JANUARY 28, 2014, SAN JOSE, CA. ABR Investment Strategy, LLC, TRENDFOCUS. PCIe SSD Opportunities in Client and Enterprise

Transcription

1 JANUARY 28, 2014, SAN JOSE, CA PRESENTATION Matt Bryson, TITLE John GOES Chen HERE ABR Investment Strategy, LLC, TRENDFOCUS PCIe SSD Opportunities in Client and Enterprise

2 Agenda NAND supply dynamics PC/tablet market outlook Client SSD trends Enterprise SSD market outlook Enterprise SSD adoption trends

3 NAND Market Overview New technology transitions will challenge supply/demand balance in coming years

4 Wall Street Bull Thesis New technologies change ROIC math Most markets have become price inelastic o Cell phone and tablets purchase/capacities Samsung profit is tied to devices o Better off with higher priced memory content? While all great arguments for conservative capacity adds, industry still needs to hit a moving target

5 NAND Absorption Forecast SSD an important driver of NAND usage

6 NAND Supply With tablet and smartphone markets maturing, NAND absorption may slow o Emerging markets may skew towards lower average capacities Despite careful expansion of NAND output in 2014, oversupply may occur Slow 3D NAND ramp into new fabs may temper total bit output growth this year

7 Why There Will Be Oversupply NAND growth is only expected to be off 10% Y/Y. Smartphone and Tablet growth rates (now over 1/3 of the end market) have slowed by ~50%. Cards & USB (1/3 of the market) look stagnant. 1H 14 is likely the worst period for supply/demand dynamics Projected Bit Growth (YY) Tablet/Phone 67% Enterprise/Client SSD 87% Total 41% % of Market Tablet/Phone 36% Enterprise/Client SSD 23%

8 PC, Tablet Outlook Stabilizing PC market will see SSD growth

9 Client SSDs Notebook SSD attach rate has exceeded 10% Drive towards thinner and convertible designs motivating OEMs to abandon HDD bays o M.2 will become the default form factor o NVMe will drive transition from SATA to PCIe SSD cost for 128 and 256 GB preventing adoption into mainstream <=$500 PCs o HDD bays, hence SATA, will remain for low cost PCs for the next couple of years

10 Enterprise Device Units Enterprise SSDs target performance applications CAGR Perf. Ent./Nearline HDDs = -2%/18% Ent. SATA/SAS/PCIe SSDs = 36%/48%/72%

11 Economics of the Enterprise Margins make the enterprise opportunity an attractive investment o Fusion I/O and STEC highlight margin opportunities for innovators o HDDs exemplify how margins are sustainable over time Conversely, technology shifts create greater risk Larger Opex requirements can blunt GM benefits

12 Economics of Enterprise A look at Fusion-IO and STEC FIO Revs and GM STEC Revs and GM $140 70% $100 50% $120 $100 60% 50% $90 $80 $70 45% 40% 35% $80 $60 40% 30% $60 $50 $40 30% 25% 20% $40 $20 20% 10% $30 $20 $10 15% 10% 5% $0 0% $0 0% CQ1'10 CQ2'10 CQ3'10 CQ4'10 CQ1'11 CQ2'11 CQ3'11 CQ4'11 CQ1'12 CQ2'12 CQ3'12 CQ4'12 CQ1'13 CQ2'13 CQ3'13 CQ1'10 CQ2'10 CQ3'10 CQ4'10 CQ1'11 CQ2'11 CQ3'11 CQ4'11 CQ1'12 CQ2'12 CQ3'12 CQ4'12 CQ1'13 CQ2'13 CQ3'13 FIO FIO GM STEC STEC GM

13 Enterprise Drives GM upside, but also additional operating costs Revenues and Drives Shipped GM% and OPM $3, % $3,000 $2,500 $2,000 $1,500 $1,000 $ % 25% 20% 15% 10% 5% 0% -5% -10% $0 0-15% WDC STX WDC GM STX GM WDC Drives Shipped STX Drives Shipped WDC OPM STX OPM

14 Enterprise SSD Units While SATA favored for cost, PCIe will post largest growth rates CAGR Ent. SATA/SAS/PCIe SSDs = 36%/48%/72%

15 PCIe Shifts PCIe cards have a limited sales horizon Product Issues o Expensive conversions to SATA where the latter is good enough o Proprietary o Serviceability issues New Technology Threats o Non-volatile DIMMs o Phase Change and other non-volatile options o NVMe (non PCIe card form factor)

16 NVMe = New SATA/SAS If M.2 takes off, we fully expect that vendors will find ways to incorporate it into enterprise applications. Already seeing both hyperscale data centers and enterprise vendors working on this front LSI s Griffin provides an excellent segue into this market, assuming the chip achieves its potential

17 Conclusions The NAND industry will overbuild at some point Varied opinions on when oversupply occurs Client SSDs will continue to gain traction But for now the pace of adoption is unlikely to spike due to capacity cost The Enterprise SSD market has demonstrated significant growth paced by enterprise SATA drive adoption We see reason to believe that PCIe will grow faster than other portions of the market gaining share going forward The form factor and protocol may not be the cards that represent the vast bulk of PCIe solutions shipped today

18 Thank You! Mark Geenen John Kim John Chen Tim Luehmann Matt Bryson Brad Gastwirth Phil Lee