|« Rethinking SSDs?||Low-Power Memory Subsystems Imperative »|
Author's Note and Errata: There were some errors in the forward NAND pricing in the version of this article as it originally went to the web on Thursday evening, July 16, which have now been corrected. We apologize to 'early readers', who may have been confused by some inconsistencies between the text and tables.
Future NAND price reductions will be much less than what we have experienced: Users of NAND Flash have become accustomed to annual price reductions of 50-60% over the past five years, built on strong GB demand growth averaging more than 150% per year. However, a conspiracy of events...financial, technical, economic and 'perceptual'...are expected to slow this rate of price decline by up to 90% for the next five years: from 100x price/GB improvement to 10x improvements...or even less. In addition, the industry is definitely facing a point where higher performance NAND will truly cost more per GB than lower performance NAND (endurance, RW speeds, or other valuable metrics), just as SLC NAND costs more than MLC today, but is used only in selected 'cost justifiable' applications. When x3 and x4 cells' share of the market grows, and SSDs gain further traction, a highly-fragmented market is almost a certainty, and the hi-low price spread for various flavors of 'flash' could be as large as 5x, solely on differential costs to produce various performance and endurance feature-sets.
In short, the NAND marketplace can be expected to take on a whole new character for the five years out to 2014, as technical progress aimed at cost reduction becomes more expensive and harder to come by, as 'performance degradation remediation' becomes more complex and 'controller-logic-and-software' intensive, as NAND vendors are forced by their managers and shareholding masters to make it a good business, and as new markets cannot develop and expand fast enough to sustain the former GB growth rates.
Most of the low-hanging (technical) fruit for NAND cost-reduction has been picked: In the past five years, lithographic shrinks were at first easy to achieve, as NAND caught and then surpassed DRAM as the 'memory process node leader'. The move from 'SLC to MLC' was low-hanging fruit waiting to happen; almost everyone had proven it out in the lab and fab years earlier, and it just took some 'seed crystals' of market competition to precipitate a wholesale transition in the market (exc. Samsung). Sustained high GB growth brought improved scale economies into play, too, as "SG&A and R&D per GB of NAND shipped" declined almost in proportion to GB growth. Also, much progress in price reduction has come at the expense of beating down manufacturers' profit margins to the point that 4Q08 was 'all red for all vendors and all products'. Indeed, 2008 ended on something of a hard stop to all this, with moves to x3 and x4 cells stalled for a variety of technical reasons, and with troubling performance hits, as well. Manufacturers' profit margins were at bare metal levels, or lower. The "One a Year" lithography shrinks, density-doublings and process node migrations are today not always affordable (tight cash and non-existent profits), but also technically more forbidding. Much new technology has to be investigated and mastered..."85-90nm to nom. 40nm" is far easier than "35-40nm to nom. 20-22nm" is expected for 2014 will be.
The look ahead, pricing progress: The modest NAND price recovery we have seen in 1Q and 2Q is just a time to rest and regroup, but the eventual resumption of price competition and reductions will be much more measured than formerly. No vendor can afford price reductions of ~50%/year any more; no one is capable of cost reductions of anything close to that. Importantly, many of the iconic personalities who bet on the sustainability of the fast growth investment and R&D strategies of the past period are moved on, in light of stubborn markets, declining profits and huge financial damage in the past year.
New NAND demand and markets for growth will also need 'cultivation'...and time: On the demand side, most NAND used today is relatively primitive, compared to its expected technical potential. A vast fraction of the GB used are lodged in applications with modest RW capabilities, tolerance for large innate silicon imperfections and failure rates (then corrected), and limited endurance.
This too, was low hanging fruit: camera chips riding the digital camera transition, USB drives to replace 'floppies', audio store for MP3 players...almost all replacing technologies that were well past their prime. These were also 'ready markets' requiring little market development by vendors, thus avoiding a time-consuming and irregular growth path. It will not be so easy going forward, and the huge price down strides made by NAND in the 2004-09 era are not likely to be matched. One has to look no further than SSDs, to get a feel for the difficulties and costs, the hit and miss, as well as the technical, standard-setting and price-performance roadmaps that have to be argued, developed, applied, rejected or modified for new and sophisticated markets to develop. It is a slow and painstaking development process. In addition, current and forecast prices always attract new applications; if one stifles the outlook, it may stifle the energy seeking new places to take advantage of "Sea Change Pricing" that has been a part of the NAND Marketing Call for many years.
|Historical NAND prices, 1Q 2004 through 4Q 2008|
|Est. SLC %||95||50||40||20||6||4|
"in best of worlds", SLC price is 2x that of MLC, though it has varied widely
over the past several years (see Denali BLOG articles)
Industry's perpetual efforts to cost reduce, and demand diversification, will drive broader product mix: What we see as a still rather narrow line-up of NAND 'performance' capabilities will become a sprawl, as elemental technologies are applied in novel and unique ways to serve diverse markets, having different needs and price points. More bits per cell always (so far, for all vendors and all products) means lower performance. "SLC to MLC" meant endurance dropped by about 10x-20x, from 100K cycles to 5-10K write cycles. For most applications, users would rather have the 'half-price' pricing than the 100K cycles. SanDisk was able to keep performance the same going from x2 to x3, but not without some considerable remediation: productivity went up only 20%, not the expected 50% in bits per mm sq., due to extra 'performance-management' circuitry. Fewer stored electrons per memory bit means more finely tuned sensors, and, almost invariably, more die area, reduced performance and more build cost. In addition, SanDisk seems, a year later, to be the only company with x3 in volume production, and that not even at their most advanced process node, which has deliberately lagged by one node their cutting edge SLC and 2MLC production nodes.
And though a move to x4 would give production cost benefits comparable to those gained when the industry moved lockstep from SLC to MLC in 2004-6, it is no slam dunk technology, by any means. Tight R&D budgets, resulting from huge operating losses for the past year, will not make anything easier. It is not likely, or even not possible, for all NAND vendors to have fully developed their "nom 22nm x4" technology in 2013/14. No chance.
Today, the line up looks as shown in Table 2, NAND Makers lithography, MLC status:
|Estimated NAND Makers' Technology Status, Mid 2009:|
|Hynix||48nm (65%); 41nm (35%), no x3 in market|
|Samsung||51nm (20%); 42nm (70%); 30nm (10%), MLC but no x3 in market|
|Toshiba/SanDisk||43nm (35%), x3; 32nm (65%) MLC|
|IMFT||34nm MLC (90%+), no x3 in market|
note: percentages refer to fraction of wafer starts at that process node
Bold guesses: NAND price outlooks: If NAND prices "today" (using 12/31/08 as 'today') are nom. $2/GB for MLC, then by the close of 2013, we expect to see a smattering of x4 NAND, with severely constrained performance, with best-NAND pricing of about 50-60 cents/GB. SLC and "SLC level performance", needed in some applications, is denied the benefits of the move to more bits per cell, since device performance is too compromised using today's design methodologies, so the $4.00/GB+ for SLC of today maybe declines to less than $1.25/GB by year end 2013, with progress coming largely from litho node moves, making some allowance for moving to sustainable profit margins and better cell constructs and continuing improvements in scale economies.
|Estimated NAND prices, 1Q 2009 through 4Q 2013|
|(or lowest perfomance grade)|
In fact what we have seen in much of the NAND flash market pricing is a thinly concealed compression of vendors' Gross Margins, coupled with a capacity of chip designers to 'engineer out costly features, performance', which today's NAND end-markets can easily do without...'defining down demand' attributes...and replacing what in retrospect can be viewed as "Cadillac NAND" with "Tinplate" or "Plastic" NAND, at far lower costs to build but fully adequate for most of today's needs. Full priced SLC was shipped in 2004, because there was no half-price MLC. Once MLC became available, it was found to be 'good enough' for 'almost all' applications. But it is not at all clear if x3 and x4 performance, without significant costly 'performance remediation' WILL be 'good enough for those same uses.
Consequences and impacts of price slowdown: This "Sea Change Pricing Model" moving to a new "Change of Heart Pricing Model" can be expected to cause major changes in the industry's view of end markets, vendor investment expectations, competition and potential market consolidation. Importantly, huge NAND price reductions in the past five years have enabled SSDs to barely make a dent in HDDs into PCs; with declines slowing, how does that change our thinking about the outlook for SSDs? This will be the subject of our next BLOG, next week.
This article is another key contribution to increased understanding of the underlying factors influencing the SSD market. So I've made our readers aware of it. Thanks Lane for your outsanding work in educating us about the internals which matter.
Just an informative blog and I was very interested to read the truth on it!