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Commentary: NAND flash controller industry headed for consolidation
Josephine Lien, Taipei; Jessie Shen, DIGITIMES [Wednesday 3 July 2013]

With more NAND flash memory chips designed into embedded applications, such as eMMC devices and solid-state drives (SSD), memory controller IC firms incapable of providing technologies for these storage solutions will either be acquired by their larger competitors, or eliminated from the market.

The fast-growing market for mobile devices, including smartphones and tablets, has already hurt the traditional flash memory card and drive business. Suppliers of stand-alone NAND flash device controllers, which are mainly Taiwan-based, are being affected negatively.

Taiwan-based suppliers of NAND flash device controller ICs including Alcor Micro, ASMedia Technology, Genesys Logic, JMicron Technology, Phison Electronics, Silicon Motion Technology, Skymedi, Solid State System (3S) and VIA Labs have long focused on mass-market USB flash drives and memory cards, and enjoyed a majority share of the stand-alone NAND flash device controller market segment. However, with SSDs, eMMC and other embedded storage devices seen as tomorrow's promising areas, the Taiwan players' less-complete and less-competitive technologies compared to their international peers such as SanDisk are now a major constraint to their business development.

The NAND flash controller industry already went through a period of consolidation, when microSD and other small-size cards started to see growing adoption among consumer digital cameras and were first found in mobile phones. Manufacturing microSD cards requires COB (chip-on-board) packaging – identified previously as a technical problem facing several makers incapable of finding a backend partner.

Meanwhile, due to the entry of upstream chip firms Toshiba and Samsung into the microSD card market, a number of memory module makers decided to purchase cards directly from their chip partners. Controller suppliers were then forced to seek cooperation with chip vendors to keep their business in the microSD card space.

Phison, Silicon Motion and Skymedi, which have drawn strategic investments from vendors such as Samsung, Toshiba and Kingston Technology, have helped Taiwan-based suppliers as a group to control as high as 90% of the stand-alone NAND flash device controller market. Nonetheless, the segment has been stagnant as the transition to embedded storage solutions takes place.

Samsung's disposal of Skymedi shares earlier in 2013 could signal some changes in chip vendors' strategies for their partnerships with memory controller companies.

Sluggish growth in the flash drive and memory card market is propelling Taiwan-based NAND flash device controller companies to diversify their offerings to include solutions for non-memory products. Nevertheless, they will still be capable of fighting for a piece of the embedded NAND device controller pie.

LSI and Marvell collectively hold a more than 50% share of the SSD controller market. The two companies are expected to put their ultimate focus on cloud computing applications, leaving the consumer electronics segment to their smaller peers.

As for eMMC controllers, Taiwan-based firms could put their focus on China's white-box market rather than international brands such as Apple to avoid direct competition with NAND chip vendors. Alternatively, diversifying their base to industrial and other application-specific areas is another tactic for Taiwan-based NAND device controller suppliers.

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