I believe many digital enthusiasts have noticed that the price of solid-state drives has plummeted since the beginning of 2023, and the price reached a record low in about May or June. But in the third quarter, SSD prices began to rise again. So why did the price of solid-state drives suddenly increase?

What is a solid state drive?

Solid State Disk, referred to as SSD, is a long-term memory that mainly uses flash memory (NAND Flash) as the storage medium. There are two concepts that need to be emphasized here:

First, as for storage media, traditional mechanical hard drives rely on "discs" to store data. The picture above shows the disassembly of the Toshiba DT027200RPM2TB mechanical hard drive. The circular part is the "disc" that stores data.

Solid-state drives rely on chips to store data. Specifically, most hard drives on the market rely on NAND Flash chips to store data. However, there are also a few solid-state drives that rely on other chips to store data. For example, Intel's 900P, 905P, P4800X, and P5800X all use 3DXPoint as storage media. In short, 3DXPoint is a product between NAND and DRAM.

Second, SSDs are long-term storage. This point is mainly to illustrate the difference between solid state drives and memory. Since both solid-state drives and memory can store data, and both use chips as storage media, the two are often confused by some people. Especially for mobile phone products, the confusion is even more serious. To put it simply, memory is the one that loses all data after a power outage, while SSD is the one that can retain data for a long time (such as several years) after a power outage.

Solid state drive price

Generally, solid-state drives are mainly composed of three types of chips, as shown in the figure above:

1. NAND chip: This is the chip that stores data

2. DRAM chip: used for caching (not necessary, some solid-state drives will castrate the DRAM chip)

3. Main control chip: used to complete data access and other tasks

Among the above three types of chips, the bulk of the cost of solid-state drives is generally NAND chips, while main control chips and DRAM chips account for a smaller share of the total cost. Therefore, the selling price of solid-state drives is often directly related to the price of NAND chips.

In the medium to long term, the price of NAND chips is mainly affected by two factors:

1. Technology iteration

2. Capacity adjustment

Technology iteration: For example, the emergence of new storage technology can effectively reduce the cost per unit capacity of memory chips, so the price of NAND chips will decrease overall.

At present, the main technical paths to improve storage density include increasing the number of bits that can be stored in the memory unit and increasing the number of stacking layers of 3D NAND Flash. According to the amount of storable bits stored in each storage unit, NAND Flash is divided into SLC, MLC, TLC, and QLC. SLC (Single-levelCell) stores only 1 bit of data for each storage unit, while MLC (Multi-levelCell), TLC (Triple-levelCell) and QLC (Quad-LevelCell) store 2-bit, 3-bit and 4-bit data for each storage unit respectively, and the storage density is gradually improved. Traditional NAND Flash is planar flash memory (2D NAND). 3D NAND uses multi-layer vertical stacking technology and has the advantages of larger capacity, lower power consumption, better durability and lower cost.

To put it simply, if PLC (Penta-Level Cell) becomes popular in the future, or if a manufacturer can create NAND chips with a higher number of stacked layers, then the price of NAND chips will usher in another wave of decline.

Capacity adjustment: For example, if upstream memory chip manufacturers increase capital expenditures to expand production capacity, resulting in oversupply, the market price of NAND chips will show a downward trend. Vice versa, when upstream memory chip manufacturers reduce production capacity, causing supply to exceed demand, the market price of NAND chips will show an upward trend.

In the short term, the price of NAND chips is mainly affected by fluctuations in downstream demand. For example, an increase in the price of solid-state drives may cause downstream customers of solid-state drives to increase their purchases in the short term, while a price drop may cause downstream customers to reduce their purchases in the short-term, thereby affecting the supply and demand of solid-state drives and causing the market price fluctuations of solid-state drives to be higher than the fluctuations in the market price of upstream NAND chips.

Popularity of QLC

Why did NAND chip prices fall first and then rise? Simply put, it can be attributed to two factors: the popularity of QLC and the reduction in NAND chip production.

Since the birth of QLC, doubts about performance and life have always been heard. But in 2022, many server manufacturers will begin to accept and configure a large number of QLC solid-state drives into their products. Taking Dell as an example, Dell Technology Group announced in 2022 that PowerScale, which is designed for unstructured data, will be the first to introduce QLCSSD.

Among them, PowerScale F600 and F900, two nodes that support NVMe, provide two QLCSSD options of 15TB and 30TB. In particular, the 30TB QLC SSD will provide the highest density flash memory in the PowerScale portfolio. A single PowerScale F900 node can support up to 736TB of raw capacity or 900TB of effective capacity (with data reduction enabled on each node), and the entire storage cluster capacity has been increased to up to 186PB, which will be twice the previous maximum capacity.

In fact, it is not surprising that server manufacturers have a "really good" attitude toward QLC solid-state drives. On the one hand, with the development of the industry, the amount of data that needs to be stored is constantly growing. Then it is necessary to configure a large-capacity solid-state drive. On the other hand, QLC is really cheap. Or according to the official words: "The introduction of QLC solid-state drives can further reduce the overall TCO cost of enterprises deploying all-flash storage."

As for the performance and lifespan of QLC, it’s actually not that big of a problem. In terms of lifespan, although the lifespan of QLC is lower than that of TLC, within the "product life cycle", the lifespan of QLC is actually sufficient.

Performance can be further optimized through other technologies. For QLC-based SSD products, current SSD suppliers actually use a variety of technologies to compensate for performance, such as multi-channel, multi-die, and high concurrency to compensate for performance. Server manufacturers can compensate for performance through optimization and innovation of storage systems. For example, Dell's PowerScale optimizes the overall performance of its storage system to maintain the performance of nodes using QLCSSD and nodes using TLCSSD at the same level.

Specifically, PowerScale itself is a storage cluster system that is horizontally scalable and composed of multiple nodes and high-speed network connections. Therefore, when implementing the read and write function, or when a file comes in, PowerScale will slice the file and then distribute it to all nodes, allowing the nodes to implement disk placement on their own. The meaning behind this is that the data will not be written to each node individually, but will be written to multiple storage media of all related nodes in a distributed manner, so that performance is guaranteed.

On this basis, PowerScale also has an NVDIMM system, which means that it provides non-volatile memory capabilities. Therefore, when data is written to each node, it is not directly placed on the disk, but first placed in the NVDIMM of each node, and then a batch is accumulated in the NVDIMM before being placed on the disk. In this way, whether it is a TLC or QLC SSD, there is almost no difference for PowerScale, which maximizes the use of storage media performance and ensures the performance of the entire storage system's write operations.

NAND chip production cuts

According to data from TrendForce, the five major NAND chip manufacturers accounted for approximately 95.4% of the market share in the third quarter of 2023. In other words, as long as the five major manufacturers Samsung, Hynix, Western Digital, Kioxia, and Micron start to reduce production, it will only be a matter of time before the price of NAND chips increases.

Kioxia: Production adjustments will be made at Yokkaichi and Kitakami flash memory factories, reducing their wafer output by approximately 30% starting in October 2022.

Western Digital: In its fourth quarter 2022 results conference call, it stated that it would reduce NAND flash wafer production by 30%.

Micron: In November 2022, Micron announced that it would reduce DRAM and NAND wafer production by approximately 20% (compared to the fourth quarter of fiscal year 2022 as of September 1), and Micron CEO Sanjay Mehrotra also stated that it will continue to monitor industry conditions and make further adjustments as needed. This means that Micron's actual capacity reduction may be higher than 20%.

Hynix: When Hynix released its third-quarter financial report in October 2022, Hynix stated that it would reduce production focusing on less profitable products in the future. In other words, within a certain period of time, the tone of investment reduction and production reduction will be maintained to restore the market's supply and demand balance to normal.

Samsung: Samsung said in a statement: "Based on assessment, the company has obtained sufficient production to cope with future changes in memory chip demand. Samsung is adjusting to reduce memory chip production to a meaningful level, focusing on products that have obtained additional supplies, and optimizing production line operations." As for Samsung's specific production reduction measures, industry insiders revealed in September 2023 that Samsung Electronics has increased NAND flash memory production reduction efforts, and the production reduction rate is expected to reach 50% by the end of 2023. Samsung has cut NAND flash memory production by 20% in the first half of 2023. Since the second half of 2023, Samsung's pace of production reduction has accelerated, and Samsung has reduced NAND flash memory production by about 40%.

Therefore, since the five major NAND chip manufacturers have implemented large-scale production reduction strategies, when the stock chips on the market are almost consumed, NAND chip prices will also rise.

Solid state drive prices increase

The price of NAND chips has increased, and the price of solid-state drives as "downstream products" will also increase accordingly. However, in this process, downstream manufacturers will show a more positive attitude towards price increases.

Taking Longsys as an example, Longsys Electronics is mainly engaged in the research, development, design and sales of Flash and DRAM memories. It has four product lines of embedded storage, mobile storage, solid-state drives and memory modules, providing consumer-grade, industrial-grade, automotive-grade memory and industry storage software and hardware application solutions.

Longsys gave this data in its prospectus:

Assuming that the wafer purchase price increases by 5%, if the product sales price increases by 5% and 8% respectively, the main business gross profit margin will increase by about 1% and 3% respectively; assuming that the wafer purchase price decreases by 5%, if the product sales price decreases by 5% and 8% respectively, the main business gross profit margin will decrease to about 1% and 4% respectively.

From such data, we can see that when the price of NAND flash memory (wafers) increases, even if the downstream manufacturers only maintain the same price increase, they will actually become more profitable (gross profit margin increases). The reason for this situation is that there is a production and sales cycle gap between the point of product sales and the point of wafer procurement. Generally speaking, when the market price rises, the sales price rises before the cost, and the gross profit margin usually shows an upward trend; while during the market price downward phase, the sales price falls before the cost, and the gross profit margin usually shows a downward trend.

Conclusion

1. Since the five major NAND manufacturers have reduced production together, the price increase of NAND chips is an inevitable result. "Can Micron's review be an opportunity for the rise of domestic memory chips?" published in April 2023. "The article also accurately predicted related trends.

2. The price increase of NAND chips should continue for some time. Based on current data estimates, the price increase process may continue until at least the third quarter of 2024. If you need a solid-state drive during this period, you can consider getting it early.

3. Although the manufacturing of mechanical hard drives does not rely on NAND chips, the price increase of NAND chips does affect the entire storage market. Therefore, mechanical hard drives will also increase in price along with solid-state drives to a certain extent.