WD’s Acquisition of SanDisk Will Further Accelerate SSD Penetration, Says TrendForce

Western Digital (WD), a major manufacturer of traditional hard disks, announced on October 21 that it will acquire SanDisk, a leading NAND Flash storage solution provider, for a total of US$19 billion. This acquisition, which is set to complete before of the end of next year’s third quarter, is considered the largest of such deals in the Flash storage industry during recent years. According to research by DRAMeXchange, a division of TrendForce, the demand growth of SSD products has shot up in the past two years. Moreover, the share of the SSD application in the total NAND Flash demand worldwide is projected to expand from 30% in 2015 to 35% in 2016, becoming the most rapidly growing and highly contested end market for this memory technology. Consequently, semiconductor and digital companies have been quick to form alliances and conduct mergers in order to strengthen their positions in the SSD market.

DRAMeXchange Assistant Vice President Sean Yang said companies with crucial technologies to SSD production have been the takeover targets for larger storage solution providers and NAND Flash memory suppliers in recent years. This latest deal is a win-win for both sides. For WD, the rise of the SSD market has accelerated the development of related storage equipment. WD’s acquisition targets in the past three years were all developers of core technologies related to NAND Flash memory.

WD’s success in acquiring SanDisk is crucial to its plan to dominate the SSD market as this target is the lynchpin to its strategy. SanDisk has wafer and memory module fabs, so it has been a major supplier of NAND Flash memory as well as a branded vendor of related products. Additionally, SanDisk had previously kept expanding its production capacity and technology portfolio with its own acquisitions, targeting companies related to SSD and NAND storage applications since 2006. SanDisk not only has the most advanced IPs and capacity to produce NAND Flash memory, it also holds key technologies on Enterprise-SSDs. Once the integration of both companies is complete, they will become the most wide-ranging, comprehensive storage solution provider in the industry. The new WD will lead in both HDD and SSD technologies as well as having a competitive advantage in NAND Flash production. Since NAND Flash accounts for the greatest part of a SSD product’s total cost, SanDisk’s capacity will turn out to be WD’s most valuable asset.

WD will continue the joint venture that SanDisk has with Toshiba, and there is no indication that WD will introduce significant changes to the original strategic partnership that has lasted for 15 years. On the other hand, the newly integrated WD will step up efforts to develop 3D-NAND and other more advanced non-volatile memory (NVM) technologies, setting up more rigorous schedules for the production of new products. From SanDisk’s perspective, WD’s previous acquisitions can improve its own equity, which is good for the shareholders in both companies.

Recently, Tsinghua Unigroup became the largest shareholder of WD by buying a 15% stake in the company for US$3.8 billion. The state-backed Chinese tech conglomerate will thus be able to indirectly obtain SanDisk’s NAND Flash resources and technologies after both companies are fully integrated. DRAMeXchange believes the Chinese government will continue to channel investment efforts into developing the domestic memory industry. This in turn will create more incidences of horizontal and vertical integrations in the NAND Flash industry in near future as China moves closer to its goal.

In the wider SSD market, the Enterprise-SSD segment is seeing strong growth due to a sharp decline in the overall SSD cost and developments in the cloud computing application. For the PC application, SSD penetration in notebooks is estimated rise substantially from 26% in 2015 to 36% in 2016 as vendors follow Apple’s lead in furnishing their notebooks with SSDs. The SSD penetration in the high-end, commercial notebook market may even surpass 50% next year. At the same time, more mid-range and low-end models are also adopting this piece of technology. Yang said, the ongoing consolidation in the SSD and NAND Flash industries means that the leading solution providers are going to get stronger, putting more pressure on the smaller competitors. Hence, more mergers and acquisitions are expected in the future.