Seagate Needs To Move Or Loose

Implications: SSD's will replace HDD's in Notebooks and Blade servers within the next five years. Anybody who wants to participate in this market needs access to competitive NAND flash products and have stability of supply. 

Analysis: The landscape of the industry will change. The price for NAND continuous to reduce by 50%-60% year over year. That means that by the end of next year the price for 1GB of NAND memory will be around $1. Respectively the bill of material for an 80GB SSD will be approximately $100 ($80 memory, $5 controller, $15 assembly and test).

Companies which want to successfully address this market need to have access to low cost NAND flash products. Companies like Samsung, Toshiba, Sandisk are producing NAND flash products for years and will also enter the SSD market by themselves. These players have access to flash at cost enabling them to compete aggressively in this market. Additional the supply in the flash market is erratic at times with substantial temporary shortages.

If Seagate wants to enter SSD they need to mimic the strategy of its competitors. It is obvious that Samsung and others have no intention to support a competitor by supplying NAND at extreme low cost and ship products to Seagate during times of shortages.

It is an open secret that Intel is looking to exit the NAND flash business by selling its share in IM Flash. However Intel also needs in the future a significant amount of NAND products for their CPU and system business.

Interesting to watch is also the IP landscape of SSD. It seems that Seagate believes it has a strong patent portfolio for HDD which will be valid also for SSD. They recently sued STEC which is a sizable supplier of SSD into the server market and potentially also into notebooks.

The conclusion is that Seagate needs to move on this subject but they have several choices. It could be IM Flash but also Hynix which is desperately looking for a partner in the NAND flash business. Hynix teamed up with Sandisk some time ago but this cooperation does not seem to lead anywhere.

However Seagate and its investors have to be aware that participating in the manufacturing of memories requires a continuous multibillion dollar investment year by year.

Surely the US electronics industry lead by Intel, Apple, Dell, HP and IBM has a strong interest that some of the strategic products like NAND will be produced in the states or at least will be controlled by US companies.

Samsung changed the paradigm of the industry proving that a successful component company as a better chance to become also a successful system company.