Little Disk Drives to Reap Big Chip Sales

Small form factor and mobile PC hard disk drives (HDD) will represent a full
quarter of worldwide semiconductor sales through 2009, thanks to snowballing
interest in MP3 players, handheld computers and some smartphones.

Research firm IDC said chip revenues in the small form factor HDD arena
will balloon at a 39.4 percent compound annual growth rate (CAGR) through
2009.

Shane Rau, program manager at PC and Storage Semiconductors, said the growth
in demand is coming from emerging consumer markets, where the up-tick in
storing digital music, movies and photographs has skyrocketed in 2005.

However, HDDs face stiff competition from the rising tide of NAND Flash
memory, which is being used in products such as the iPod Nano and USB
drives.

Rau said that HDD semiconductor suppliers, which include Marvell, Agere and
Texas Instruments, must be mindful of making enough chips to accommodate the
growth in “volatile consumer markets,” where consumers are picking up
products that use NAND Flash memory storage as an alternative to HDDs.

NAND Flash is used in certain Apple iPods and USB drives but
doesn’t store as much data as small form factor HDDs are capable of storing.
Even so, Rau said the arrival of the iPod has proven to be a disruption to
the dynasty that small form factor HDDs were enjoying.

“The disruption came to a head when the iPod Nano incorporated NAND Flash
instead of a small form factor drive,” Rau said. The question becomes how
much will NAND be able to penetrate into what formerly was small form factor
drive’s territory. There needs to be some settling as to which one will
win.”

Rau said IDC believes NAND Flash memory will do well in devices with
capacities of up to about 10 gigabytes.

But HDDs will likely rule in devices that require higher storage capacity
than NAND can support. The new iPod video player uses a small HDD.

“To the extent that video penetrates portable devices like the iPod Video
will probably determine the small form factor drives,” Rau said. “The
question is: how popular will portable video be?”

Still, a cursory look around the industry shows the level of NAND support
and adoption growing.

Just last week, Intel and Micron agreed to form a
new company to manufacture NAND Flash memory.

IM Flash Technologies, LLC, will manufacture products for Micron and Intel,
two chipmaking giants with enough capital, intellectual property and
personnel to snatch a good portion of the NAND market.