which is the better choice on paper. Details in October’s market update: http://www.horizontechnology.com/horizon-october-2017-storage-market-brief/. Toshiba is expected to enter the market early in 2018, with its 14TB PMR drive with both Seagate and WDC/HGST choosing SMR. In addition, Toshiba will be pursuing a MAMR solution as well, however, let us not forget that Toshiba outsources head manufacturing, putting them at a cost disadvantage.
2018 is shaping up to be an interesting period, with several developments around drives and storage architecture as a whole. We are at a tipping point where traditional storage, which has served us well, is no longer adequate to support the growing demands of the digital economy. To drive customer adoption, users need to be able to offer robust solutions at competitive price points in a very competitive market – which is driving the movement to tiered storage. HDD will provide the low-cost bulk storage, while SSD will manage queries of key datasets at the front end. However, SATA and SAS interfaces are not up to the task of meeting the performance requirements at the front end. We have already seen evidence of the need for speed, with PCIe sales showing a healthy 15.7% growth in a soft quarter at the expense of SATA and SAS. Expect to see an accelerated cannibalization of SATA/SAS sales by PCIe.
With evidence of further optimization of tiered storage to satisfy an increasing need for speed and low latency, we are seeing the arrival of storage class memory (SCM), also known as non-volatile memory that sits between drives and memory. The implications for the storage market is a movement toward more complex and nuanced solutions, with the integration of new technology often proving to be costly and complex, requiring the integration of several moving pieces. However, the rewards are substantial.
Notebook/Desktop Storage Sales
In what is traditionally the busy season, the PC market continues to show signs of weakness, with gaming being the lone bright spot. There is little to cheer for, with ODMs and Mfrgs reporting numbers as weakening from September. There is some talk of cannibalization, with Q4 builds having shipped in Q3.
Hard Drives continue to be the storage of choice for Notebooks due to the high cost of SSD, with 500GB and 1TB being the preferred capacities. The mix between HDD and SSD is 70/30. Considering market conditions, we have seen stable demand for both 500GB and 1TB, with market tightness for 1TB capacities. With improved 3D NAND yields, client SSD pricing is coming down quickly and may possibly be the catalyst to increase SSD content at the expense of HDD in the notebook market.
For many years, industry pundits have talked of how the web is going to improve our lives by improving healthcare, simplifying banking and making information available anytime and anywhere. However, we have learned of the dark side of the cloud. From unintended consequences to deliberate theft and manipulation resulting in identity theft, fake news and numerous security breaches, to the influence peddling and loss of privacy that is begging for a solution.
Security and privacy are front and center, dominating conversations. As a result, there are many new approaches to combatting cybercrime, including 2-factor authentication, user and entity behavioral analytics and machine learning, micro-segmentation and flow visibility, digital safe rooms, endpoint detection, and response. With the most intriguing being the use of distributed cloud storage within blockchain technology, which has the potential to be a disrupter in the storage world by offering a more secure, faster and cheaper storage solution than traditional cloud services. By utilizing blockchain and distributing shards of data across a network of farmers who, for a fee, offer unused storage and offer secure storage at a tenth of the cost of an Amazon or Microsoft Azure.
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