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雷达卡
5 December 2008
SSD market outlook
SSD breaks HDD dominance
Takeo Miyamoto
Research Analyst
(+81) 3 5156-6726
takeo.miyamoto@db.com
Sc Bae
Research Analyst
(+82) 2 316 8907
sc.bae@db.com
Bob Gujavarty
Research Analyst
(+1) 415 617-3244
bobby.gujavarty@db.com
Fundamental, Industry, Thematic, Thought-leading
Deutsche Bank Company Research's Research Committee has deemed this work
F.I.T.T for investors seeking differentiated ideas. Our global memory
semiconductor analysts review the SSD market that is expected to bring a longterm,
substantial growth opportunity to the NAND Flash industry from 2H09. It has
also reviewed the positive and negative impact on the related components
industry.
Deutsche Securities Inc.
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
FITT Research
Companies featured
Toshiba (6502.T),¥301 Hold
2008A 2009E 2010E
EPS (¥) 39 9 16
P/E (x) 23.2 34.1 18.9
EV/EBITDA (x) 6.4 5.1 3.9
SEC (005930.KS),KRW430,500.00 Buy
2007A 2008E 2009E
P/E (x) 13.2 12.0 13.3
EV/EBITDA (x) 7.4 4.6 4.8
Price/book (x) 1.83 1.33 1.24
SanDisk (SNDK.OQ),USD8.08 Hold
2007A 2008E 2009E
EPS (USD) 0.93 -1.35 -0.82
P/E (x) 48.7 – –
EV/EBITDA (x) 17.5 – –
Intel (INTC.OQ),USD12.77 Buy
2007A 2008E 2009E
EPS (USD) 1.18 1.11 0.85
P/E (x) 19.8 11.5 15.0
EV/EBITDA (x) 9.7 4.5 5.5
Micron Technology (MU.N),USD1.81 Buy
2008A 2009E 2010E
EPS (USD) -2.10 -1.40 0.55
P/E (x) – – 3.3
EV/EBITDA (x) 21.8 5.4 1.9
STEC, Inc (STEC.OQ),USD4.73 Hold
2007A 2008E 2009E
EPS (USD) 0.11 0.16 0.67
P/E (x) 70.7 29.8 7.0
EV/EBITDA (x) 26.4 7.9 2.4
Seagate Technology (STX.O),USD4.30 Hold
2008A 2009E 2010E
EPS (USD) 2.67 0.45 0.70
P/E (x) 8.8 9.5 6.1
EV/EBITDA (x) 5.6 2.7 2.4
Western Digital Corp. (WDC.N),USD11.62 Buy
2008A 2009E 2010E
EPS (USD) 4.32 2.40 3.00
P/E (x) 6.4 4.9 3.9
EV/EBITDA (x) 3.9 1.6 0.9
Hitachi (6501.T),¥415 Hold
2008A 2009E 2010E
EPS (¥) -17 15 14
P/E (x) – 27.7 30.1
EV/EBITDA (x) 5.3 3.7 3.7
Fujitsu (6702.T),¥400 Hold
2008A 2009E 2010E
EPS (¥) 23 27 21
P/E (x) 33.6 14.8 19.1
EV/EBITDA (x) 4.8 3.1 3.4
TDK (6762.T),¥2,590 Hold
2008A 2009E 2010E
EPS (¥) 554 190 182
P/E (x) 16.6 13.6 14.2
EV/EBITDA (x) 6.5 1.3 1.3
Hutchinson Technology (HTCH.OQ),USD2.69 Hold
2008A 2009E 2010E
EPS (USD) -0.67 -1.83 0.10
P/E (x) – – 27.6
EV/EBITDA (x) 7.4 4.2 2.5
Fundamental: NAND oversupply accelerates SSD affordability
Due to the collapse in NAND Flash prices, the projected price gap between SSD
and HDD has significantly narrowed recently. SSD is priced at (2~3)x of HDD in
the mainstream category and c. 1x in the entry level category. On top of this, the
performance of SSD has significantly improved in the last six months thanks to the
rapid innovation of controller chip technology. We believe this will lead to
materially faster than expected SSD adoption by mainstream applications.
Industry: SSD penetration into PC market to accelerate from 2H09
We forecast SSD penetration into the PC market will normalize from mid 2009 and
will reach a 50% penetration rate in 2012. We believe netbooks will be the initial
catalyst in the low end, and business PCs will be the mainstream growth driver.
We forecast SSD’s demand contribution to NAND Flash will reach 29% in 2010
and 48% in 2011 and this should result in significant improvement in NAND Flash
supply-demand dynamics over the next 2~3 years.
Thematic: SSD is not only better but also cheaper
We are clearly more optimistic on SSD than consensus. The market believes that
SSD is more expensive, cannot answer the growing capacity needs of users, and
has unsatisfactory performance. However, we conclude that SSD will be a
cheaper solution for most PC users whom we expect will be satisfied with 64GB
of storage capacity. We calculate that SSD will be cost competitive on a per unit
basis at this capacity. The faster data transfer speed of SSD suggests a superior
cost-over-performance ratio to HDD.
Thought-leading: Buy NAND Flash makers in 1H09 for mid-term growth
We believe NAND Flash manufacturers to be the key beneficiaries of surging SSD
demand and the subsequent improvement of NAND Flash market demand-supply.
We also profile SSD controller IC chip makers as benefiting from this trend more
than others. We suggest investors watch SEC and Toshiba during 1H09 for a mid
to long term earnings boost from NAND Flash, which would substantially improve
long-term profitability. SEC’s earnings contributions from NAND Flash will grow
from low single-digits this year to 20-30% in 2010. Toshiba is currently losing
money on NAND Flash memory, but by 2010 NAND Flash will make a positive
contribution of at least 15% of earnings In contrast, HDD related companies will
face a critical competitive juncture due to increased competition with SSD.
Valuation and risks
We value SEC on cyclical context historical P/E and Toshiba on a combination of
P/E and P/B. Risks include poor execution by NAND Flash manufacturers.
Executive summary
SSD, a big relief for NAND Flash
SSD expansion will come much earlier than expected
We expect SSD will replace HDD in the $20b embedded PC storage market, much faster
than the market’s general expectation. Our optimism stems from the simple fact that SSD
has become not only a faster solution, but also a cheaper solution for PC users who do not
require massive storage for their PCs such as netbook PCs and business PCs;
1) Thanks to the much faster than expected decline in NAND Flash prices, we forecast that
SSD will be absolutely cheaper than HDD in the less than 32GB (giga-byte) category by
2009 and in the less than 64GB category by 2010. We expect that SSD will re-dominate
the netbook market from 2009 as 32GB will be enough for most of the netbook users.
And we believe business users, which account for 55% of the total PC market, will
rapidly replace HDD with SDD from 2010, as they will have less need for more than
64GB storage for each PC. We believe so, as we think 1) business users do not need to
store multimedia files which are the main source of huge storage requirements, 2) they
will have a central network storage system.
2) SSD should offer substantially better performance than HDD and we believe this could
offer enough reason for PC users to trade some excessive capacity offered by HDD for
SSD. We believe SSD’s advantage in data transfer rate and power consumption has
become non-comparable to HDD now. The initial failure of SSD adoption by PC OEMs in
the last two years was partially due to the inferior performance of SSD versus HDD in
data transfer speed, power consumption, and reliability. However, having learned from it
experiences, SSD makers have improved the performance of their products substantially
in the last six month.
SSD to drive NAND Flash market return to growth path after 2H09
We expect the NAND Flash market will contract consecutively in 2008 and 2009. However
with SSD, the market will start to grow again from 2H09. We forecast a 10% decline in 2009,
but 13% growth in 2010 and 31% growth in 2011.
NAND Flash chip and controller chip suppliers will be the key beneficiaries
We believe NAND Flash manufacturers such as SEC, Toshiba, Sandisk, Intel, and Micron
should be the key beneficiaries of SSD proliferation. NAND Flash demand from the SSD
segment will represent 11%of total NAND Flash demand in 2009, 29% in 2010 and 48% in
2011. We believe NAND Flash manufacturers would not only benefit from the SSD market
itself, but also benefit indirectly through the improved NAND Flash supply-demand due to
strong demand contribution from SSD. We believe the controller IC chip suppliers such as
STEC should be the other key beneficiaries of SSD, because the controller IC will determine
the performance of SSD.
Negative impact on HDD companies
We believe HDD related stocks may be impacted negatively by SSD due to cannibalization
concerns. We believe HDD could remain the dominant storage device for desktop PCs for
consumers, which may shift its focus to network storage and external HDDs for PCs.
However we expect SSD to replace them gradually in such segments as business PC and
portable PC for consumers. While the magnitude of negative impact could vary by company,
we think that overall growth of the HDD industry may stall. This could be negative to the
entire HDD supply chain that includes HDD makers such as Seagate, Western Digital,
Hitachi, and Fujitsu, and component makers such as TDK and Hutchinson. While SEC and
Toshiba both have HDD business units as well, we believe the positive impact from NAND
Flash outweighs the negative from HDD.
Key risks to our bullish SSD call
We are optimistic about SSD because we believe SSD could eventually offer more value to
PC users than HDD can. However, our optimism could be proven to be too aggressive or
idealistic, if SSD suppliers fail to do their best in appealing to customers.
1) Business users who are typically conservative and slow to adopt new technologies could
be hesitant to adopt SDD as fast as we believe, simply because it has not yet proven to
be a safe solution. As such, we hope NAND Flash manufacturers such as SEC and
Toshiba, which themselves are large business users, would validate and endorse the
reliability of SSD by adopting it for their own PC requirements as soon as possible to
stimulate earlier penetration of SSD.
2) Our belief that SSD could offer more value to PC users than HDD does comes from the
fact that a substantial number of PC users are forced to purchase massive storage
capacity even though they may not really need it. Thus, we think PC users will be willing
to trade excessive capacity for faster data transfer speed at the same price point if
offered an appropriate level of capacity. The faster that SSD makers are able to change
PC user perceptions to match their true computing needs, the faster SSD penetration
will be. However, if SSD players fail to do so and are forced to continuously compete
against HDD in the paradigm of “more capacity at lower prices”, it would slow SSD
penetration of the PC market versus our forecast.
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