TechPulse 360

Analyst Jim Handy does not expect prices for SSDs to match HDDs

Last week, Brian Beard, a Samsung executive, went out and predicted that solid state drives (SSD) will soon be as cheap if not even cheaper than hard disk drives.

For now, it looks like a far out shot as currently a 256GB SSD – the highest capacity commercially available – costs around $489 for the Super Talent SSD, versus less than $80 for the equivalent disk drive. That’s 6 times less!

For Jim Handy, Objective Analysis’ analyst covering the Flash industry, the price parity between SSDs and HDDs sounds indeed like a pipe dream.

“Samsung does make both HDDs and SSDs, so these comments should be balanced, but I suspect the HDD side is regretting Brian Beard’s comments right now [Beard is in the SSD group],” said Handy.

However, Beard has a point. If the 60 per cent annual megabyte price decline of NAND continues – versus 40 to 45 per cent for HDDs – it’s just a matter of a few years before the dollar-per-gigabyte price parity is reached.

The problem is that the 60 per cent per year price reduction is not sustainable by cost reductions alone, according to SanDisk’s CEO, Eli Harari.

So what to believe? Here’s what Jim Handy had to say on the issue raised by Beard.

Price parity will never happen as long as HDD prices keep pace with SSD’s

If you ask when an SSD will cost the same as an HDD, well, that has always been the case, as long as the SSD is significantly smaller than an HDD.  If you want to know when an SSD will match the price AND the capacity of an HDD, that is unlikely to occur for at least for another decade, if ever.  HDD price per gigabyte drops at a rate that is between 40 to 50 per cent per year. So it’s keeping pace with SSDs and it’s projected to continue to do that over the long term.

NAND Flash is selling below cost, but it’s bouncing back

Something that many people don’t seem to realize is that manufacturing cost really does limit the speed at which prices can fall.  When the market moves from profitability to losses (during the transition from an undersupply to an oversupply) prices drop very quickly to absorb all the margins.

During this time a 60 per cent price drop is possible – even normal.  Once prices have reached manufacturing costs the fall will slow to match the speed at which costs decline.  For NAND that rate is 40 per cent per year.  We are actually in a market today where NAND has sold below cost, but it’s bouncing back up to cost.

Micron might file an anti-dumping suit against Asian rivals

It is very likely that Micron, in a year or two, will file an anti-dumping complaint against other NAND makers for the period during which NAND was selling for below $2.00/GB, since most manufacturers’ cost is about $2.00 today. The treat of such lawsuits forces NAND (or DRAM) makers to keep their prices above costs.

NAND Flash pricing is very predictable

NAND pricing is actually pretty predictable to anyone who has lived through a number of down cycles in commodity memory markets and has come to understand the very predictable path this pricing follows.