Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

3D NAND: Are You Ready for a Boom?

By Piyush Arora - Mar 11, 2014 at 10:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

3D NAND industry is poised to skyrocket. Have you prepared your portfolio accordingly?

The 3D NAND industry is poised to take off. In a research report issued last month, TechNavio said that the rising flash-storage needs at practical price points will compel enterprise clients to increasingly adopt 3D NAND drives. This will expand the 3D NAND industry by compound annual rate of 180.7% between 2013-2018, the report says. Let's understand why we're shifting to 3D NAND, and how you can profit from it. 

Why 3D NAND?
The manufacturing cost of flash memory is directly proportional to its die size. Since the introduction of flash memory, manufacturers have been shrinking their fabrication process. This allows more transistors to be crammed in the same die area, thereby increasing chip density at practically no extra cost.

But the laws of physics are playing a spoiler. We're nearing a scaling limit, which essentially means that memory manufacturers can't shrink their fabrication process any further without a trade-off with economic feasibility. In simple terms, there isn't much room to increase the chip density of planar NAND modules.

Toshiba explained the possibilities of 3D NAND technology back in 2007. These flash modules are comprised of vertically stacked NAND strings, which save precious die area and allow more transistors to be stuffed in. Consequently, this boosts the chip density at practical price points. 

Prime beneficiaries
Samsung
(NASDAQOTH: SSNLF) understood the potential of 3D NAND technology, and it began the mass production of its V-NAND drives in July last year. 

In its presentation, the consumer tech goods giant explained that its 40nm 3D NAND process had an equivalent lithography of 10nm planar NAND modules. Crossbar estimates that using 20nm 3D NAND process will produce an equivalent lithography of 5nm planar NAND, thereby allowing Samsung to breach the scaling limit. 

Considering that Samsung has a technological head start, it will be able to debug known issues with 3D NAND drives before any of its competitors. This, in turn, will contribute in improving its V-NAND fabrication yields and result in gains from economies of scale.

SanDisk (NASDAQ: SNDK) is another formidable competitor here. The pure-play flash-memory manufacturer is working with Toshiba to introduce its own iteration of 3D NAND modules, known as BiCS. As per the agreement, about 49% of the total NAND output goes to SanDisk. 

According to TrendForce, BiCS modules have already gone through their rigorous testing and sampling phase. And to mass-produce these modules, Toshiba is expanding its Fab-5. The research firm estimates that the manufacturing facility will commence operations in the fourth quarter of 2014. 

An indifferent peer
Western Digital
( WDC -1.95% ), however, seems to be unaffected by this 3D NAND mania. Though the memory giant manufactures planar NAND drives, it has no intention of venturing into the 3D NAND space -- at least not yet. The company is betting on helium-filled hard drives to capture the enterprise-scale storage industry. 

This indifferent approach will create an entry barrier for Western Digital later on.

  • IHS estimates that 3D NAND market share is poised to surge from less than 1% currently to 49.8% in 2016. Western Digital will miss out on this explosive growth. 
  • Plus, Western Digital will have to compete fiercely to dislodge established 3D NAND products from Samsung and SanDisk later on.
  • Moreover, as the price per gigabyte falls with the maturing 3D NAND industry, enterprise clients will increasingly adopt flash drives. This, in turn, will harm Western Digital's hard-drive business.

Therefore, it is vitally important for Western Digital to enter into the 3D NAND segment.

Foolish final thoughts
The prospects of 3D NAND definitely look good on paper. Actual growth, however, will depend on how well these chips perform against the 2D NAND chips. Investors might want to keep a close eye on upcoming benchmarks and adjust their portfolios accordingly.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Western Digital Corporation Stock Quote
Western Digital Corporation
WDC
$57.84 (-1.95%) $-1.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
673%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.