SSD Vendors Collaborate to Cut R&D Costs, Speed Deliveries

As manufacturing costs soar, major players in the emerging solid-state disk and NAND technologies markets have entered into partnerships to share costs and speed development. But do these arrangements bring benefits to the market, or do they introduce risk factors for future product development and protection of intellectual property?

"Partnering in the SSD and NAND areas has been very beneficial for us," said Brendan Collins, vice president of product marketing for Hitachi, which has partnered with Intel on SAS and Fibre Channel SSDs. "Partnering reduces manufacturing costs, but it also cuts our research and development expense." Collins did not specify how much Hitachi's R&D expense was reduced.

Micron Technology cut its R&D expense (as well as its manufacturing costs) by nearly 50 percent by sharing development work with Intel on 34-nm NAND and with Nanya Technology of Taiwan on DRAM, says Bill Lauer, senior director of marketing for Micron. "Research and development runs into hundreds of millions of dollars, so to be able to cost-share R&D is a pure cash flow benefit for us."

Collaborating on product development also allows companies to work from their areas of core competency. "The Intel-Hitachi relationship is a prime example," says Jess Janukowicz, SSD research manager for industry researcher IDC. "Here you have a NAND supplier in Intel teaming with a storage company like Hitachi. This brings a different set of skills to the market. Intel brings the process technology and manufacturing expertise, and Hitachi brings the customer needs and solution sets. This combination brings value. I don't know if there is any downside to these kinds of partnerships."

Nevertheless, there is a risk. What happens when partnerships dissolve?"Companies involved in these partnerships select their partners carefully, and we commit to joint product development and manufacturing for multiple years," says Hitachi's Collins. "But we are also realistic and understand that for a variety of reasons, the partnership could end."

The partnership agreements usually contain termination clauses and procedures that allow for an orderly transition out of joint agreements when necessary.

"If this happens, one of the first things you do is look at the [intellectual property] situation that you're in," says Collins. "If the IP was jointly developed, each company has access to it. But there still is the realization that it normally takes a collaborative product development team around 18 months to get up to speed. So if a partnership dissolution occurs that you didn't see coming, you could risk missing an entire generation of product."

Still, there are even "upsides" to many partnership dissolutions when they happen, since many reflect changing market conditions -- and the need for new solutions and partnerships. For example, if a NAND market is projected for five to seven years, would it not make sense to dissolve a partnership after the product has run its course?

"We enter into partnership contracts with success in mind, but they also give us great flexibility to respond to emerging technology markets and trends," says Troy Winslow, director of Intel's NAND Solutions Group.The benefits of cooperative partnerships help not only the direct participants, Winslow says, but also the market, with reduced pricing that is derived from lower R&D and manufacturing costs and with compressed product cycles. Those result when companies effectively blend their core competencies into market solutions, instead of delaying market entry while each company struggles with internal funding and expertise to develop and manufacture products entirely on its own.

"If we had to organically grow a flash company [at Hitachi], it would take years for us to do it," agrees Collins. "You could potentially miss one or two years of product. In enterprise SSD, a product 'generation' is typically two years, with a preceding development cycle of 18 months. The desktop and mobile markets for SSD are 15 to 18 months before next-generation product arrives. Partnering allows us to keep pace with innovation and to deliver next-generation product to the market faster and more cost effectively."

A recent example was the price reduction in M and E series SSDs that Intel announced earlier this month. "We can increase the value of these products for our customers by reducing prices since we are now migrating to lower-cost 34-nanometer NAND SSDs, which will be available later this year," says Winslow. "At the same time, we are building these lower costs into our pricing models and passing the savings on to enterprise customers."

Ultimately, the NAND and SSD markets are driven by the types of solutions that customers want to see -- and the ability of the entire product food chain, from process engineering to OEMs, to keep pace. "I would expect to see even more partnerships in the future," says IDC's Janukowicz. "This is really about delivering more storage solutions to the market faster. You've got the players on the storage and the semiconductor sides teaming up, and each brings a different set of benefits. All of this brings end users and enterprises closer to reliable, high-performance, durable product that incorporates the highest skills of each product partner."