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3 Easy Ways to Enter the SSD Market

by Zsolt Kerekes editor, April 28, 2009

The list of SSD company acquisitions in this article goes from 2000 upto today (2013)

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3 Easy Ways to Enter the SSD Market
Nowadays it seems like everyone wants to get into the SSD market.

It looks attractive (for those who are in other parts of the storage market which are declining or flat lining.) Although I explained in an article last year - why not all segments will do equally well.

There's always a lemming-like rush to get into technology markets at the point when the bendy bit of the hockey-stick curve pokes its head above the visibility horizon.

The visibility horizon is when a new market reaches a size that even lazy analysts can't fail to notice - typically $1 billion annual revenue.

As long as the projected market size (at the other end of the curve) is big enough - typically $10 billion - all that an aspiring company has to do is cut and paste some analyst / editor quotes about the future size of the market into the bullet points under the graph. (No one ever checks to see if they are authentic - and no one ever waits 5 years to see if they come true.)

If you're unfamiliar with hockey - the interesting bit of the curve is simply a straight line which heads due North - almost at right angles to the horizontal time line. Strictly speaking - to make it more plausible - it should have a small tilt - maybe 60 degrees instead of 90?

If you're taking notes - you must follow the conventions about which way the graph is drawn and be sure to aim the curve in the approved direction ( / ) to show rapid market growth. If it goes the other way ( \ ) it shows a crashing market. And you won't get the money.

Add some more few bullet points in the powerpoint about how everyone else has failed to see this opportunity (except you) and create a spreadsheet which shows how your revenue will go up like a rocket - even if you only get a small percentage of the total available market - provided the VCs give you the money fast enough to ensure you have 1st mover advantage. (The clock is ticking even as you click on the next slide.)

Investors love to see these kind of plans. They've never seen anyone do it before. They don't know what else to do with their money - and it's safer tossing cash at start-ups than investing in banks. (If you're reading this on the late night repeat - that may, or may not, still be true.)

I've been involved in the SSD market as an integrator or analyst for decades. And many SSD founders have said they've found the content on this site useful in helping them decide to get into the market - or modifying their plans - if they were already in it.

So I feel confident about compiling a list of 3 easy ways to get into the SSD market - along with examples, cases studies, to do lists, and links to help you succeed. Here goes...


SSD Market - Easy Entry Route #1 - Buy a Company which Already Makes SSDs

Acquisition is the easiest way to make a big splash in the storage market. It's no different in the SSD market. Moreover it's easier now than ever before.
  • There are more SSD oems in the market to choose from.
  • The effects of the recession (and increased competition - due to all those new SSD oems) mean that it's harder to be successful. That can make the prospect of being acquired more attractive (to some companies).
Buying an SSD company has the superficial attraction that you have a good idea of what you're getting. But it's much harder to choose a suitable target than you may think.

Sometimes things go wrong. For example:- in 2008 the newswires were buzzing with stories about Samsung acquiring SanDisk. But it didn't happen - because SanDisk's management didn't want to be acquired. Instead the market learned a lot about the weaknesses in Samsung's IP portfolio. The longer this fiasco went on - the more Samsung's competitors benefited from the negative publicity.

In my role as Occasional SSD Agony Aunt - I've spoken to people about the "SSD acquisition problem" at both ends of the game. Here's what I've learned.

The acquiring company has to do a lot of research to understand what it's getting and the acquirer has to evolve its own understanding of the market.

Who's the best company to acquire? - is a question I've been asked many times...

To which I always reply - "There is no such thing as a single company or technology that's competitive in every part of the SSD market."

That's not me being evasive, and it's not because I can't think of any good SSD companies. But the market is much more complex than most people think. And by the time you've done your homework, learned about the market and whittled down a shortlist, a new SSD press release from out of the blue may completely invalidate all the thinking which led to your shortlist. Which means you have to start all over again.

In order to be helpful - I always suggest that acquirers study the present and past lists of the Top 10 SSD Companies. They are based on the SSD search volume of millions of readers. Unlike an opinion based shortlist - it's a good empirical place to start. (Earlier in this decade I noticed that companies named in my "top 10 lists" of other subjects had an unusually high tendency to get acquired. That wasn't my fault! It simply indicates that if a company sticks out in one type of search - by potential customers - it may also be extra visible in another type of search - by would-be acquirers. It's a different type of search than SEO.)

The best SSD companies don't want to be acquired - or are picky about whom they may be willing to partner with. If they've got a revenue stream and are seeing very high customer inquiries and growth - the founders will rightly (or optimistically) think that whatever their company might be worth now - it will be worth a lot more in another year's time. As long as they're profitable and have got enough cash flow - why should they even discuss the subject? A lot of SSD founders or managers have worked in bigger companies before - and part of the reason they're where they are now is frustration at the slow market reaction times of other companies. When you're the boss and having fun and making money - there's more than enough to do without wasting time talking to potential acquirers - who may just end up picking your brains and resurfacing as competitors. Note this is markedly different to storage software companies - most of which never progress to a profitable revenue stream - and where the sole aim of founding the company is to get acquired.

For obvious reasons it's much easier acquiring an SSD product line from a company which is going bust (or has already done so).

Here are just some examples (pre May 2009) of SSD companies (and SSD product lines) which have already been acquired.
SSD Company Acquisitions - part 1 of 2- examples upto May 2009
Western Digital acquired SiliconSystems This is 1 of the 2 most significant SSD acquisitions in the market - because it was a major hard disk oem acquiring a successful flash SSD oem.

SiliconSystems had sold millions of its SiliconDrives into the embedded market prior to the acquisition.
SanDisk acquired M-Systems This is the other most significant SSD acquisition, even though it happened in 2006 - because it was a major flash memory oem acquiring a successful flash SSD oem.

Prior to this acquisition M-Systems had developed high speed MLC controller technology and achieved early market success in the use of SSDs in phones. M-Systems had also designed fast 3.5" flash SSDs for use in enterprise servers. The successor to this IP is what made SanDisk itself so attractive as an acquisition target later (in 2008 by Samsung).
SMART Modular Technologies acquired Adtron These are examples of companies which were already in the SSD market acquiring other SSD companies to strengthen their market position or technology.
STEC acquired both Gnutek and Memtech
Micron acquired Lexar Media These are examples of forward integration.
Dataram acquired assets of Cenatek
Density Dynamics assets of TiGi These are examples of convenient tactical acquisitions which are simply to get into the SSD market.
GalaxyStor acquired assets Winstation Systems
HGST acquired Fabrik, parent company of G-Tech
Curtiss-Wright acquired VMETRO which had earlier acquired the PCI SSD maker Micro Memory
SSD Company Acquisitions - part 2 of 2
since May 2009 (the original publication date of this article)
February 2010 Micron Technology announced an agreement to acquire privately held Numonyx in an all-stock transaction worth approximately $1.3 billion.
May 2010 Microsemi announced it had completed the acquisition of White Electronic Designs.
June 2010 Cadence acquired the SSD controller and IP company - Denali Software.
November 2010 In - OCZ acquired some of the fibre-channel controller technolog assets of Solid Data Systems for approximately $1 million.
January 2011 TeleCommunication Systems acquired Trident Space & Defense.
March 2011 OCZ announced it had signed a definitive agreement to acquire Indilinx for for approximately $32 million.

WD announced it would acquire Hitachi GST for approximately $4.3 billion. Although due to regulatory issues connected with the hard drive market - the acquisition didn't complete until a year later
May 2011 SanDisk announced a definitive agreement to acquire Pliant Technology for approximately $327 million.
June 2011 Oracle announced it has entered into an agreement to acquire Pillar Data Systems - which was already majority owned by Oracle CEO Larry Ellison. Pillar at this stage was a maker of hard drive based storage arrays which included a small percentage of 3rd party COTS SSD capacity (SSD ASAPs hybrid) rather than a pure play SSD vendor.
August 2011 Samsung acquired Grandis - an nv RAM company which has been developing spin transfer torque random access memory (STT-RAM).

Fusion-io announced that it has entered into a definitive agreement to acquire IO Turbine for approximately $95 million.
October 2011 LSI announced a definitive agreement to acquire SandForce for approximately $370 million. The transaction is expected to close early in the first quarter of 2012. SandForce president and CEO, Michael Raam will become General Manager of LSI's newly formed Flash Components Division.

OCZ agreed to acquire the UK Design Team (approximately 40 engineers located in Abingdon) and certain assets from PLX Technology which will enable OCZ to accelerate the development of its next generation of fast SSDs - while also reducing development costs.
December 2011 Apple acquired Anobit for a sum thought to be in the region of $400 to $500 million.
January 2012 OCZ announced it has acquired SANRAD for $15 million.

Micron announced it has acquired the assets of UK based Virtensys which marketed rackmount SSDs stuffed with Micron's PCIe SSDs and supported by a patented multi-server sharing virtualization interface.
February 2012 SanDisk announced it has acquired FlashSoft - one of the leading independent software vendors in the SSD ASAPs market.

Rambus announced it has acquired CMOx pioneer Unity Semiconductor for an aggregate of $35 million in cash. As part of this acquisition, the Unity team members have joined Rambus to continue developing innovations and solutions for next-generation non-volatile memory.
April 2012 MemoCom merged with Waltop.
May 2012 EMC announced it has acquired XtremIO for $430 million.
June 2012 SK Hynix announced it has entered into an agreement to acquire Link_A_Media Devices

SanDisk acquired Schooner Technology (an SSD software company).
July 2012 Intel acquired NEVEX - (an SSD software company with products in the SSD caching market.
August 2012 IBM announced it will acquire Texas Memory Systems.
October 2012 Cypress Semiconductor acquired Ramtron a maker of low capacity nvm called F-RAM (ferroelectric random access memory).
November 2012 NetApp acquired Cache IQ (an SSD ASAP vendor)
December 2012 Samsung acquired NVELO - an SSD software company - which operates in the SSD ASAPs (caching) market in the notebook segment.
January 2013 Imation acquired Nexsan for $120 million. Nexsan - among other things - was in the rackmount hybrid SSD ASAPs market.

Violin acquired GridIron Systems.
March 2013 Fusion-io acquired another storage software company - ID7 - which had been collaborating on the development of FIO's ION data accelerator software. ID7 was the primary developer of the SCST (SCSI target subsystem for Linux). Fusion-io also announced it had achieved 9.6 million IOPS (64 byte) from a single 365GB MLC ioDrive2 (PCIe SSD).
April 2013 Fusion-io acquired NexGen Storage (an iSCSI hybrid array IP company) for $119 million.
June 2013 WD announced that it had agreed to acquire Stec for approximately $340 million. Stec will be absorbed into HGST.
July 2013 SanDisk - announced a definitive agreement to acquire SMART Storage Systems for approximately $307 million. Among other things SMART had multiple oem design wins for its SAS SSDs - and it was a leader in the enterprise focused adaptive R/W flash IP technology market.

WD announced it had acquired VeloBit (an SSD software company operating in the SSD auto-caching market).

EMC announced it had agreed to acquire yet another storage software company - called ScaleIO.
September 2013 WD's enterprise SSD subsidiary - HGST announced it would acquire Virident Systems (a leading PCIe SSD company) for approximately $685 million in cash.

Cisco announced its intention to acquire WhipTail (a leading rackmount SSD company) for approximately $415 million in cash and retention-based incentives.
When it works well, acquisition is a powerful way of getting a strategic foothold in the SSD market. It gives you access to products and technology which competitors can't easily replicate. And if the acquired company has a strong base of patents than that may provide another lucrative source of revenue in the future.

But what if your needs are tactical? You need to get into the SSD market quickly - but it's likely that your needs will change. You need the flexibility of getting into the technology now - but in a way that doesn't leave you locked into an expensive dead-end if things change?

That's where the next method comes in.


SSD Market - Easy Entry Route #2 - Badge Engineering / OEMing / Integrating Someone Else's SSD Product

This kind of deal is extremely common in the storage market.

Unlike an acquisition - this is strictly a marriage of convenience. (Sometimes I get the impression I'm reading the pre-nuptial in the text of the OEM Announcement press release.)

On the one side is typically a company which already has an established route to market and strong marketing brand. Let's call them OldRichCorp. Whatever they put in a box - with their label on it - will sell (no questions asked) to their loyal faithful customers. (In real life it's harder than that - but this is the story told by the negotiators in OldRichCorp when they're putting a new contract in place.) The main risk for OldRichCorp is that if it doesn't offer an oemed SSD product at all - then its customers may be tempted to take their whole business to their main competitor OtherBigCorp to get these features. OldRichCorp knows from its long dark corporate history that it should not try to develop this technology in-house. And although it has set up a task force to look into the subject of acquiring an SSD company - it can't afford to wait years without having a saleable solution.

The other partner, let's call them HotTechnologyCo, typically has some best of breed, hot technology product - but suffers from the disadvantage that their product is just a small part of the solution that users buy. Although HotTechnologyCo does sell a proportion of products to end-users - the cost of capturing each new customer is high compared to the value of each product. Much easier to sell at a lower price to volume customers who do all the marketing for you. Unfortunately this almost guarantees that HotTechnologyCo never invests enough resources to stand alone. There are many risks for HotTechnologyCo because the bulk of its business future is in the hands of a single big customer. If sales are low there is little that HotTechnologyCo can do to push sales along. On the other hand, if sales are high - OldRichCorp may be tempted to switch its business to one of many new suppliers emerging in the market.

It would be possible to write a whole book about the dynamics of the OEM business. It's full of stresses and conflicts.

Imagine the irritation that IBM felt in the early 1980s when rushing to cobble together its 1st PC product line. It was already years late coming to market - and that meant it had limited choices. No realistic choice at all for the microprocessor supplier (Intel had already sown up the market for 16 bit designs) and a limited range of suppliers for a "ready to run OS". Nevertheless those choices had a profound impact on the PC market for the next 25 years. Is it possible that one of the many OEM deals which have already been reported on these pages will have the same effect on the SSD market as those early PC market choices?

I don't think so - because the SSD market is too multi-dimensional and fragmented. But it is nevertheless true that when companies like OldRichCorp cast their favors publicly on suppliers - it helps to advance the whole market - even if they turn out to be transient choices.

"I gave you the best years of my life" wailed HotTechnologyCo when she was dumped by OldRichCorp.

"You were prettier then, and younger" says OldRichCorp. "And I found you playing around with You Know Who."

Markets are cruel. And we hope is that all this Darwinian activity leads to better products sooner.

A note about my use of the terms such as "Badge Engineering" - which sounds derogatory - but which I think (coming as I do from a design background) more accurately summarizes succinctly what goes on in a lot of deals. Does OldRichCorp do anything technical to leverage the products they get from HotTechnologyCo - apart from putting the stuff in a box with their own logo?

They don't even do that to start with. Stage 1 on technical value add - is getting the driver bugs sorted out. Stage 2 may be some parameter tweaks. But in most cases the value added part of the design is easily transferrable to products from another source.

Here are just a handful of examples of SSD OEM deals which have been announced in the SSD market.
SSD Market - Who OEMs Whom? - some examples from StorageSearch.com
EMC oems STEC

IBM oems STEC

HP oems Fusion-io and Samsung

Coraid oems Intel

Fujitsu oems STEC

Kingston Technology rebrands Intel

Hynix Semiconductor and Imation oem Mtron

LSI oems STEC

Pillar Data Systems oemed Intel, then switched to STEC

Dynamic Solutions International oems Texas Memory Systems

Sun Microsystems has in the recent past oemed Intel, STEC and Superior Data Solutions
Nearly all the examples above relate to high volume deals in the flash SSD market. The exception being Dynamic Solutions International. DSI, for many years oemed rackmount SSDs from Texas Memory Systems, which it integrated into the banking and financial markets. These products were initially RAM SSDs. But the product range now includes flash.

Another difficult to enter market - in which low volumes of SSDs are oemed by other companies is the military / defense market. But being designed into an embedded system or product is different to an oem product which is actively marketed under a different brand.

SSD Market - Easy Entry Route #3 - ReUsing 3rd Party SSD IP

In this category I've grouped together these activities
  • licensing SSD IP (designs, technology and patents)
"Successful IP Equals Product plus Service"
according to an article written by Jim Lipman
Marketing Director - at OTP memory maker Sidense
Now, having seen the earlier parts of this article, you may have been hoping that this, too, would be another one of those "easy to do" methods which simply requires a big enough credit card limit or intelligent purchasing department. Isn't designing your own SSD from chip level building blocks quite hard?

Yes.

This is not a quick trip to the virtual SSD mall in the hope you'll see some nice bits. You've got to know what you're doing - and what the trade-offs are in reusing 3rd party SSD IP. But it's still a lot easier than designing everything yourself. And that's why I've included it in this article.

Sometimes companies cross license their patents simply to reduce the risk of being sued by each other - or as the end-point to such litigation.

I'm not talking about such defensive moves here.

A more likely scenario on licensing IP may be that you're working on a small form factor SSD and expect great performance - but while you were designing the media part of the SSD for a SATA-2 interface the external market has moved on - and that doesn't look so attractive any more - or is not the best showcase for your memory performance. Instead your marketers think your product might be better going straight to a SATA-3 or 8Gbps host interface or even PCIe. If you know another company which can offer you a ready to use design - that could shave valuable microseconds off your latency and increase the throughput you can put on the datasheet.

Or maybe you're a flash memory company who suddenly realizes that adding the right chips to your memory can significantly affect their saleability. Being locked out of the SSD design represents a lost market opportunity that's bigger than a new world leading notebook or server, You can't design motherboards and operating systems but you know a lot about designing chips. With the right start you can crash into the SSD party and secure your forward revenue stream.

Or maybe you're a hard disk maker looking at ways to get into the SSD space. You've left it late because you really couldn't understand why people would buy these ridiculously expensive (cost per gigabyte) storage components (when you've spent decades pushing the curve the other way). And you had a bad experience with the hybrid disk market - which made you suspicious about SSD projections. Now you realise - that it doesn't matter if you get it! Users are buying them for reasons which you find incomprehensible (because you were talking to the wrong analysts). HDD sales are down. If users are going to buy SSDs they might as well buy them from you. You know enough about host interfaces and chip designs - but need some pre-rolled (as opposed to roll your own) flash array IP.

Or maybe you're a RAID adapter company and are looking for a new market. Many SSD oems are putting RAID inside their SSD systems - and because of latency issues - that reduces the market for your products (originally designed for hard drives). But have you seen the price they charge for a RAID plus some flash chips? How hard can it be to make money in such a crazy market?
SSD Market - IP Technology (Dis)Agreements - a few examples from StorageSearch.com
2005 KingSpec launched China's 1st 2.5" SSD using a controller from Hyperstone.
2007 SanDisk licensed various IP from JMicron.
2008 PNY paid a settlement to SanDisk and signed a patent cross-license agreement related to removable flash storage.
Indilinx said it is working with MOSAID Technologies on a 600MB/s SATA-3 flash SSD controller.
Hitachi and Intel announced they were jointly designing a new range of high IOPS flash SSDs with Fibre Channel and SAS interfaces.
2009 Seagate's patent suit against STEC was dismissed without merit.
Samsung agreed to pay $70 million to settle a flash memory IP suit initiated by Spansion and the 2 companies agreed to cross licensed their patents.
RunCore's Pro IV SSD uses Indilinx controller.
SMART Modular Technologies uses Marvell's PCIe based NAND flash controller and SandForce's SATA SSD processor.
Solidata uses SandForce's SATA SSD processor in its high IOPS SS series SSDs.
OCZ announced it would preview a new SAS SSD product line based on SandForce's SoCs - in January 2010.
For more stories about licensing, patents etc which have appeared on these pages - click on this search.

For a general directory of storage chip and interface suppliers - click here.

And finally this is the place for SSD controller chips. It includes a directory, news, articles etc.


That was going to be - The End of this article. I only promised "3 easy ways..." - but if you've got this far then you might find these links useful too...
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