11/22/2015 Western Digital repositions for digital transformation opportunity | Tech Channel MEA http://techchannelmea.com/technologyannouncements/westerndigitalrepositionsdigitaltransformationopportunity 1/14 TCM Search Search Western Digital repositions for digital transformation opportunity Source: Arun Shankar Publish date: 04 Nov 2015 Print Email The overall storage industry is being driven by a duplicity of drivers. One primary driver is increasing generation of digital data through connected consumer devices. Another equally important driver is increasing requirement to analyse and store enterprise data, both for its commercial value and legal and regulatory requirements. The possibility that data extraction and analytics will improve in future makes the longevity of data storage more important. Since the ability to store large volume of data is an enabler for creation of digital data, the two are working in cyclic fashion. This is creating an opportunity for vendors like Western Digital to address the storage requirement away from the traditional PC compute platform, where multiple copies of data need to be stored and accessed by cloud platforms at any time. The recent acquisition of SanDisk by Western Digital in late October, following close on the heels of the acquisition of EMC by Dell in early October, represents another effort by a leading While Western Digital has its traditional business model built around volume business from the PC ecosystem, it is being challenged by the erosion of conventional hard disk drive technology, and the PCcompute eco system. (Image courtesy Western Digital) The recent acquisition of SanDisk by Western Digital is an effort by the legacy PC compute storage vendor to address demands for tomorrow’s converged digital infrastructures. Home / Technology / Announcements Articles Pictures Videos Emirates airline, Dnata to enhance business with big data analytics Mubadala, GE finalise deal for joint venture in Al Ain Mahindra Comviva to extend footprint across MENA region Canon enters partnership with Cerebra Middle East Microsoft, Pacific Controls announce software platform Galaxy 2021 Read more.. Most Recent We have noticed a shift in the customer demands and requirements in the market. Mourad Zohny, Global Business Partners Manager, IBM The capital required to build the capability to build the next generation semiconductors is quite significant. Michael Dell, Chairman of the Board of Directors and CEO of Dell Every generation is living five to seven years longer than the previous. Sarwant Singh, Senior Partner and Head Visionary Innovation Group, Frost & Sullivan Simplification and automation of security are the two ways forward. Anthony Perridge, Security Sales Director, Cisco Read more.. Briefly Spoken Home Sign In Register TECHNOLOGY CHANNEL PARTNER PROGRAMMES NEW PRODUCTS EVENTS PEOPLE EXPERT TALK CONVERGENCE CLOUD SECURITY STORAGE MOBILITY RESEARCH & SURVEYS
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11/22/2015 Western Digital repositions for digital transformation opportunity | Tech Channel MEA
Western Digital repositions for digital transformationopportunity
Source: Arun Shankar
Publish date: 04 Nov 2015 Print Email
The overall storage industry is being driven by a duplicity of drivers. One primary driver isincreasing generation of digital data through connected consumer devices. Another equallyimportant driver is increasing requirement to analyse and store enterprise data, both for itscommercial value and legal and regulatory requirements. The possibility that data extraction andanalytics will improve in future makes the longevity of data storage more important.
Since the ability to store large volume of data is an enabler for creation of digital data, the twoare working in cyclic fashion. This is creating an opportunity for vendors like Western Digital toaddress the storage requirement away from the traditional PC compute platform, where multiplecopies of data need to be stored and accessed by cloud platforms at any time.
The recent acquisition of SanDisk by Western Digital in late October, following close on theheels of the acquisition of EMC by Dell in early October, represents another effort by a leading
While Western Digital has its traditional business model built around volume business from the PC ecosystem, it isbeing challenged by the erosion of conventional hard disk drive technology, and the PCcompute eco system.(Image courtesy Western Digital)
The recent acquisition of SanDisk by Western Digital is an effort by the legacy PCcompute storage vendor to address demands for tomorrow’s converged digitalinfrastructures.
Home / Technology / Announcements
Articles Pictures Videos
Emirates airline, Dnata to enhance businesswith big data analytics
Mubadala, GE finalise deal for joint venture inAl Ain
Mahindra Comviva to extend footprint acrossMENA region
We have noticed a shift in thecustomer demands andrequirements in the market.Mourad Zohny, Global Business Partners Manager,IBM
The capital required to build thecapability to build the nextgeneration semiconductors is quitesignificant.Michael Dell, Chairman of the Board of Directorsand CEO of Dell
Every generation is living five toseven years longer than theprevious.Sarwant Singh, Senior Partner and Head VisionaryInnovation Group, Frost & Sullivan
Simplification and automation ofsecurity are the two ways forward.Anthony Perridge, Security Sales Director, Cisco
Read more..
Briefly Spoken
Home Sign In Register
TECHNOLOGY CHANNEL PARTNER PROGRAMMES NEW PRODUCTS EVENTS PEOPLE EXPERT TALK
CONVERGENCE CLOUD SECURITY STORAGE MOBILITY RESEARCH & SURVEYS
vendor from traditional IT computing repositioning itself for the demands of digital ITcomputing. While Western Digital has its traditional business model built around volumebusiness from the PC ecosystem, it is being challenged by the erosion of conventional hard diskdrive HDD technology, and the PCcompute eco system. It recently completed the acquisition ofHGST to move into newer storage technology areas.
SanDisk on the other hand, has its business model built around, disruptive solid storage driveSSD technologies, but because of the relatively newer technology cycles, it is being challengedby lack of scale and volume. It also has limited mapping and design cycles into connected devicemanufacturers, enterprise storage manufacturers, datacentre vendors, and hyper scale storagevendors. One of the likely benefits of the merger between Western Digital and SanDisk istherefore access to new technology areas and OEM supply chains for the two vendor businessmodels respectively. Western Digital existing business is likely to gain entry into disruptivetechnology areas addressed by SanDisk, and SanDisk existing business is likely to gain entryinto OEM and supply chain agreements addressed by Western Digital.
Comparison of financial performance of Western Digital (left) and SanDisk (right). Fiscal year endings are month ofJune for Western Digital WD2013, WD2014, WD2015; and month of December for SanDisk SD2012, SD2013,SD2014. All values are in $ Million. Gross profit = Revenue Cost of sales. Operating income = Gross profit Operating expenses. (Source: Annual reports, TCM Graphics)
Western Digital, which includes subsidiaries WD and HGST, has seen its top line andprofitability challenged due to its significant foundation built around legacy PC products. Therevenue in fiscal 2013 was $15.4 billion and this has declined by 3% CAGR to $14.6 billion infiscal 2015, with year ending in the month of June. Contribution of operating income was 8.2%of revenue in fiscal 2013, and 11% of revenue in fiscal 2015, at a value of $1.6 billion. The threeyear growth in operating income across fiscal 2013 into 2015 has been CAGR 13%.
The exposure of Western Digital to the slump in the PC industry is mentioned in their 2015annual report. Excerpts:
While sales to nonPC markets are becoming a more significant source of revenue, sales to thePC market remain an important part of our business. The PC market, however, has been, andmay continue to be, adversely affected by the growth of tablet computers, smart phones andsimilar devices that perform many of the same capabilities as PCs, the lengthening of product
life cycles and macroeconomic conditions. We believe that the deterioration of the PC markethas accelerated recently, and that this accelerated deterioration may continue or furtheraccelerate, which could cause our operating results to suffer. Additionally, if demand in the PCmarket is worse than expected as a result of these or other conditions, demand for our productsin the PC market may decrease at a faster rate and our operating results may be adverselyaffected.
In other words Western Digital is being challenged by the erosion of its legacy business builtaround the traditional PC and traditional IT industry. The demand for conventional HDDs indesktop and notebook PCs is in decline due to the slowdown in PC sales, the increased usage ofSSDs as replacements for HDDs in notebook PCs, and the growing shift of storage workloads tothe cloud. While sales to nonPC markets are becoming a more significant source of revenue, thebusiness model of Western Digital is still built around sales to the PC market and is an importantpart of its business.
Amongst Western Digital product segments, storage linked to PC compute is in decline over lastthree years, with unit CAGR of 8% from fiscal 2013 into fiscal 2015. Branded attached storagehas been flat over last three years. However its storage shipped into consumer electronic devicesand enterprise applications, has been growing at relatively faster clip. Storage shipped intoconsumer electronic devices segment grew at 15% unit CAGR from fiscal 2013 into fiscal 2015,including applications in gaming, surveillance video, streaming video, personal cloud storage,amongst others. Storage shipped into enterprise applications and solutions grew at 5% unitCAGR from fiscal 2013 into fiscal 2015, including demands for storage in enterprise servers,tiered storage, data centre storage, cloud storage, hyper scale storage, converged infrastructurestorage, amongst others.
With the rapid expansion of cloud and data centre workloads, Western Digital is attempting tocapture the growing opportunity in the enterprise space and reduce its significant exposure to theupheavals of the PCcompute industry. Cloud and data centre workloads demand highperformance and high capacity storage. Typically these are provided by solid state hard diskdrives, multi platter hard disk drives, hyper scale storage and tiered storage solutions.
Much of this activity associated with the growing opportunity in the enterprise segment space isdelivered by Western Digital from its HGST subsidiary. From its HGST subsidiary, it isdeveloping an Active Archive tiered storage family of products, and has launched Helium filled,multiplatter, high capacity HDDs. HGST also offers storage management software. Recentacquisitions by Western Digital including Amplidata, Virident, sTec, and Velobit, have beenwith the view of enhancing HGST’s capability and delivery into the enterprise space.
Western Digital revenue in fiscal 2013 was $15.4 billion and this has declined by 3% CAGR to $14.6 billion infiscal 2015. Contribution of operating income was 8.2% of revenue in fiscal 2013, and 11% of revenue in fiscal2015. The three year growth in operating income across fiscal 2013 into 2015 has been CAGR 13%. (Source:Annual reports, TCM Graphics)
Amongst Western Digital product segments, storage linked to PC compute is in decline over last three years, withunit CAGR of 8% from fiscal 2013 into fiscal 2015. Branded attached storage has been flat over last three years.Storage shipped into consumer electronic devices segment grew at 15% unit CAGR from fiscal 2013 into fiscal2015. Storage shipped into enterprise applications and solutions grew at 5% unit CAGR from fiscal 2013 into fiscal2015. (Source: Annual reports, TCM Graphics)
In comparison to Western Digital, SanDisk has exhibited better financial returns driven by itssolid state product portfolio and backward integration with Toshiba into manufacturing NANDFlash wafers. The revenue in fiscal 2012 was $5.0 billion and this has increased by CAGR 15%to $6.6 billion in fiscal year 2014, with year ending in the month of December. Contribution ofoperating income was 14% of revenue in fiscal 2012, and 24% of revenue in fiscal 2014, at avalue of $1.6 billion. The three year growth in operating income across fiscal 2012 into 2014,has been impressive at CAGR 50%, according to its 2014 annual report.
SanDisk has four primary market and product segments including mobile and connected devicesthat use removable and embedded storage; consumer electronic devices that use embedded flashstorage; client computing devices that use client computing SSD; and enterprises and hyper scaledata centres that use high capacity and high performance solid state drives SSDs.
The percentage of revenue contribution from removable storage including USBs, micro USBs,has been falling from 53% in fiscal 2012 to 38% in fiscal 2014. The percentage of revenuecontribution from embedded storage including flash drives in consumer electronic devices hasbeen marginally declining from 24% in fiscal 2012 to 22% in fiscal 2014. However, thepercentage of revenue contribution from solid state solutions has been growing the fastest, from9% in fiscal 2012 to 29% in fiscal 2014.
SanDisk describes the future product opportunity landscape in its 2014 annual report. Accordingto the vendor, over the next several years, the largest growth areas for NAND flash will be SSDsolutions in the enterprise and hyper scale data centre and client computing markets. In mobileand connected applications market, the growth in the adoption of smartphones and mobiledevices and increasing storage capacity in these devices will continue to drive increasing NANDflash storage demand. There will also be growth in the usage of NAND flash memory in newapplications, such as automobiles and connected homes. The market for NAND flash memorysolutions in consumer electronics such as imaging devices and USB drives, will beapproximately constant or declining over the next several years, according to the SanDisk 2014annual report.
In enterprise markets, the shift to flash storage in datacentres is underway, and enterprise SSDproducts continuing to penetrate market segments that historically have been served by hard diskdrives. In many use cases it costs less to architect and install flash based storage infrastructurethan HDDs, leading to a lower cost of acquisition. This cost crossover represents a tipping pointfor the enterprise market, and as enterprise SSD densities increase further, SanDisk expects moredatacentre infrastructure will be architected using flash. SanDisk expects growing demand forSSD solutions from hyper scale customers, according to its 2014 annual report.
SanDisk experienced growth in sales of both client SSD solutions and enterprise SSD solutionsin fiscal 2014, with growth in enterprise SSD solutions partially benefiting from acquisition ofSmart Storage in August 2013 and acquisition of Fusionio in July 2014. However SanDiskexpects revenue from client SSD solutions to decline in fiscal year 2015, compared to fiscal year2014, due to a large customers moving away from client SSD solutions, starting in the firstquarter of fiscal year 2015.
In comparison to Western Digital, the SanDisk business model is challenged by a relative lack ofscale, rather than disruptive shifts in the market as they are affecting Western Digital. As per the
2014 SanDisk annual report, 48% of its revenue in fiscal 2014 was generated by its top tencustomers, with one customer accounting for 19% of 2014 revenue.
The reason why SanDisk procurement and sellout supply chain is challenged is becauseSanDisk SSD products are complex and rely on sophisticated firmware in comparison to its otherproducts, which can result in increased costs and lower gross profits due to frequent productupdates. Changes in OEM customer specifications for these products could require SanDisk toupdate the firmware for its SSD products, which would result in increased costs for processingthese updates.
SanDisk enterprise SSDs are sold to a limited number of OEM customers with long design,qualification and test cycles prior to sales. OEM customers in the enterprise storage marketrequire SanDisk to customize products, which can lengthen the product design, qualification,manufacturing and sales process. Lengthy and uncertain processes make it difficult to forecastdemand and timing of customer orders. The difficulty in forecasting demand and the customizednature of SanDisk products for certain OEMs make it difficult to anticipate inventoryrequirements, according to its 2014 annual report.
Moreover the growing demand from hyper scale customers is difficult to forecast. These hyperscale customers may place orders for significant volumes with short lead times that may bedifficult to forecast and fulfil.
SanDisk revenue therefore depends in large part on ability to achieve design wins with OEMcustomers and success of products sold by OEM customers. The composition of SanDiskprimary customer base has changed over time, including shifts between OEM and retailbasedcustomers. SanDisk has executed a strategy of deriving a greater portion of revenue from highvalue offerings, especially enterprise solid state drives. SanDisk primary OEM products includecards for mobile devices, embedded memory products, and SSDs for the notebook, storage andserver markets.
SanDisk revenue in fiscal 2012 was $5.1 billion and this has increased by CAGR 15% to $6.6 billion in fiscal year2014. Contribution of operating income was 14% of revenue in fiscal 2012, and 24% of revenue in fiscal 2014. Thethree year growth in operating income across fiscal 2012 into 2014 has been impressive at CAGR 50%. (Source:Annual reports, TCM Graphics)
The percentage of revenue contribution from removable storage has been falling from 53% in fiscal 2012 to 38% in
fiscal 2014. The percentage of revenue contribution from embedded storage has been marginally declining from24% in fiscal 2012 to 22% in fiscal 2014. The percentage of revenue contribution from solid state solutions hasbeen growing the fastest, from 9% in fiscal 2012 to 29% in fiscal 2014. (Source: Annual reports, TCM Graphics)
In principle the acquisition of SanDisk into Western Digital should benefit the business modelsof both the storage vendors in the immediate term. But as history has shown merger of two hightech companies is sometimes difficult to predict, especially when the stakes of winning andlosing are high.
Western Digital overview
Western Digital entered the hard disk drive HDD industry in 1988 and is a developer,manufacturer and provider of storage solutions with HGST and WD as its subsidiaries. HGSTwas founded in 2003 through the merger of HDD businesses of IBM and Hitachi and wasacquired by Western Digital in March 2012.
The Western Digital product portfolio includes hard disk drives HDDs, solid state drives SSDs,direct attached storage solutions, personal cloud network attached storage solutions, and publicand private cloud data centre storage solutions. HDDs remain Western Digital’s principalproducts and are also today’s primary storage medium for the vast majority of digital content,with the use of solidstate storage products growing rapidly. Western Digital has relationshipswith the full range of customers currently addressing storage opportunities. These includestorage subsystem suppliers, major server OEMs, internet and social media infrastructureplayers, and personal computer and Mac OEMs. Western Digital products are marketed underthe HGST, WD and GTechnology brand names and sold to OEMs, distributors, resellers, cloudinfrastructure players and consumers.
In the HDD market space Western Digital is represented by HGST and WD brands andcompetes with Samsung, Seagate, and Toshiba. In the SSD market space Western Digitalcompetes with Intel, Micron, Samsung, SanDisk, Seagate and Toshiba. These two storagesegments cover client compute, client noncompute and enterprise applications.
Enterprise storage
Enterprise storage solutions consist of HDDs and SSDs for performance enterprise and capacityenterprise markets. Western Digital enterprise storage devices include capacity drives whichprovide reliability at the lowest cost per gigabyte and are primarily for use in data storagesystems, in tiered storage models and where data must be stored reliably for years. WesternDigital enterprise storage offerings include performance HDDs, which are optimised forperformance applications supporting high volume online transactions, data analysis and otherenterprise applications. Performance and capacity HDDs and SSDs are the most engineeredproduct line in the storage industry.
The infrastructure to support cloud computing storage is driving the demand for multiplatterhigh capacity HDDs as well as enterprise class SSDs in tiered storage architectures. With thesignificant increase in data storage demand, enterprises and cloud infrastructure players haveadopted tiered storage architectures to improve storage performance and manage costs of thisgrowth as they cope with increasingly large, growing pools of digital content. Tiered storagearchitectures optimise data storage to the most appropriate storage device, driving increasingdemand for high capacity HDDs, high performance HDDs, and flashbased SSDs.
Western Digital recently began shipping a new category of enterprise storage product calledactive archive through its HGST subsidiary, which is a fully enclosed rack system utilisinghelium hard drives and object storage software. The HGST Active Archive system is a verticallyintegrated solution, which is S3 compliant, and is a scale out object storage system that utilisesHGST’s heliumfilled HDDs for improved storage economics. The world’s first 10TB drive, ahelium sealed HDD designed for active archive applications, was launched by HGST. Theadvanced technology allows HGST to pack sevenplatters in a standard 3.5” form factorproviding up to 10TB capacity. This drives down total cost of ownership at the data centre levelby providing significant improvements in capacity, power, cooling, and storage density. HGSTreached an important milestone in March 2015, shipping its one millionth helium drive.
HGST also offers software for caching, highavailability and clustering that acceleratestraditional enterprise storage environments and enables significant server consolidation andimproved total cost of ownership for cloud and hyper scale environments.
HGST HDD offerings include high performance 10,000 to 15,000 revolutions per minute drivestargeting server and storage system OEMs, enterprise capacity drives for bulk storageapplications for both hyper scale cloud customers and OEMs, helium sealed drives featuringcapacities till 10 Terabytes, mobile drives for the notebook, PC and gaming markets, a GTechnology line of branded products for professional content producers, enterprise storagesoftware and active archive system.
HGST SSD offerings for servers and storage system applications include 2.5” serial attached,Small Computer System Interface SCSI SAS drives, as well as peripheral componentinterconnect express PCIe NVMe, SSDs and embedded flash solutions.
Since the beginning of fiscal 2014, Western Digital has been strengthening its enterprise SSDproduct portfolio embedded in HGST, through acquisitions including Virident Systems, sTecand VeloBit. In March 2015, it acquired Amplidata for $0.25 billion to expand further HGST’sstrategy into higher value data storage platforms and systems through its object storage softwarefor public and private cloud data centres. Prior to that Western Digital acquired Virident inOctober 2013 for $0.61 billion to bring in server flash storage solutions for virtualisation,database, cloud computing, webscale applications, and this has been integrated into HGST. InSeptember 2013, it acquired sTec for $0.34 billion, again adding into HGST’s SSD productcapabilities.
The acquisitions are meant to further HGST’s strategy to address rapidly changing needs ofenterprise customers by delivering intelligent storage solutions, leveraging the demand forconverged datacentre infrastructures of server, storage and networks. With this strategy, WesternDigital is assembling the technology building blocks to increase overall market participation andbe a fullline data storage solutions supplier.
Client storage
Client storage devices consist of internal HDDs and SSDs for desktop and mobile PCs. Clientcompute storage solutions include HDDs designed for use in desktop PCs requiring highperformance, reliability and capacity with various attributes such as low cost per GB, quietacoustics, low power consumption and protection against shocks. HDDs designed for use inmobile PCs require high performance, reliability and capacity with various ranges ofperformance and attributes such as low power consumption for extended battery life and cooleroperation, quiet acoustics and protection against shocks.
The company also offers Serial Advanced Technology Attachment SATA HDDs, specificallydesigned for home and small office, HDDs for surveillance and video recording applications,and HDDs designed for advanced singleuser computing systems such as video editing,computeraided design and gaming, which require high performance and high reliability.
Branded storage
External storage devices supplement the storage space on PC systems for home and small officenetworks and through wireless connections provide remote access to personal content. Thesedrives when directly attached to PCs are ideally suited to back up the data already stored on PCinternal drives because of their portability and security features. The growing availability ofwireless connectivity is creating growth opportunities for external networked attached storagesolutions. Western Digital branded solutions consist of HDDs embedded into WD, HGST and GTechnology external storage appliances with capacities ranging from 500 GB to 24 TB and usinginterfaces such as USB 2.0, USB 3.0, FireWire, Thunderbolt and Ethernet network connections.
Consumer storage
Consumer Electronics solutions are used in DVRs, gaming consoles, security surveillance, settop boxes, camcorders, multifunction printers, entertainment, and automobile navigationsystems. These HDDs are designed and optimised for video streaming and continuous digitalvideo recording. These HDDs deliver quiet operation, low operating temperature, low powerconsumption, high reliability and optimized streaming capabilities.
Sales channel
OEMs including largescale data centre operators, purchase products from Western Digital,either directly or through a contract manufacturer such as an original design manufacturer andassemble them into the devices they build. Western Digital also sells directly to cloudinfrastructure players, which they classify as OEMs.
Distributors sell Western Digital products to nondirect customers such as small computer andconsumer electronics manufacturers, dealers, systems integrators, online retailers and otherresellers. Distributors are generally nonexclusive for purchase and redistribution in specificterritories.
Western Digital sells directly to a select group of major retailers such as computer superstores,warehouse clubs, online retailers, and computer electronics stores, and authorize sales throughdistributors to smaller retailers. The retail channel complements other sales channels.
Unit HDD shipments moved in fiscal 2013, 2014, 2015 by Western Digital into PC and Non PC application areas.(Source: Annual reports, TCM Graphics)
SanDisk overview
SanDisk operates in the flash storage solutions market. NAND flash memory is the currentmainstream technology used for flash storage solutions, providing benefits of small form factor,fast write speed, solidstate architecture and ability to retain data without power. NAND flashmemory has been characterized by rapid technology transitions which have reduced the cost perbit by increasing density of the memory die on the wafer.
Embedded and SSD solutions provide opportunity for greater differentiation and a higher priceper gigabyte. The markets for flash storage are generally price elastic, meaning decrease in priceper gigabyte results in increased demand for higher capacities and emergence of newapplications for flash storage.
SanDisk is developing advanced generations of NAND flash technology with increased memorydensity and capacity including 2dimensional and 3dimensional NAND. In parallel with NANDscaling efforts, the company is also investing in future alternative technologies, including 3dimensional resistive RAM. In addition, it is investing in complementary technologies, such ascontrollers, firmware and software that manage the NAND flash. SanDisk strives to continuouslyreduce the cost of NAND flash memory to grow existing and future markets, and supply adiverse set of customers and channels.
Since late 2014, SanDisk has been ramping production of industryleading 15nanometer node,using both X2 and X3 technologies. In the second half of 2015, SanDisk will begin pilotproduction of 48layer 3D NAND, the most advanced NAND technology, with commercialintroduction targeted for 2016. The launch of 3D NAND represents transformational change inmemory architecture.
Transition to new generations of products containing 1Ynanometer, 15nanometer orsubsequent process technologies such as 3D NAND and X3 NAND memory architecture, iscomplex and requires new controllers, new test procedures and modifications to aspects ofmanufacturing, resulting in the need for qualification of the new products by SanDisk OEMcustomers.
A key component of SanDisk’s ability to reduce cost of NAND flash is ability to transitionNAND flash manufacturing technology to smaller geometries. SanDisk began transitioning to15nanometer node in second half of fiscal year 2014 and expects to continue rampingproduction throughout fiscal year 2015. Beyond the 15nanometer node, there is no certainty thatfurther technology scaling can be achieved cost effectively with 2D NAND flash architecture.SanDisk is investing in 3D NAND architecture and production is expected in fiscal year 2016.
To achieve compatibility with various electronic platforms regardless of the host processors oroperating systems used, SanDisk continues to develop new capabilities in NAND flash,advanced controllers and firmware design. SanDisk products are designed to be compatible withindustrystandard and customer specific interfaces used in operating systems for PCs, mobilephones, tablets, notebooks, digital imaging devices, gaming platforms, GPS products, serversand storage systems, and other computing and electronic devices.
Sandisk and Toshiba operate three business ventures in 300 mm NAND flash manufacturingfacilities, which provide NAND wafers for SanDisk end products. The three plants arecollectively referred to as Flash Ventures. In 2014, SanDisk entered into a nonbinding
memorandum of understanding with Toshiba related to the construction and operation of afabrication facility, primarily intended to provide space to convert Flash Ventures current 2DNAND capacity to 3D NAND, with expected readiness for production in 2016.
Sandisk faces competition from NAND flash memory manufacturers and from companies thatbuy NAND flash memory and incorporate it into their end products. SanDisk competitorsinclude NAND manufacturers, flash memory card and USB drive manufacturers, client storagesolution manufacturers, enterprise storage solution manufacturers, and digital media players.
SanDisk provides embedded and removable storage for mobile and connected applications.SanDisk is supplier of microSD removable storage cards and embedded products, such asiNAND, MCP iNAND and custom solutions, for use in phones, tablets, notebooks, globalpositioning system, devices, eReaders, wearable products and other mobile or computingdevices. Multimedia features in mobile products that enable imaging, high definition videos,gaming and other applications have driven significantly increased demand for flash storagesolutions in these devices. The company also provides removable storage cards and embeddedstorage solutions for use in automotive and connected home applications.
SanDisk removable cards include CompactFlash and Secure Digital SD removable cards,primarily used in digital cameras and camcorders. Ultrasmall microSD removable cards aredesigned primarily for use in mobile products such as smartphones, tablets and eReaders.Removable cards also include SanDisk Ultra, SanDisk Extreme and SanDisk Extreme PROproduct lines.
In the removable storage product category, SanDisk has launch the world’s highestcapacitymicroSD card at 200 Gigabytes, a 512 Gigabyte highperformance SD card, and a highendurance microSD card that can record up to 10,000 hours of full HD video for use in securityand surveillance applications.
SanDisk embedded products meet the demand for embedded storage for mobile phones, tablets,notebooks, portable and wearable devices, automotive and connected home applications. Theseinclude iNAND embedded flash product line, multichip packages, MCP iNAND, whichcombine NAND and mobile dynamic random access memory DRAM, in an integrated package,and custom embedded solutions. SanDisk iNAND solutions are offered under the SanDiskStandard, SanDisk Ultra and SanDisk Extreme brand names.
Consumers across the world are adopting advanced smart mobile devices and increasingly thesedevices have higher embedded storage capacities. The mobile market remains a key area ofNAND flash consumption, and SanDisk is innovating with embedded offerings includingiNAND Discrete, iNAND MCP and custom solutions. In 2015, SanDisk expects to increase theuse of X3 technology in its embedded portfolio.
Client computing
SanDisk provides client SSD solutions designed to enhance user experience in notebooks, thinandlight laptops and desktop computers. These client SSD solutions include SATA and PCIeinterfaces. SanDisk believes client SSDs will replace hard disk drives in both corporate andconsumer client computing platforms over next several years.
SanDisk offers SSDs for client computing applications which includes desktop computers,notebook computers, tablets and other computing devices. Client SSDs can be used in a standalone configuration instead of a hard drive, or in a dualdrive configuration in conjunction with ahard drive or in hybrid drives that contain a hard drive and our SSD. Client SSDs are offered inindustrystandard and custom form factors and branded under the SanDisk, SanDisk Ultra,SanDisk Ultra Plus and SanDisk Extreme PRO brand names.
Flash penetration in client and enterprise storage applications is accelerating. Client SSDadoption rates continue to increase in the PC market, and SanDisk is addressing the marketopportunities with a broad set of form factors and wide deployment of threebitpercell, X3technology in both retail and commercial channels.
Enterprise and hyperscale data centres
SanDisk enterprise SSDs are used in highcapacity and highperformance data storageapplications, and to accelerate application performance. SanDisk provides enterprise softwaresolutions to improve performance of SSDs in various enterprise workload environments.SanDisk enterprise SSD solutions encompass major storage interface protocols, including SerialAttached SCSI or SAS, Serial ATA or SATA, and Peripheral Component Interconnect Expressor PCIe. SanDisk enterprise SSD brand names include Lightning, Optimus, CloudSpeed andFusion ioMemory.
SanDisk provides enterprise SSDs designed for mission critical environments and includesolutions optimised for storage in write intensive, read intensive and mixed use applications.These enterprise solutions include SAS and SATA SSDs for enterprise storage, and PCIe SSDs,which are designed to accelerate enterprise application performance. The company also providesenterprise software solutions designed to improve the performance of SSDs in various enterpriseenvironments. SanDisk expects enterprise SSD solutions to be a key NAND flash growth driverover the next several years as SSDs increasingly replace hard disk drives in enterprise andhyperscale data centres.
SanDisk expects growing demand for SSD solutions from hyperscale customers. Thesehyperscale customers may place orders for significant volumes with short lead times that may bedifficult for us to forecast and fulfil, which could result in loss of sales opportunities andadversely affect business.
SanDisk SSD products are more complex and rely on more sophisticated firmware than its otherproducts, which may result in increased costs and lower gross margin due to frequent productupdates. Changes in OEM customer specifications for these products could require SanDisk toupdate the firmware for its SSD products, which would result in increased costs for processingthese updates.
SanDisk enterprise SSDs are sold to a limited number of OEM customers that have long design,qualification and sales processes, and the growing demand from hyperscale customers may bedifficult to forecast. The enterprise storage market is comprised of a relatively limited number ofOEM customers, with long design, qualification and test cycles prior to sales. OEM customers inthe enterprise storage market require SanDisk to customize products, which can lengthen theproduct design, qualification, manufacturing and sales process. Lengthy and uncertain processesmake it difficult to forecast demand and timing of customer orders. The difficulty in forecastingdemand and the customized nature of SanDisk products for certain OEMs make it difficult toanticipate inventory requirements.
Consumer electronics
SanDisk provides flash storage solutions for multiple consumer markets, including imaging,USB drive, gaming, audiovideo and others. Flash storage solutions are used in digital camerasfor high resolution still images and video, and in solid state digital camcorders for highresolution video. Gaming consoles and portable game devices now include advanced featuresthat require high capacity embedded or removable storage solutions.
USB flash drives allow consumers to store and transfer files, pictures and music on keychainsized devices. SanDisk sells a line of digital media players with both embedded and removableNAND flash under Sansa brand with varying combinations of audio and video capabilities. Thecompany also sells a line of wireless media drives under Connect brand that provides wirelessstreaming of content to computers and mobile products. Primary removable card formats forconsumer devices include CompactFlash, SD and microSD. SanDisk USB flash drives providethe user with ability to carry files and application software in a portable format.
Sansa is SanDisk’s branded line of flashbased digital media players, and SanDisk Connect is thebranded line of wireless media and flash drive products. Sansa line of products includes featuressuch as FM radio, voice recording and support for a variety of audio and video formats. SanDiskConnect line of products allows wireless streaming of highdefinition movies, photos, music and
documents on tablets, smartphones and computers. SanDisk also sells memory wafers andmemory components to customers who package memory under their own brands or embedmemory in other products.
Sales channels
SanDisk commercial channel represents sales directly and through distributors to OEMs, systemintegrators, valueadded resellers, who bundle, embed or integrate SanDisk flash storagesolutions. The commercial channel addresses a large variety of applications, including mobilephones, tablets, notebooks, gaming devices, enterprise storage solutions, servers and othercomputing devices. Commercial channel sales also include sales made directly to enterprisecustomers.
SanDisk sells products directly and through distributors to consumer electronics stores, officesuperstores, mobile phone stores, mass merchants, ecommerce retailers, catalogue and mailorder companies, drug stores, supermarkets, convenience stores and kiosks in a wide variety oflocations.
SanDisk revenue depends in large part on ability to achieve design wins with OEM customersand success of products sold by OEM customers. SanDisk primary OEM products include cardsfor mobile devices, embedded memory products, and SSDs for the notebook, storage and servermarkets. SanDisk ten largest customers represented approximately 48% and 49% of its revenuein fiscal years 2014 and 2013, respectively.
The composition of SanDisk major customer base has changed over time, including shiftsbetween OEM and retailbased customers. SanDisk has executed a strategy of deriving a greaterportion of revenue from highvalue offerings, especially enterprise solid state drives. Ongoingsupply constraints and rapid shifts in the product mix required by some customers prevented usfrom fulfilling available demand towards the end of 2014. With inventory already at very leanlevels, a modest loss of output from the wafer fabs amplified the effects of supply constraintsand resulted in lowerthananticipated fourth quarter results.
SanDisk products are made by combining NAND flash memory with a controller and firmware.SanDisk manufactures data storage solutions in a variety of form factors using flash memory,controller, firmware and software technologies. The solutions include solid state drives SSDs,embedded products, removable cards, universal serial bus USB, drives, wireless media drives,digital media players, wafers and components. SanDisk SSD products are used in enterprise datacentres and client computing platforms and provide highspeed, highcapacity storage solutions.SanDisk embedded flash products are used in mobile phones, tablets, computing platforms,imaging devices, automobiles and other products. SanDisk removable cards are used inapplications such as mobile phones, tablets, digital cameras, gaming devices, personalcomputers, automobiles and other products.
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