by Andy Patrizio
If you were thinking about buying an SSD drive, now might be the time. An off-hand comment on an earnings call and moves by a memory maker may signal a price spike in the not-so-distant future.
On September 5, OCZ Technology Group, one of the top independent solid-state drive SSDs made a pre-announcement of its second quarter of fiscal year 2013, which ended on August 31, 2012, and said revenue will be lower than expected due to insufficient supply of NAND flash memory used in its Agility- and Vertex-series SSDs.
“Despite achieving bookings in excess of our expectations for our second fiscal quarter, we were not able to meet our previously stated revenue guidance due primarily to constraints in NAND flash supply. During the month of August we experienced a significant shortage on certain NAND flash components, based on industry-wide tightening of supply, leaving OCZ with an undersupply of the 20nm-class MLC NAND used in our Vertex and Agility Line of products,” said Ryan Petersen, chief executive officer of OCZ Technology in a statement accompanying the pre-announcement.
This is a bit surprising given how cheaply OCZ drives are selling these days. MicroCenter, for example, has the Agility 3 120GB for $84.99 while a 240GB Vertex 3 is $189.99, about half of what they sold for a year ago.
This declaration comes just three months after Toshiba, one of the largest producers of memory, cut production of DRAM by 20% to 30%, depending on the factory. The company cited an oversupply problem that has caused the prices to decline.
Analysts were left scratching their heads, too. “The glut continues. Nobody else is having any trouble getting product. I have discussed this with investors and NAND flash suppliers and nobody knows what to make of the statement,” said Jim Handy, principal analyst with Objective Analysis, who follows the memory market.
Michael Yang, principal analyst for memory and storage at IHS iSuppli, also didn’t believe it. “Q2 saw an oversupply [of memory] and ASPs dropped heavily, by up to 40 or 50 percent from Q1,” he said.
OCZ’s main supplier of DRAM is Micron Technology, and both Micron and OCZ are in the quiet period before announcing financial numbers, so neither company could discuss the matter.
However, on a recent analyst call with Citi, Kipp Bedard, Micron’s head of investor relations all but admitted Micron was the unnamed supplier OCZ was referring to, and why no one else had a similar problem.
Apple, said Bedard, used a mix of different flash memory so it wasn’t beholden to one process design or one memory supplier. “Then, all the way to the other spectrum where perhaps a customer has designed particular products around a company’s NAND product, a very specific 25 nanometer MLC product,” he said, which is exactly what OCZ drives are built on: 25nm MLC flash DRAM that Micron builds.
“And so, if that starts to get tight, there’s the risk that there won’t be enough supply there,” said Bedard.
Micron did not say why its supply is tight. Handy says making NAND flash manufacturing is a very hard process, harder than CPUs, especially at 25nm and under. Micron has not reported any manufacturing problems, and while it did suffer an explosion and fire in March, that was in a research lab and not the main manufacturing facility.
However, it is possible that these great prices for SSD drives won’t last. OCZ is not Micron’s only customer, and now Toshiba is taking supply off the market. As we move into the fourth quarter, seasonality will dictate demand. “There will be less abundance of flash, maybe specifically in the flash memory targeted for embedded markets,” said Yang.
And yet, Yang said prices won’t necessarily go up. “There are a lot of factors that influence price. Demand might still not be equal to production, even after production has been cut,” he said.