Shift to 3D NAND Will Benefit Samsung, Micron, and Seagate

Striking changes are occurring in the NAND industry. Samsung (NASDAQOTH: SSNLF  ) began the mass-production of its 3D NAND modules in August last year, which compared to its planar NAND modules, are twice as fast, last 10 times longer, and consume 50% less power. Micron (NASDAQ: MU  ) , SK Hynix, Seagate (NASDAQ: STX  ) , and Toshiba intend to follow suit and are currently developing their respective 3D NAND technologies. But, how exactly will 3D NAND make its place in the flash memory industry? Let's find out.

How is 3D NAND better?
Whether it's 2D or 3D NAND, the cost of manufacturing flash modules largely depends on die size.

To cut production costs, memory manufacturers strive to cram more transistors onto the same die by shrinking their fabrication process. However, we've reached a point where chip lithography can't be shrunk any further, thereby suggesting that the cost of planar NAND modules can't be drastically reduced.

To utilize the die area more efficiently, Toshiba introduced its 3D NAND technology back in 2007. These modules consist of vertically stacked NAND strings, which squeeze more transistors into the same die area. Thus, these next-gen flash modules offer better performance, higher density, and lower cost per GB. 

According to Samsung, its 40nm 3D NAND produces an equivalent lithography of a 10nm planar NAND. As explained by Crossbar, a 3D NAND module fabricated using a regular 20nm process would produce an equivalent planar NAND process of 5nm. Therefore, mass-produced 3D NAND modules offer scalability at relatively lower costs. 

Adios, 2D NAND?
Jim Handy of Objective Analysis explained that, since the fabrication process of 2D NAND is not shrinking, planar flash drives will continue to cost 10 times more than equivalent hard drives. This pricing barrier would be detrimental to the adoption of enterprise-scale planar flash drives, which is where 3D NAND will shine. 

Enterprise SSD clients struggling to meet rising data storage needs will have to adopt 3D flash drives due to their high density and low cost per GB requirements. DRAMeXchange believes that this shift will propel 3D NAND's market share to 20% in 2015, up from 3% in 2014. IHS, being slightly more bullish, expects 3D NAND market share to expand to 49.8% by 2016. 

Thus, the future looks bright for 3D NAND industry.

How this may impact companies
Since Samsung has been mass-producing enterprise scale 3D NAND modules since August last year, it has a technological head start. This enables the company to fix known bugs with the 3D NAND technology, before its peers. The company has managed to increase its production yield, which, according to DRAMeXchange, will enable it to lower production costs by 2015. 

Micron is another formidable competitor. Jagadish Iyer of Piper Jaffray believes that the company will be sampling its next-gen non-volatile memory in the first half of 2014, and begin the mass production of its 256GB 3D NAND drives early next year. Meanwhile, the pure-play memory manufacturer will shrink its planar NAND fabrication process -- one last time -- to 16nm, which can later be utilized in the fabrication of its 3D NAND modules.

Investors scouting for a diversified memory manufacturer should consider investing in Seagate as well. The company manufactures hard drives and solid state drives, and plans to sample its 3D NAND modules during the first half of 2014. It has a strong foothold in the enterprise SSD and HDD segments, which altogether represents 39% of Seagate's overall gross profits. Plus, the company's entry into the 3D NAND industry will expand its product portfolio, strengthen its enterprise market position, and result in a balanced growth. 

Foolish final thoughts
3D NAND is evolving fast and is expected to replace planar NAND over the long haul. Companies aiming to mass-produce these flash drives stand to benefit the most. So, memory-focused investors should invest in companies that are moving forward with new technology.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 13, 2014, at 11:01 AM, ARH213 wrote:

    I guess one also needs to 3D locate the printed access wires to each of the individual 3D transistors as well. This is amazing complex technology that has become dirt cheap. And still there is room for further cost reduction! Much of the same technology that creates the nanostructures on read-write heads in hard drives translates to the processing of transistors, so I agree, Seagate is a potential supplier of 3D NAND. Critical to profits and investment payoff as with any product will be who achieves the best quality and quantity at the lowest cost.

  • Report this Comment On February 22, 2014, at 11:44 PM, bigfool2013 wrote:

    The winners, as always in the storage business, will be who can successfully manufacture in bulk. Lab results are good but the rubber hits the road in the factory. By the way where is WDC, I can't believe they don't have an iron in the fire.

  • Report this Comment On February 24, 2014, at 12:30 PM, andyjan wrote:

    It may be wise for your readers to have their enthusiasm tempered by reading an analysis of Samsung's V-NAND as presented at the International Solid-State Circuits Conference on February 12th in San Francisco. Take-aways: even with 24 layers, their effective cell size is bigger than existing 2D NAND; to gain any advantage, they will need to stack up to 192 layers which is highly unlikely. For more details, see the 3DIncites blog at

    http://bit.ly/1m6ef0g

    (Full disclosure - I wrote it)

    ~AJW

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