In late 2013, Avago Technologies (NASDAQ:AVGO) announced it planned to acquire LSI Corp. for a whopping $6.6 billion. LSI designed, among other things, controllers for hard-disk drives and solid-state drives (via its acquisition of SandForce).

About six months later, though, Avago sold LSI's accelerated solutions and flash components divisions to hard-disk drive giant Seagate (NASDAQ:STX). This, according to AnandTech, meant that Avago jettisoned LSI's flash accelerator business and its solid-state drive controller business.

Given that hard-disk drives are generally considered "older" technology in the world of storage, and solid-state drives represent the "new" and "exciting" technology, it might initially seem Avago got it backward.

But it didn't. Here's why.

The solid-state drive market is fiercely competitive; not so much with hard-disk drives
The hard-disk drive industry has three major players: Seagate, Western Digital (NASDAQ:WDC), and, to a lesser extent, Toshiba. Supplying these three players with controllers for those drives are Marvell (NASDAQ:MRVL) and Avago (via its purchase of LSI).

The market for hard-disk drives might not be booming -- according to Yahoo! Finance, both Seagate and Western Digital are expected to register modest revenue declines in the coming fiscal year -- but it's large and relatively stable. And, for drive vendors and controller vendors alike, there's not much competition.

This is in sharp contrast to the solid-state drive market.

In solid-state drives, a number of vendors manufacture NAND flash, including the Intel (NASDAQ:INTC) and Micron (NASDAQ:MU) joint venture, the Toshiba and SanDisk (UNKNOWN:SNDK.DL) joint venture, Samsung Electronics, and Hynix.

All of these companies develop and market solid-state drives, and they also sell NAND flash to companies that then build their own solid-state drives. Four of the six vendors above (Intel, Samsung, Toshiba, and Hynix) develop their own solid-state drive controllers. Micron and SanDisk generally source controllers from the merchant vendors.

This vertical integration isn't the only factor that makes the merchant solid-state drive controller market so tough. Several merchant vendors, including JMicron, Marvell, and Silicon Motion (NASDAQ:SIMO), are all vying for the noncaptive solid-state drive controller business.

Finally, speaking of "captive demand," Apple's new MacBook came packed with an Apple-designed flash controller (widely believed to be the product of its 2012 acquisition of Anobit). I suspect Apple's plan is to transition completely to in-house flash controllers, further narrowing the proportion of the market a merchant controller vendor can ultimately target.

Avago seemingly made the right choice
I would say Avago ultimately made the right choice to jettison the LSI SandForce business. Competition within the merchant market for flash/solid-state drive controllers is fierce, and the opportunities for merchant controller vendors as a proportion of the total solid-state drive market don't seem to be getting any larger. The hard-disk drive controller business is much more attractive.

Ashraf Eassa owns shares of Intel and Micron Technology, Inc. The Motley Fool recommends Apple, Intel, and Yahoo. The Motley Fool owns shares of Apple, Western Digital., and Yahoo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.