Hard disc drive makers have been hit hard by the emergence of NAND flash drives. NAND storage capacity has climbed fast, and costs are shrinking, making the technology more feasible for use in personal media players. HDD makers are responding by upping storage and reducing sizes and power requirements on their own devices, but as NAND nears 60 GB, HDD makers may need to hedge their bets.
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Unlike in the digital audio player market, the fight between NAND flash and hard-disk drive (HDD) on the personal media player (PMP) platform is far from over. The 1.8-inch HDD still has a firm grip on the PMP category that requires storage capacity of 20 GB or higher due to the cost per byte advantage over NAND flash.
Our consumer survey indicated that among PMP owners, hard drive-powered devices still account for a slight majority of the ownership. On the other hand, the micro-drive segment (1-inch or the 0.85-inch HDD), which features a capacity ranging between 4 to 12 GB, has been hit hard by the NAND flash as its cost-per-byte lead -- which it enjoyed during 2003-2005 -- has dissipated, and NAND flash's merits (durability, low power consumption and light weight) earn it the preferred status for the low storage PMP category.
Battle Lines
1.8-inch HDD makers, mainly Toshiba, Hitachi (NYSE: HIT), Seagate, and newcomer Samsung, are fully aware of the threat the NAND flash is posing to their HDD business for portable CE market. Therefore, their battle strategies include the following:
Maintain the cost advantage by enhancing capacity at the same cost. In September 2007, Toshiba launched two new 1.8-inch HDD models: one with 80 GB storage using a single platter, and the other doubling the capacity using two platters. Samsung made a similar announcement two weeks earlier.
Dress up the HDD with features that make it slimmer, more energy efficient and more durable. For instance, the 60 GB, 1.8-inch HDD from Samsung or Seagate is measured at only 5mm (0.2-inch) thin. The latest Toshiba 160 GB model consumes 0.32 watt of power in idle condition, compared with the 1.5-watt industry average.
Seagate has long been touting its G-force technology, an anti-shock feature that protects the drive by moving the heads off the platter when the device is powered off. Thus, during a drop, no parts make contact with the media inside the drive. All of these features are aimed at keeping HDD as a viable option for portable device manufacturers.
Support CE-ATA, a portable CE-friendly storage interface. The new interface standard replaces the Serial ATA (advanced technology attachment), an interface well-suited for mainstream computing applications that emphasize faster data transfer rates but care less about power consumption. CE-ATA, on the other hand, addresses well the key challenges of a PMP design: cost-effective integration and maximum power efficiency.
The CE-ATA Specification 1.0 was finalized in March 2005. Since then, Hitachi has been a strong promoter of the new standard; Seagate has also conformed to the standard in its latest 1.8-inch HDD models. However, Toshiba and Samsung support both the CE-ATA and the legacy parallel advanced technology attachment (PATA) interfaces on their 1.8-inch drives.
Flash's Response
On the other side of the aisle, flash memory manufacturers are gearing up their production capacity and redrawing the roadmap to further challenge the HDD's role in the market for portable entertainment devices.
According to the theory first publicized in 2002 by Dr. Chang Gyu Hwang, president and CEO of Samsung Electronics' Semiconductor division, flash can double its density growth every 12 months. Like the famous Moore's Law, the prediction has worked out quite well over the last five years as NAND flash storage capacity grew from 256 MB in 2002 to 16 GB in 2007. Apple (Nasdaq: AAPL) has already incorporated the 16 GB NAND flash in its latest iPod touch models [*correction]. If the theory continues to hold, the next milestone will be 32 GB in early 2008.
It will be just a matter of time before the manufacturers to ramp up production and bring the cost down to a market-acceptable level. Samsung debuted the world's first 32 GB flash card in September 2006, followed by SanDisk (Nasdaq: SNDK) in January 2007. In early 2008, Apple released its latest iPod touch with 32 GB of flash memory -- just what we have predicted for this capacity flash memory to go mainstream.
Looking ahead, flash is expected to reach 60 GB or higher during the 2009-2010 timeframe, at which point it will begin to take away the medium-storage PMP market share from the 1.8-inch HDD manufacturers. Companies that do not have assets in the flash business have come to grips with such a trend. Seagate, for instance, has not only produced hybrid drives mixing both flash and HDD, but also announced plan in September 2007 to make flash-based, solid-state disks from 2008, a measure to hedge its bets in the consumer electronic market, in our analysis.
Harry Wang is a senior research analyst with Parks Associates. His focus is on the consumer electronics and entertainment service industries with a focus on portable CE hardware, software and associated applications and services.
*ECT News Network editor's note: The original publication of this article incorrectly stated, "Apple has already incorporated the 16 GB NAND flash in its latest iPod nano models" In fact, Apple has incorporated 16 GB NAND flash in its latest iPod touch models. We regret the error.
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