by
Zsolt Kerekes
editor - published April 2008 (with later updates)
SSD market
history
the Top
10 SSD OEMs
this
way to the Petabyte SSD
Hostage to the
fortunes of SSD
3 Easy Ways to Enter
the SSD Market
How did we get into
such a mess - with SSD software? |
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Why Seagate
will Fail the SSD Challenge
Seagate is the world's largest
manufacturer of
hard drives........... |
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In recent quarters the
company has been losing market share to other HDD oems such as
Western Digital.
Although
it's undeniable that many parts of the hard disk market are under attack from
solid state disks - I've
discussed in my article
How Solid is
Hard Disk's Future? - why I think this factor will do no more than nibble
into hard disk revenue in the short term.
Having said that - SSDs
do pose a threat to HDDs in the long term - as described in the
SSD market
adoption model.
This article analyzes the 4 ways that Seagate has
reacted (or might react) to the opportunities and threats posed by the SSD
market.
1 - Hybrid
Hard Disks
In January 2007 - the company, along with many
other hard disk oems launched the
Hybrid Storage Alliance an
international group dedicated to communicating the benefits of hybrid
hard drive /
flash technology to
computer makers and end users. Although
Samsung was the first
company to demonstrate a commercial prototype hybrid hard disk in May 2006.
Seagate's own
Momentus
5400 PSD Laptop Hybrid Drives is a typical example of how the company is
meeting the flash challenge - with a feeble 256 megabytes of flash supporting a
160G byte hard drive.
My own view is that hybrid flash hard disks fail
to meet the SSD performance challenge in both consumer and enterprise
applications. And I don't expect this product category to be successful. That
view hasn't changed since the concept was first mooted.
2 - Seagate Branded
SSDs
In August
2007 - Seagate announced it would launch a genuine solid state disk product
sometime in 2008. (...Later:- That didn't happen, and the company merely
repeated itself later - shifting the date to 2009.)
There has been much
speculation about whether this will be done by rebadging, in-house design or
acquiring an SSD oem.
Whichever route is taken - I predict that
Seagate will almost certainly fail to achieve significant long term
market share in the SSD market. The main reasons for Seagate's SSD failure will
be:
- insufficient enthusiasm to develop the new SSD business at a time when the
hard disk market is still growing - also dampened by disillusion with hybrid
products by that time.
Why should Seagate invest manufacturing
resources in an industry where in February 2008
iSuppli
said flash prices were already dropping below costs and the overcrowded
market for 2.5" flash
SSDs points towards an upcoming costly shake-out?
- unwillingness to kill off its own profitable hard disk products by
introducing new SSD products aggressively (a hesitation which its competitors
will not have)
- lack of corporate management skills - which are different when you're
competing as a newcomer in a multi-vendor fast changing market like SSDs -
compared to the sluggish manufacturing led pace in the decades old hard disk
market - when you're the main encumbant.
3 - Using its Patent IP to Sue and then License SSD oems
Instead
of losing money on every flash SSD it sells a better option for Seagate is to
deter SSDs which threaten its market with lawsuits related to its vast patent
IP. This technique suffocated a serious challenge earlier this decade which came
from a startup hard disk maker called
Cornice.
The
patent threat will fail to stem the SSD tide, but if there is enough revenue in
the flash SSD market, Seagate may calculate it will make some money milking it
for "technology licenses".
There are good precedents for "technology
taxes". At some periods
in
the 1990s chipmaker Texas Instruments earned more profits from patents than
it did from selling its own chips.
Apparently going down this route -
in April 2008 -
Seagate filed suit
against STEC alleging
patent infringements related to hard disk interfaces.
You can see what
some other SSD analysts have to say on this subject in these article links.
Gregory
Wong, at Forward Insights says
"It's
hard to see the financial motivation behind such a move..."
Jim
Handy, at Objective Analysis looks at the weight of the patent arsenal but
says that SSD Purchasers shouldn't worry. See sidebar article on the right...
Don
Clark reminds us of an earlier patent dispute in the HDD market
"that
Rodime began in 1992, which ended after Seagate agreed to pay the Scottish
company $45 million in 2000..."
...Later:- STEC
dismissed the Seagate claims in these terms.
STEC is one of the first
companies to build (flash) SSDs, having designed, manufactured and shipped SSDs
as early as 1994, long before any of the suggested patents were issued to
Seagate.
Given the
effect SSDs
are having on the HDD market, STEC believes that Seagate's lawsuit is
completely without merit and primarily motivated by competitive concerns rather
than a desire to protect its intellectual property.
STEC believes
that Seagate's action is a desperate move to disrupt how aggressively customers
are embracing STEC's Zeus-IOPS technology and changing the balance of power in
enterprise storage. Seagate is sending a clear signal that it recognizes
STEC as the leader in the
SSD business and is attempting to slow down part of the growth that STEC is
gaining through its SSD offering, particularly in the enterprise segment. STEC
will aggressively pursue its defense to this infringement action.
4 - Acquiring an SSD Company
Whenever I've
discussed this possibility with oems or VCs my argument has been - that the
best SSD companies aren't for sale!
The management of SSD oems who
have excellent IP which makes them stand out from the competition know that
their companies will be worth more in a few years. And the longer they stay
independent - the better.
Also excellent SSD oems are doing much
better in the market than the 30 to 50 companies making me-too products. So the
excellent companies are less likely to get into a distressed financial state
which leads to a forced acquisition.
If, on the other hand, Seagate
merely acquires a
distressed SSD oem in the me-too category - it will be acquiring more market
problems than solutions.
See also
Charting the
Rise of the Solid State Disk Market |
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In later years - what happened was this.
In
December 2009 -
Seagate entered the SSD
market with a me-too 2.5" SATA SLC SSD.
In January 2010
-
LSI and
Seagate
announced
they had collaborated on designing
PCIe SSDs for the
enterprise accelerator market which sampled in late 2010. It was very
similar to OCZ's PCIe SSD product - and also used
SandForce controllers.
In
January 2012 - LSI
acquired SandForce-
and became yet another competitor in the crowded
PCIe SSD market.
In
June 2012
- Seagate
announced it will use DensBits's flash care
technology in the design of forthcoming consumer and enterprise SSDs. Seagate
has also made an equity investment in DensBits.
In August 2012
- there were strong industry rumors that Seagate wanted to acquire
OCZ. I didn't think it
would bring much value to Seagate at a price which would be acceptable to OCZ -
given that Seagate already had an OCZ like enterprise SSD - and would in effect
be buying an SSD distributor rather than a uniquely different SSD IP set
(different to what Seagate already had - or could get much cheaper.) For example
it would make more sense and be better value for Seagate to acquire
SMART.
Having
said that - I still believe that Seagate will probably mess up and underperform
any SSD acquisition that it may engage in.
It doesn't get the SSD
market. And the pressures of keeping the HDD market afloat and occupying the
gaps left by SSDs will be difficult enough challenges to occupy Seagate's
management until the end of the HDD era.
In May 2014 -
Seagate announced it
had agreed to acquire the flash SSD business of
LSI - which included
- at the time - the industy's #2
PCIe SSD product line
(by volume) and the industry's #1 most widely used by 3rd parties
SSD controller
products.
For more analysis - see
SSD news. |
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selected SSD articles
2.5" PCIe SSDs
the Top
SSD Companies
Enterprise
SSD market silos
adaptive R/W &
DSP in SSDs
What do
enterprise SSD users want?
Where are we now
with SSD software?
How fast can your SSD
run backwards?
Failure
model pitfalls when analyzing SSDs
Baldness cures, diets and
SSD longevity
What makes
this enterprise SSD different?
The big market impact of SSD dark
matter
Enterprise
SSDs - the Survive and Thrive Guide |
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| Seagate's "view"of
SSDs? - NUTS! |
Editor:- In January 2011
- Seagate
published a
point of
view document (pdf) which was designed to show that the position of the
hard disk market is
unassailable in the notebook market - no matter what happens in the next few
years with SSDs.
Using a selective mix of market size and cost data
Seagate "proves" that the size of the
SSD market is constrained
and that it would be uneconomic for flash makers to invest in more fabrication
resources to make more SSDs.
This places in the reader's mind the
suggestion that the SSD market will stay small - and by inference Seagate has
nothing to worry about from this media hyped threat. |
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If I've learned one useful
rule of thumb from having been involved with the PCIe SSD market since it began
in 2007 - it's this...
No single PCIe SSD design is optimal for all
enterprise applications.
And that's one reason why Seagate's Nytro range appears so confusing
at first glance. |
| overview of Seagate's
enterprise SSDs (April 2015) | | |
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| Seagate's
1st SSD - Finally a Real Product |
Editor:- December 8, 2009 -
Seagate
announced details of its
Pulsar SSD
- a 2.5"
SATA
SLC
SSD with 200GB capacity.
Sequential
R/W rate is upto 240MB/s and 220MB/s respectively, R/W IOPS are 30,000 and
25,000 respectively. Aimed at the server market the
BER is quoted as
1 sector per 10E16. Seagate says it has been sampling the new drive - its 1st
SSD - since September 2009.
Editor's comments:- the remarkable
thing about Seagate's 1st SSD is that it took the company so many years to enter
the market. Technically - it's unremarkable.
Will it succeed in the
market? In my view it would be unrealistic to assume that Seagate's long
running dominance in the hard
disk market will translate to dominance in SSDs too - because nearly all
its potential oem customers have already been evaluating or using SSDs from
other sources for
upto 4 years.
And
even if Seagate's new product succeeds in filling holes in design slots in
2010 - its oem customers can always replace this product with their own designs
leveraging the merchant market for
SSD controllers & IP.
To succeed in the SSD market - Seagate will have to demonstrateunique
mastery in some aspect of SSD technology which customers value. The most
attractive area will probably be in the area of
reliability.
In
recent quarters we've seen a spate of
flaky SSDs get to
market. This tendency will rise in 2010 as many storage oems decide that
shipping untried products is a lower risk to their businesses than losing out on
customer mind share. Each bad news story helps companies who have a clean
reputation. But as a newcomer to the SSD market Seagate may have to wait years
to establish its own reputation.
It's tempting to compare Seagate's
entry to the SSD market with
Western Digital. But
the 2 cases are completely different. When WD acquired
SiliconSystems
in March 2009 - it got a business which had started marketing SSDs in August
2004. That gives WD's product marketers 5 years of market experience they can
talk to customers about - compared to 3 months for Seagate. Nevertheless - being
late is better than never. | | |
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| Seagate
Sampling SSDs |
In October 2009 -
Seagate
disclosed
it has started sampling its 1st SSD product to major oems.
Companies
which are many years late in emerging markets (and the SSD market already
numbers over 165 companies) rarely achieve dominant market share.
Even
if Seagate assembles an adequate SSD offering - the SSD market has moved on in
the past few years - and it's getting easier for server companies
to enter the SSD
Market using acquisition, designing their own SSDs or badge engineering.
Another
factor is that the company's strong experience in
SAS interface design
- an important factor in 15K RPM hard drives - may not be as relevant as once
anticipated - because the server market is mostly adopting
PCIe SSDs and
SATA SSDs for DAS
acceleration in new designs. | | |
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Seagate
Still Waiting for Legal Costs Related to Cornice Litigation
agrees to
dismiss claims against STEC |
Editor:-
February 18, 2009 - a report today on Law.com says Seagate is
suing its legal insurer for not paying in full the costs incurred in suing Cornice.
Cornice would have failed
in the small form factor
disk market anyway - even if it had won the case (which it didn't) -
because of the price
advantages of flash
memory compared to low capacity
HDDs.
A year
ago Seagate's legal team fired a seemingly random warning shot at the SSD
market - when it started proceedings against
STEC.
Seagate today is in a
desperate market situation. It dominates segments of the hard disk market which
are rapidly going out of fashion. And it will most likely
fail the SSD
Challenge too.
When markets decline companies often switch the
focus of business development activities from their marketers to their
lawyers. But they still need to retain engineers to mine the gold (real or
imagined) in their patent portfolios - or to build defences - because the grey
suits can't do that on their own.
...Later:-
February
19, 2009 STEC announced the mutual dismissal of the patent infringement
lawsuit with Seagate.
"This is an important development in light
of the mass adoption of SSDs," said Manouch Moshayedi, chairman and CEO of
STEC. "We have a 15-year history of SSD design and development, over which
time we have amassed strong SSD intellectual property. We have always maintained
that the allegations brought against us by Seagate were without merit. With this
case behind us, we can now optimize our resources to take full advantage of the
market opportunities at hand." | | |
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OBJECTIVE
ANALYSIS ALERT!
April 14, 2008 SEAGATE FIRES 1st VOLLEY AT SSD
MAKER STEC
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Following through on the company president's
promise to Fortune Magazine on March 17, Seagate Technology today filed a patent
infringement lawsuit against STEC on the manufacture of solid-state drives
(SSDs). Seagate alleges infraction against four Seagate patents.
Some History
Although most HDD makers are viewed as companies with no SSD
technology, they really do own intellectual property that overlaps the SSD
business, as the Seagate patents show. Both Western Digital and Seagate
partnered with SanDisk in the 1980s as SanDisk worked to establish today's flash
card market. In doing so, these HDD makers gained access to key flash SSD
intellectual property, some of which is being used in today's complaint.
Implications for SSD Makers
Although we are not in a
position to comment on the validity of Seagate's claim, we have been watching
the technology business long enough to understand the way the patent game is
often played. It is rare and very costly for such cases to be taken all the way
to trial; a settlement is usually reached beforehand. As a general rule the two
companies will square off by comparing the sheer volume of patents each
possesses, with the owner of the larger portfolio naming the terms. In this
case we compare Seagate, with a portfolio of some 3,366 patents against STEC,
whose patent portfolio appears to comprise roughly about a dozen patents, and we
see a phenomenal disparity. In light of this Seagate will probably either ask
for royalties and perhaps for a cross-license as well.
This last might be tough for STEC to accept because that would give
Seagate access to STEC's crown jewels. STEC, like most other high-end SSD
makers, profits from their know-how in a market with very low barriers to entry.
STEC has every reason to wish to jealously guard their proprietary technology.
About those low barriers: There are more than 40 SSD makers today,
with less than 20% of these companies manufacturing a differentiated, or
high-end product. The large majority of SSD makers expect to participate in the
market simply by purchasing a controller from one company (often Phison or
Silicon Motion), NAND chips from another (Samsung, Toshiba, Hynix, Intel,
Micron) and slapping them together with a few other low-cost components into an
SSD.
Now STEC is only a $189 million firm, and the royalties Seagate can
collect from them will be limited. What does this mean to titans like Samsung
($103B revenues, 25,300 patents), Toshiba ($70B revenues, 27,400 patents), or
Intel ($38B revenue, 15,200 patents), all of whom have shown off SSDs of their
own?
As the numbers above illustrate, all of these larger companies
understand the US patent system and have spent the past several years growing
their patent portfolios. They will be in a stronger negotiating position
against Seagate, and may fight back more aggressively than will STEC. In
addition, these companies have the financial wherewithal to underwrite a costly
lawsuit.
What is likely, though, is that STEC will be the proving ground for
Seagate's patents, with other companies choosing to settle or fight based upon
how the STEC/Seagate battle shapes up. We suspect that Seagate is already
holding negotiations with all major SSD makers, and will be using this suit as a
way to prove they are willing to play tough.
Implications for SSD Purchasers
Should OEMs who planned to purchase SSDs be concerned about this
move?
Not really. In such dealings the plaintiff (Seagate in this
case) usually will try to collect somewhat equivalent royalties from all
players. This keeps the playing field relatively level: the royalties that STEC
might end up paying are likely to be similar to those paid by other firms except
in cases where appreciable cross-licensing can be used to negotiate lower
royalties.
Even so, royalties are rarely high enough that they make a
significant difference to the purchase price. This means that one firm's
offerings are not likely to suffer a competitive disadvantage to their
competition because both are paying about the same rate. In a way a royalty
payment is like a sales tax or a VAT - if Seagate prevails then SSDs will all
become slightly more costly as the price of the royalty payment is passed on to
the buyer.. Implications for Seagate If Seagate profits from this move the
money should all fall directly to the bottom line. Royalty payments can be a
boon for a company, as SanDisk's president sometimes observes: SanDisk's royalty
income is more than enough to pay for the company's R&D expenses, and R&D
tends to spawn more patents. Seagate does not currently break out royalties
in their financials. We have not yet scrutinized their SEC filings to see if
royalties are reported there.
There is the possibility that this case will come to trial, and if
it does then legal fees will be a drain on both companies. Should Seagate
prevail, then their royalty income will be trimmed by their legal payments. As
we mentioned before, this is a relatively rare occurrence, and we would expect
to see a settlement before this case goes to trial.
Jim Handy,
Objective
Analysis
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