Toshiba and WD continue to tussle over fab ownership.

All eyes have been on the acrimonious relationship between Toshiba and WD as they fight for control of their joint venture NAND FAB. Does anyone really remember who had the high bid? This seems to be dragging on and on like a bitter divorce. However, recent reports indicated that the two were finally sitting at the table to hash out their differences. Toshiba avoided delisting but cannot afford to allow this to go unresolved for much longer. They need to get their financial house in order. While WDC cannot compromise their strategic acquisition of San Disk by losing a stake in the joint venture FAB, currently there is no direct impact on WD’s balance sheet. However, they cannot afford not to have access to technologies for the development of next generation storage. Unfortunately, the latest updated indicates that there is still some distance between them around what WDC’s future ownership stake looks like.

 

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Looking at the competitive SSD landscape, the SSD manufacturers that are vertically integrated (own FAB capacity) fall into the tier 1 bucket and command the lion’s share of enterprise SSD sales, where end users demand performance against the lowest cost option, and the client space, with much loser performance requirements, is driven by cost, allowing for a thriving third party market. Once they work through their issues, WD and Toshiba are positioned to manage the market transition towards SSD, while Seagate is relying on foundry relationships to ensure NAND supply, which could be good or bad. If SSD capacity surpasses demand, Seagate will be the beneficiaries of cheap NAND without the cost of the capitalization of a FAB. However, realities paint a starker picture. Not only are they once removed from the supply chain, limiting their control, but they don’t have the same access to technology that WD, Intel, or a Toshiba have for developing new gen products. When demand outstrips supply, they are relying on their competitors to provide NAND to build SSD. Not a great position to be in.

 

The concern over the endurance of TLC based SSD continues to drive open market demand for MLC based SSD. Samsung PM863 and SM863 have been in demand in the open market. Intel’s Intel 3710 and 3610 series have been in high demand due to being end of life, yet its replacement, the S4600 series, will not ramp volume shipments until late Q3. Although we have seen recent deliveries made for 200GB, 400gb, and 800GB 3710 series parts, they continue to fetch a considerable premium, and we expect this to be temporary as Intel fills last time orders.

 

The transition to TLC based SSD has been gradual with continued questions about wear performance. We have seen increased volumes of Samsung’s TLC based SSD, PM863a, and SM863a being offered in the open market, and we seewill see greater acceptance of TLC based enterprise SSD, as new generation software is written specifically to take advantage of flashed based SSDs as opposed to current software written to take make SSD work in a HDD environment. Once this transition takes off, we will see increased adoption of TLC based SSD in the enterprise environment.

 

Please email me at stephen.buckler@horizontechnology.com