A 3D-NAND and SSD Industry Update, and the HDD Roadmap

Vijay Rakesh
Vijay Rakesh Senior Equity Research Analyst, Semiconductors
March 22, 2016



We hosted a call with an NAND industry expert, Jim Handy. Some takeaways include: 1) Samsung 48-Layer 3D-NAND is now available in the market; 2) MU is now showing 64-layer 3D-NAND; 3) enterprise SSDs with a 32% CAGR continue to be a big market for NAND; and 4) the HDD OEMs also continue to push areal density enhancements with shingled HDDs and HAMR. We believe increasing NAND supply will be a drag on the HDD industry, which is facing challenges with weak PC demand, a flat high performance market, and margin headwinds such as Toshiba.

Key Points

Samsung 48-Layer products are now available in the market. Our industry expert noted Samsung's 48-layer 3D- NAND is now available as of last week (which assuming the 1.5-2 month production cycle would imply a January start to production).

Is Micron going from 32-Layer (L) to 64-L? The speaker also noted that at the International Solid-State Circuits Conference in San Francisco in February, MU showed what appears to be 64-L 3D-NAND. To put in perspective, 48-L drives 50% bit growth from 32-L and an ~30% cost reduction, with a much better ROI.

Soft NAND pricing in January, and the Toshiba operating margin guide, could point to soft NAND pricing in 2016. Jim also noted NAND pricing in January was weak, and appears to have stabilized. But we would note Toshiba (Covered by Takeshi Tanaka, Mizuho Japan) guided Apr'16-Mar'17 OM down 1000bps to 5%. As we show on the next page, SNDK and Toshiba operating margins trend similarly and could point to some weakness.

Enterprise SSDs, growing at a 32% CAGR, could be a headwind for 15K HDDs if cost reductions in 3D-NAND get aggressive. Jim noted enterprise SSDs will grow at a 32% CAGR into 2019, and any potentially significant ~40% 3D-NAND cost reduction could start to impact an already mostly flat growth 15K enterprise HDD market.

HDD OEMs continue to focus on Areal density enhancements to compete with SSDs. Key to note also, the HDD OEMs are following areal density enhancement. Near-term, the focus is on PMR and shingled HDDs to drive better capacities. But we believe soft NAND pricing and 3D-NAND could continue to pose a challenge to HDD OEMs.

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