Recently, industry media released a report that the tight supply of components has eased recently, resulting in an increase in enterprise server shipments. With demand from ByteDance and tenders issued by Chinese telecommunications companies, ODM has largely been able to maintain the momentum of data center construction.
The overall performance of the enterprise SSD market was affected by the decline in NAND Flash prices. Enterprise SSD revenue for the NAND Flash industry decreased 28.7% sequentially to $5.22 billion in Q3’22. In addition, all enterprise SSD vendors also underperformed during this period.
Let’s take a look at the revenue of the major enterprise SSD vendors in the industry in the third quarter of this year.
Samsung
Samsung reported revenue of about $2.12 billion. Its market share also shrank to 40.6% from 44.5% in the second quarter of 2022. Samsung’s performance was mainly dragged down by the decline in its NAND Flash ASP. In terms of product development, SSDs with 128L NAND Flash and PCIe 4.0 will remain the main products of Samsung Enterprise Storage in 2023.
Going forward, Samsung and its competitors can take advantage of the opportunities offered by server CPU diversification to boost SSD shipments. Due to the widespread adoption of its solutions in CSPs and ODMs, AMD is currently expanding its market share in server CPUs. At the same time, CSPs began developing their own CPUs.
In addition, the penetration of ARM-based server CPUs is climbing, and new CPUs will support higher data transfer rates for storage solutions. Another notable development is the Open Compute Project (OCP). The segment of OCP-compliant enterprise SSDs is expected to grow in the future. All in all, Samsung can tap into new sources of demand. However, competition in the enterprise SSD market will also intensify, and Samsung will face difficulties in maintaining its market share at nearly 50%.
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SK Group
SK Group’s enterprise-class SSD revenue, which includes SK Hynix and Solidigm, declined to approximately $1.21 billion in the third quarter of 2022. SK Group is acquiring Intel’s NAND flash and SSD businesses, and the benefits will be even more pronounced next year. Solidigm will begin mass production of PCIe 5.0 SSDs supporting the OCP specification in 2023. This will create opportunities for greater cooperation between SK Group and selected North American CSPs. In addition, samples of PCIe OCP products are now being certified by server OEMs, so demand for them is expected to continue to rise.
In addition, some media said that SK Group is about to complete its plan to develop a comprehensive enterprise SSD product line and establish a market position for these products. With a full range of TLC, QLC and PLC products at flexible prices, SK Group should be able to increase its market share for enterprise SSDs in the future.
Western Digital (WDC)
Western Digital reported enterprise SSD revenue of $673 million for the third quarter of FY22. Although the company only began focusing on enterprise SSDs last year and its PCIe 4.0 product has not yet completed customer sampling, media said it has expanded its partnerships with North American customers and has an aggressive pricing strategy. Therefore, it has a good chance of surpassing most of its competitors in revenue in Q4 ’22.
On the other hand, a survey of its customer base revealed that WDC clearly has no substantial follow-up plans to develop products with SAS interfaces. In addition, the revenue performance of its PCIe 3.0 products in 2023 is not expected to be as impressive as this year, as customers will upgrade to higher data transfer rates. Therefore, WDC must get more customers to recognize its PCIe 4.0 products as soon as possible in order to effectively maintain the market share of enterprise SSDs.
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Micron
Micron’s enterprise SSD revenue slipped to approximately $656.2 million in the third quarter of 2022 due to a slight downward revision in server OEM demand. In terms of product development, Micron introduced the 176L PCIe 4.0 Enterprise SSD early on, but customers sampled these products for longer than initially expected. As a result, vendors as a whole are moving up PCIe enterprise SSD shipments more slowly than originally expected, and SATA remains a mainstay of vendor offerings. The media also believes that increasing shipments of PCIe 4.0 products will be one of the focuses of the bright year. As market growth for SATA products slows, Micron will be more constrained to significantly increase enterprise SSD revenue.
Kioxia
Kioxia began accelerating shipments of its PCIe 4.0 products in Q3 2022. At the same time, demand for its SAS products has remained steady. As a result, the vendor’s enterprise SSD revenue is approximately $559 million. Going forward, Kioxia will begin mass production of PCIe 5.0 SSDs by the end of this year. In addition, vendors have ensured that the specifications of their PCIe products support OCP. As for 2023, Kioxia has the opportunity to boost its enterprise SSD revenue in a few quarters as more customers recognize its PCIe offerings.
Kioxia is expected to continue to expand its market share because it has a comprehensive product line that includes SATA, PCIe and SAS. However, Kioxia also needs to further improve the flexibility of its supply chain. Solving this pressing problem will determine whether the supplier can maintain a stable response to the customer’s needs.
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summary
Heading into Q4’22, economic adversity has forced companies across most industries to scale back on equipment-related spending. At the same time, server OEMs have taken steps to rein in rising inventories, so the momentum of their purchasing activity has slowed significantly. Looking specifically at China, as there will not be another wave of server-related tenders, the demand situation is not expected to turn around anytime soon. With the oversupply situation rapidly worsening across the NAND Flash market, the overall average contract price for enterprise SSDs is expected to decline by more than 20% sequentially in the fourth quarter of this year. This, in turn, will result in a more than 20% sequential decline in enterprise SSD revenue.
