NAND Trends: Higher Prices, Smaller Geometries

As NAND prices fell throughout 2008, bottoming out at around 85 cents per GB, it looked like the prospect of inexpensive mobile devices and continuous downward pressures on solid-state technology might aid adoption by enterprises. This year, however, it looks like NAND manufacturers are focusing less on market share and more on profitability.

The end result is higher prices for NAND in 2009, propelled by purposeful reductions in fabrication capacity. "What we are seeing is the end of a cycle of over-investment by manufacturers in NAND capacity over the past few years," says Greg Wong, principle analyst with Forward Insights), a semiconductor industry researcher. "Demand dropped across the board in fourth quarter, 2008, and now we are at a place where there is more capacity than demand." As a consequence of price declines and over-capacity, many NAND and SSD manufacturers lost money.

By aggressively cutting capacity in first quarter of this year, semiconductor manufacturers have reduced NAND supplies and, as a result, NAND prices have doubled to $1.50 to $1.60 per GB. Predictably, this is likely to raise NAND and SSD component costs in business and consumer mobile devices and in SSDs for enterprise computing and storage. Analysts like Wong still cite total cost of ownership as the cost-determining factor for enterprise decision-making, which may reduce the importance of individual NAND and SSD component price spikes. "TCO is more than the cost of one component in the entire storage solution," says Wong. "For example, an enterprise can be looking at the comparative TCO when it can replace an entire array of hard disks with an SSD. That still makes a compelling cost argument."

For enterprises, the price increases are likely to be more visible and may have an impact. With the price of NAND going up, laptops and notebooks incorporating SSDs will reflect those price increases and will compare even less favorably to laptops and notebooks containing conventional hard drives. For IT managers who buy hundreds or thousands of mobile computers, that can make a significant difference.

Dips and spikes in semiconductor prices are not new, and spot markets for these commodities have existed for decades. If you are an enterprise IT manager, monitoring these prices is not typically part of your daily routine. But you do hope for transformational technologies that will lower both the raw commodity prices of memory and the TCO costs without the normal weather changes of spot markets. Traditionally in semiconductors, this has meant shrinking geometries that allow semiconductor manufacturers to produce more with less.