How Many is Enough SSD Companies ?

Implications: § By some estimates there are over 50 companies currently offering products that they call solid state drives (SDDs)  §  Many of these products have been designed hastily and some of them show no improvement in benchmarking tests vs. hard disk drive metrics  §  There will be a significant consolidation and culling of the SSD players over the next 1-2 years  §  It is likely that SSD consolidation will mirror that of HDDs in the 1980’s

Analysis: At the Flash Memory Summit (August 12-14, 2008) in Santa Clara, CA it became clear that there are a great many companies from all over the world that are offering flash based SSDs.  By some estimates there are over 50 of these companies.  Some of these companies are relabeling other manufacturer’s products but many are buying flash memory and controllers, writing some firmware and introducing their own products.  Some of these companies are specializing in the enterprise (high performance) SSD space and some are specializing in embedded and industrial markets.  Still other are hoping that flash memory will play a major role in laptop and mobile computer applications.  

The number of SSD companies reflects a perceived “gold rush” of people hoping to stake a claim on what many feel could be a flash memory bonanza.  There have been several enterprise flash memory SSD products introduced and integrated in to storage systems by companies such as EMC.  Computer manufacturers such as Dell and Lenova have made significant commitments to flash-versions of laptop models and in some cases to SSD only laptops.  Total volumes of SSDs for all of these applications have been modest but many projections predict robust growth of these storage devices.  

Many of the companies making SSDs will probably not be around in a few years time, a victim to consolidation and bankruptcy.  It is likely that the SSD industry will follow a trend that was seen in the HDD industry.  In the early 1980’s there were over 80 companies manufacturing hard disk drives.  By the 1990’s there were fewer than a dozen and today there are only 6-7 companies making hard disk drives.  When a market first emerges many people feel that they can enter the market and compete even if they don’t have a clear differentiator from their competition or they have supply chain problems.  As the unit volume in the industry increases prices drop and many of the competing companies are no longer competitive and either must merge with other companies or go out of business.  

The number of SSD companies will probably decline by 30% over the next three years.  Companies that don’t manufacture their own flash memory will be under a cost disadvantage as the prices of SSDs go down and face increasing price competition.  Likewise SSD companies that don’t have their own SSD controller technology will be at a significant cost as well as performance advantage.  Companies that have good controller IP as well as access to flash memory manufacturing will be most able to weather the early days of SSD competition.  This will be especially true in the rough and tumble world of laptop and mobile internet devices.  

Some of the companies that will probably survive the initial market culling include Samsung, Intel, SanDisk, Toshiba and Micron.  Companies in the enterprise market that have sophisticated controller IP may survive longer even if they don’t have their own flash factories since these products have higher margins.  The current surplus of flash memory will help these companies keep their costs down as well.   

As flash increases in volume and as a clear space in the storage hierarchy is created for SSDs (and following a similar trend to the early HDD industry) there will probably be less than 15 players in 10 years time.  Most unit volume by then will probably be held by 5-6 players with the balance being niche market manufacturers.