NAND demand and supply overview
To meet the current NAND (negative AND) demand, key NAND players Samsung (SSNLF), Micron Technology (MU), Intel (INTC), and SanDisk-Toshiba (SNDK) (TOSBF) are spending on capacity expansion. Specifically, Micron expects NAND market to grow at a CAGR (compounded annual growth rate) of 35%–45% in 2016 and 2017.
Micron’s investment in 3D NAND
Samsung has been producing 3D NAND at its $14 billion fabrication facility, or fab, in China since 2014 while others are ramping up their 3D NAND production. Micron has invested $4 billion at it Singapore (EWS) fab to produce 3D NAND. The company claims that its 3D NAND is superior to others.
Micron has also stated that it has produced a 32-layer 3D NAND structure at the cost of competitors’ 48-layer structure. Micron is meanwhile moving a step further and developing 3D NAND Generation 2 technology and expects to bring this into production in fiscal 2Q17. Generation 2 is expected to reduce costs by 30%, as compared to Generation 1. Micron would gradually ramp up the Gen 2’s production in fiscal 2017, which would give the company cost leadership in the 3D NAND market and help increase the adoption rate of SSDs (solid state drive) in PCs above 15%–20%.
Superior product, new ecosystem
A superior product would do well in a slow market as well. But in the NAND market, where there’s likely to be a supply shortage, the product’s performance would not make a significant difference. In fact, if Micron’s costs are lower, it will profit more than competitors.
But a new ecosystem is required to enable the 3D NAND, and so Micron has been investing in software and firmware. It has also acquired Tidal, a manufacturer of PCIe (peripheral component interconnect express) controllers, to build the ecosystem.
Peer companies’ investments in 3D NAND
SK Hynix has already started supplying 3D NAND and has begun the second phase of its capacity expansion, which is expected to become operational in calendar 2H16. Along with SanDisk, Toshiba plans to invest over $3 billion between 2016 and 2018 on a 3D NAND fabrication plant, with the first production starting in fiscal 1H16.
Intel is also converting its China fabrication plant to produce 3D-NAND, with the first production expected to start in calendar 4Q16. Micron and Intel have jointly developed a breakthrough memory technology 3D XPoint, and they expect to launch it in 2017 or 2018.
Let’s examine the specifics of this breakthrough in the next part.