PCIe Gen3 SSD controller inventories continue to pile up due to falling notebook demand, but PCIe Gen4 SSD controller shipments remain strong, according to industry sources.
Phison Electronics CEO Khein-Seng Pua pointed out that controller chips accounted for 33% of revenue in the second quarter of 2022, a record high, despite an increase in inventory. Along with solid shipments of Gen4 SSDs, the company's OEM business has equipped various high-end notebook computers of well-known brands with high-speed Gen4 controllers.
Phison is the main supplier of Gen4 SSDs for the Steam Deck handheld gaming computer, and Phison's enterprise-level server storage has also been approved by its strategic partner and will begin small batch shipments in fourth-quarter 2022, according to industry sources.
According to Pua, Gen3 inventory is high. Since most 2021 notebook models used Gen3, most inventory PC makers have on hand use Gen3 SSDs. New models in 2022 switched to Gen4, which drove growth demand. Pua added that even if notebook demand does not meet expectations, there will be no issues with inventory.
Decreased demand for Gen3 models has caused prices to fall rapidly, resulting in a significant price gap between Gen3 and Gen4. Gen4 chips are expected to become the mainstream in 2023 and account for more than 50% of Phison's revenue.
Revenue from controller chips may not continue to grow in the second half, as sluggish pull-ins for mobile phones may offset the continued growth of Gen4 product shipments. Pua believes the supply situation in the second half will need to be observed, including whether rush orders emerge in October-November and a rebound occurs during Christmas.
Although wafer foundry capacity has loosened recently, Pua said only Gen4 products are still in short supply. Gen4 products use TSMC's new tape-out process and customer demand remains strong. Capacity supply is expected to remain short until first-quarter 2023.
In May, Phison teamed up with AMD and Micron Technology to announce the joint creation of the PCIe Gen5 ecosystem and the launch of the world's first Gen5 SSD.
Pua pointed out that new products are expected to ship in September and Gen5 controllers are expected to begin shipping in the fourth quarter. At that time, Micron's new 232-layer NAND flash will be equipped with Phison's Gen5 product, an important milestone for Phison.
Silicon Motion Technology also recently announced MonTitan, its next-gen PCIe Gen5 SSD platform. Samples of the MonTitan SSD platform are expected to be sent out in the fourth quarter.
The enterprise-level Gen4 SSDs from China-based DapuStor uses the 12nm process and have been in mass production since April 2022. DapuStor recently announced it received small orders from North American and Chinese customers.
