In opening up my crystal ball, I think what will happen is that the NAND suppliers themselves are going to take a lesson learned from others in the industry and move up market. This means that both Samsung, Intel, Toshiba and others that make NAND are going to start making storage devices that can be sold in the market.
To a degree, we see them at least investing in the technologies behind the up market devices. At “worst” acquiring them. Because as Henry points out
NAND is a commodity part that had low margins, even storage devices such as a disk drive have low margins but are likely better than NAND, but storage appliances have way better margins. I think that this is happening in other markets and it will start to happen in the SSD market.
Very much so. Look at Seagate and WD with their micro NAS appliances. Margins on those low end boxes are probably better with their drives than the drives themselves. Which means that the low end SOHO NAS providers are competing directly with their suppliers.
sTec, before their acquisition, tried something similar. It had the side effect of pissing of its partners pushing its products, and caused those partners to switch providers.
This said, the undifferentiated NAS market is still commodity. The storage component vendors (its not just SSD that they sell, they are looking to sell everything) need to look beyond that into massive scale cold storage, or extreme performance systems. If this trend takes hold, as Henry notes
The only way to accomplish that in a short period of time is through acquisition. … If I am right, by mid- to late 2014 we are going to see purchases in this area by the NAND suppliers.
I agree with Henry. I don’t think M&A is going to slow down here, if anything, I think the folks with real value will be gobbled up.
Moreover, folks without much value (and Henry starts out with a discussion of one), are in for a much larger world of hurt. Competing with your supplier is a very hard thing. If all your suppliers are competing with you, maybe its time to rethink your market, and find a buyer. And not reject 5 offers. Subsequent offers are likely to be far lower.
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