Santa Clara, Calif. First the good news: Suppliers of hard-disk drives expect 2005 to bring their strongest growth in 15 years, based on higher demand for storage from popular consumer devices like MP3 players, cell phones and personal video recorders. Now the bad news: Drive suppliers in China are targeting the same wares, and so are the suppliers of flash memory chips.
Flash supplier SanDisk Corp. projects that digital still and video cameras, mobile phones and digital audio players will account for more than half of the $10 billion NAND flash market this year and a majority of the roughly $16.5 billion market in 2007. The same products and other "convergence devices" are forecast to push demand for 1-inch hard-disk drives (HDDs) to 400 million units by 2010, according to a presentation by International Data Corp. to the International Disk Drive Equipment and Materials Association (IDEMA) earlier this month. "The 5-Gbyte Seagate drive you buy in 2008 won't be in your PC. You'll carry it in your pocket and plug in wherever you are," IDC research manager John Buttress told IDEMA. By 2008, he said, "50 percent of all drive revenues will be in sub-2.5-inch devices."
The iPod validated the concept of using microdrives to store music and videos, said Jeffrey Janukowicz, strategic-marketing manager for storage products at Agere Systems Inc. (Allentown, Pa.). "A lot of people wondered if this MP3 thing was going to take off," he said. "We see HDD-enabled mobile phones using 1-inch drives; we're just waiting for the service providers like Verizon, Sprint and Cingular to buy in."
If microdrives are used in just 10 percent of the 600 million cell phones projected to ship this year, that would require a 60 million-unit increase in drive production, Janukowicz said. "If you consider the number of MP3 players, camcorders and PDAs, the TAM [total available market] is hundreds of millions of units."
Some 305 million HDDs shipped in 2004, but shrinking average selling prices have kept industry revenues flat. Harry Blount, Lehman Brothers analyst and senior vice president, told IDEMA that drives for consumer electronics may not be subject to immediate pricing pressures, giving industry revenues a chance to grow.
Microdrives may even have reversed the industry's trend toward consolidation, said Agere's Janukowicz. "We see new companies entering the market," he said. Among Agere's chip customers is Cornice Inc., a Longmont, Colo., startup whose 1-inch drives were designed into the SPH-V5400 mobile phone that Samsung introduced in South Korea in December. Other new microdrive players include GS Magic Inc. and RioSpring Inc., both based in China.
So confident was IDEMA about the future of microdrives vis--vis flash that it invited Sanjay Mehrotra, chief operating office of SanDisk, to address its recent meeting here. SanDisk is already producing a 4-Gbit NAND flash chip in 90-nanometer CMOS, Mehrotra said. Tracing a pathway down to 16-Gbit chips produced in 55-nm CMOS, Mehrotra said SanDisk could provide memory cards that are competitive with microdrives in density, cost and ruggedness. They will store 4 to 32 Gbytes by 2007, he said, at a cost of roughly 10 cents per megabyte.
A digital still camera will have 1 Gbyte of flash memory in 2009 and sell for $10, or effectively 2 cents per image, according to SanDisk. A handset with video, audio and gaming features will include 4 Gbytes of flash and cost less than $40. An MP3 player with 1 Gbyte of flash will go for $10, or 5 cents a song, SanDisk said.
But the price of HDD storage is on an even steeper downward curve, said Andy Higginbotham, director of entertainment product marketing for Western Digital Corp. The only advantage flash memory has over hard drives is in power consumption, he said. Flash consumes 87 milliwatts on a read cycle, against 577 mW for a 1-inch HDD. Both storage media could withstand 2,000-g shocks, Higginbotham claimed. Driven by digital camcoders, PDAs, cell phones and MP3 players, the 1-inch drives will enjoy a 165 percent compound annual growth rate, he said.
Blount of Lehman Brothers cited set-top boxes as another driver for HDD growth. "The cable companies want to put PVRs [personal video recorders] into your home," he said. "A half-terabyte on your home network is not out of the question."