NAND Sourcing Changes as Supplies Tighten

Last week Micron and IBM announced that Micron would be IBM’s main supplier of NAND flash chips.  The week before Micron announced a strategic agreement with Seagate to supply NAND flash. Why all this activity?

It comes down to today’s budding NAND flash shortage and the fact that suppliers tend to groom their customer lists when supplies get short.

Neither IBM nor Seagate represent the enormous opportunities that major consumer electronics firms like Apple do.  Since many NAND suppliers are very cost-focused they look for customers that need very little support and purchase in high volumes.

IBM and Seagate look for a lot of support, and, since they both ship mostly enterprise flash systems or SSDs, they consume relatively small unit volumes of NAND flash chips.

These companies need to have an understanding of the inner workings of the flash chips they purchase.  This understanding allows them to modify internal parameters of the flash to extend its lifetime and reliability.  I explained how this works in a post in The SSD Guy blog.  This requires a lot more effort from NAND vendors than most other customers, who are happy with the limited specifications they find in the data sheet.

It appears that Samsung (Seagate’s former flash partner) and Toshiba (formerly aligned with IBM) decided to cut these ties to go after bigger opportunities.

I have not heard anything definitive about this, but that bigger opportunity could be at Apple.

During its last earnings call on January 21 SanDisk explained that the company had lost business at a key customer and would need a couple of quarters to recover from this loss.  SanDisk had been an important supplier to Apple, and Apple accounted for 19% of SanDisk’s 2014 revenues according to SanDisk’s SEC Form 10K.  Perhaps aggressive price drops by Toshiba and Samsung caused SanDisk to lose a big part of its Apple business.

Overall we can see strategies emerging – Toshiba and Samsung appear to be directing their efforts towards high-volume low-support customers and may be dropping their prices to accomplish this effort.  Micron seems to be willing to do a little more work in exchange for higher margins.  I am sure that time will expose SanDisk’s ultimate goal, but like Micron, SanDisk has a stronger focus on margins than on volume.