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Technology Stocks : ASML Holding NV
ASML 364.60-1.1%11:47 AM EDT

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From: BeenRetired11/16/2016 7:55:05 AM
   of 14177
 
Duh! SSS tipping point has arrived..................................................................

"relative price differential (the SSD is 175% more expensive) has narrowed into a small absolute differential. $70 is low enough that the obviously superior SSD technology will overwhelmingly be chosen, given the speed differential"

Soon?
Jump from today's cutting edge 64-layer to tomorrow's 200-layer.
Then?
Some form of "X"RAM that might replace both RAM & NAND.

while shills contort n distort on the 20th HDD hotbox PC.

Remember?
A few years ago?
slime street shills and sponsored "experts" told us this could never happen.
Then, SSS would only be niche.
Could never be for cold storage.

SSS will totally replace ALL HDDs, a power sucking, heat producing, space hogging, failure prone 20th bottleneck.

Cymer/HMI/Zeiss/ASML.
Seagate: The SSD Tipping Point
Nov. 15, 2016 11:56 AM

Summary
The SSD threat to HDDs has long been known.

However, right now I believe the pieces are in place to produce a tipping point.

As such, I expect consumer HDD demand to accelerate its drop, and for the higher-margin Enterprise business to also suffer.

It's long been known that SSDs (Solid State Drives) would provide a massive challenge to HDDs (Hard Disk Drives). I needn't remind that ultimately SSDs are much faster, more reliable, less power hungry and lighter. The benefits to computing, especially mobile computing, are entirely obvious.

For the longest of times, SSDs faced but one problem. They were a lot more expensive. As a result, they were only available in lower storage sizes, and these prices and lower storage sizes showed up as being a significant negative for many increasingly storage-hungry applications, such as video. Video, of course, was (and still is) enjoying a massive explosion in usage (at ever-higher resolutions, too).

As time went by, SSDs steadily saw their costs head lower, them being aided by Moore's law when it came to semiconductor manufacturing. Again, this isn't new. What is new, is that I believe the market might now be at a tipping point. Prices and capacities have reached a level where, I believe, suddenly desktop/laptop HDDs are going to see an extreme decline.

This decline will be aided not just by the SSDs becoming larger and cheaper, but also because video (and photo storage) has for a large part shifted towards the cloud. Now, this cloud doesn't store content on vapor, it also needs HDDs -- but the cost per bit at the cloud level will be lower than the cost per bit at the consumer level. Plus, of course, having a video in 1000 consumer devices consumes a lot more bits than having the video in 1 central location. Anyway, video started being heavily consumed in streaming form, and photos have gained from such freemium services as Google Photos, reducing the need for local storage.

The end result is SSD capacities continuing heading towards the "critical" 500GB-1TB levels, while local storage needs have, for the most part, stagnated at those same levels as well (for a mainstream consumer). And as these two meet at a decent price level, the tipping point happens: suddenly, consumers will no longer even consider buying a device which carries an HDD instead of an SSD.

Consider prices for components. A 500GB SSD today can easily be found for less than $110. A 500GB HDD is much cheaper, at $40. The price differential is now just $70 between the two. What can seem as a tremendous relative price differential (the SSD is 175% more expensive) has narrowed into a small absolute differential. $70 is low enough that the obviously superior SSD technology will overwhelmingly be chosen, given the speed differential. This is so because an HDD-equipped laptop will behave as a much lower-end device than the same laptop using an SSD. Thus, a 15% or so price differential between the two laptops will appear as minimal versus the performance boost.

The Tipping Point Is Already Becoming Evident

Take Seagate (NASDAQ: STX). Seagate reports its segments as being:

  • Enterprise.
  • Client Compute. This is where all PC desktop and laptop HDDs go.
  • Client Non-Compute. This relates to other devices using HDDs, like DVRs or, recently, gaming consoles (moved from Client Compute).
  • The tipping point I am talking about affects mostly "Client Compute". The year-on-year performance for this segment is already showing steep contraction, with volume drops of around 30%. These are the drops I actually expect to accelerate.

    Moreover, Seagate has shifted some of this segment into the Client Non-Compute by moving gaming consoles there (Xbox One, PS4). Alas, one could argue that these consoles are just 1 generation away from quitting HDDs as well, especially if Nintendo's Switch gains any market traction. The Switch is based on a mobile device which works as a hybrid console (fixed, on-the-go). Obviously, it doesn't use an HDD.

    Regarding DVRs, it might take longer since cost is a powerful argument and customers might be more amenable to poor performance.

    It should be said that Enterprise HDDs were 41% of revenue in the latest quarter, versus 24% for PC Client revenues. Thus, while in terms of volume Client Compute represented 41%, it's clear that Enterprise ASPs still bridge a lot of that gap. But this brings us to another problem.

    Another Problem - Enterprise

    The other problem relates to the Enterprise segment. This segment could broadly be divided into high performance HDDs and high capacity HDDs. Here's how Seagate defines Enterprise Performance HDDs:

    Enterprise Performance HDDs. Our 10,000 and 15,000 RPM Enterprise Performance disk drives feature increased throughput and improved energy efficiency, targeted at high random performance server application needs. Performance 10,000 RPM HDDs ship in storage capacities ranging from 300GB to 1.8TB, and our 15,000 RPM HDDs ship in storage capacities ranging from 146GB to 600GB.

    Now, these are certainly some of the higher ASP, higher margin, Enterprise products. The problem, of course, is obvious. This is the precise segment which gets eaten by SSDs the quickest. SSDs are superior in performance, and HDDs sacrifice capacity for performance. HDDs in such a segment are bound to lose market share particularly quickly.

    The other broad segment, focusing on higher capacity, is the one where HDDs will lose the slowest -- indeed, it's the one segment that's helping show stability, as it gains from the mobile->cloud content move as previously described. However over time 3D NAND improvements and Intel's XPoint are sure to also bring grief there.

    Yet Another Problem - SSDs Are A Different Market

    It might be that some will put forward the argument that Seagate will be able to sell SSDs as well. Indeed, Seagate already does and has an entire Enterprise segment dedicated to it:

    Enterprise SSDs. Available in capacities up to 3.8TB, the SSD features 12GB per second SAS, and delivers the speed and consistency needed for demanding enterprise storage and server applications. We also offer our Nytro family of accelerator cards with capacities up to 4TB.



    This, in my view, is a fallacy. It doesn't matter if Seagate will also sell SSDs. The problem here is that HDDs are currently an oligopoly served by a handful of competitors. These competitors control the underlying disk drive technology and don't share it with other potential entrants.

    The SSD market, however, is entirely different. The essential building blocks, be they NAND flash memory or controllers, are accessible to every entrant who wants to buy them and build SSDs with them. If there's an oligopoly, this oligopoly would be at the level of the NAND suppliers including Micron (NASDAQ: MU), Samsung, SanDisk, Hynix and Toshiba.

    At the SSD level, there's a gazillion competitors, none of which has any cost advantage. Seagate is only one more such competitor. The underlying economics for the SSD business are thus intrinsically horrendous at this point in time, and likely to remain so. Thus, for Seagate, substituting HDD sales for SSD sales, while it can keep the revenue line going, is also sure to lead to a negative margin impact over time.
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