An Overpopulated Solid-State Drive Market Won't Spur Much M&A

Flash memory-based solid state drives, or SSDs, are all the rage right now, with companies tiny and huge scrambling to come up with technology to replace hard-disk drives in PCs.

A piece in EETimes Wednesday covered this trend, tantalizing us with the headline "Shakeout looms in SSDs." It didn't go into much detail about what the shakeout would look like, however, and naturally we wondered whether the plethora of technology producers in this arena -- 50, by some counts -- would lead to M&A.

The general answer is no, according to analyst Jim Handy of chip market research firm Objective Analysis. You've got the big SSD chip specialists like Samsung Electronics Co. Ltd., as well as Intel Corp. (INTC), Micron Technology Inc. (MU) and SanDisk Corp. (SNDK). For the most part, these companies will build their SSD offerings via internal development, Handy says.

"The big companies will continue to work to get this right," he says. "The ones that emerge will be the ones that can do their own R&D."

Some of the deals that have been struck in this area haven't necessarily provided a technological jump-start to the acquirer, Handy notes. SanDisk shelled out $1.6 billion in 2006 for Msystems Ltd., which had been supplying SSDs for years. But SanDisk ended up yanking the technology it acquired from the market in order to work on a more advanced version, the analyst says.

At the other end of the spectrum, there are dozens of tiny companies that produce their version of SSDs by building a simple controller chip and combining it with flash memory.

"It's the classic low barrier to entry issue, but many of the SSDs made by these companies don't perform any better than hard-disk drives," he says. Most of these companies will simply wither on the vine, Handy adds.

There are handful of small companies, however, that possess strong SSD technology that could draw the interest of larger players, including SiliconSystems Inc. and Bitmicro Networks Inc., Handy says. The acquisition of these companies wouldn't quite amount to a shakeout, but could help some of the established companies speed up the development of their SSD offerings, especially as enterprises start trusting this technology for their storage needs.

Comments

[oneijoe:]

Perhaps the author was in too much of a hurry to thoroughly research the current state of SSD, but there IS one company with a definitive lead in both performance and implimentation.

STEC's Zeus drives have been used by EMC for the enterprise market this entire year. Also, STEC's MLC-based SSD's are reportedly populating Apple's MacAir.

Bottom line... Should STX (who needs it most, imo) or some other large company want to buy the lead in SSD technology, STEC could make an outstanding acquisition.

2008 Aug 28 08:53 AM

[xStatProf:]

Isn't SanDisk's SSD trouble involved with controllers? Hasn't Seagate developed good controller technology?

2008 Aug 29 11:25 AM