Industry insiders are talking about what move Seagate Technology, the world’s largest and most successful disk drive maker, is going to make to get into a better position in the NAND flash market.
Analyst Daniel Amir of financial advisory/asset management firm Lazard put out a mergers-and-acquisition research note June 19 speculating that Seagate Technology may buy out Intel’s 49 percent interest-worth anywhere from $1 billion to $2 billion — in its IM Flash Technologies flash memory joint venture with Micron Technology.
Other flash industry watchers, skeptical of that opinion, believe that Seagate may looking instead at flash chip makers Hynix and SanDisk as possible acquisition or partnership targets.
Seagate, Intel and Micron — like virtually all companies — do not comment on acquisition speculation.
In any case, server and storage arrays makers EMC, Dell, Sun Microsystems, Xiotech and others are either producing such solid-state hardware options now or will be bringing them to market in the next few months. So it’s incumbent upon drive makers such as Seagate, Western Digital and Samsung to have the new SSDs ready when they will be needed, and that may be sooner rather than later.
“Because [Seagate] is the largest provider of enterprise storage solutions, it makes sense for them to migrate part of their business to include SSDs,” Avi Cohen, director of research at Avian Securities, told me June 20.
“The biggest issue in producing SSDs — in order to do this in a profitable manner over time — is that you need to have a captive source of raw NAND, either to make your own or team up with somebody to make their own.
“They’ve [Seagate] openly said they’re looking to team up with someone to secure that supply.”
NOR-based flash, which first came to the market from Toshiba in 1988, has long erase and write times but provides full address and data buses, allowing random access to any memory location.
NAND flash memory, which has much faster read-write performance, also originated with Toshiba and forms the core of the removable USB storage devices known as USB flash drives, as well as most memory card formats now available. Apple’s iPod and iPhone are two of the most currently successful commercial usages of NAND flash.
The IM Flash project has made news lately. This month, the IM Flash project started shipping a 34-nanometer, 32-gigabit NAND flash memory chip, the world’s smallest and densest yet. Four months ago, the project announced a new high-speed NAND flash memory chip based on 8GB memory that they said has data speeds of up to five times faster than conventional NAND.
Amir’s opinion may be based on Intel’s history of divesting itself of projects or companies that don’t measure up within its own strategy timelines. At the moment, there is an over-supply in both flash markets — despite the increasing sales of handheld devices — and prices have been plummeting.
“Intel has been unhappy in that misfortunes of the NAND business have affected their overall numbers, even though it’s a small part of their business,” Cohen said. “Historically, they have sold or spun out or exited underperforming businesses, and they’ll do it again in the future.”
Why does Intel really need to be in this business anyway? Cohen asked rhetorically. “It doesn’t affect their main [chip] business. It’s never a great business anyway because it’s so cyclical,” Cohen said.
Earlier this year, Intel spun out its NOR flash unit as a new company called Numonyx, after the NOR market cooled off.
“However, I am skeptical of an Intel-Micron breakup,” Cohen told me. “First of all, Micron would have to agree, which would mean the loss of a major partner — Intel.
“Second, Micron has a cross-licensing agreement with SanDisk, which allows them to not have to pay royalty to SanDisk for MLC [multi-level cell] production. This makes it that much easier to become competitive. That becomes a lot less certain if Intel pulls out.”
“I think the best thing for Seagate is to buy SanDisk and call it a day,” Cohen said. “Seagate has more expertise on the enterprise side, while SanDisk has more exposure on the retail side. SanDisk is the lowest-cost producer of NAND.
“But this is speculation. If I were running the place, that’s what I would do. The thought is that Seagate needs to do something.”
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