CINNO: Storage Controller Is Next Star in China Semi Industry
2018.05 CINNO Research Vice President-Sean Yang
The global memory industry development has been in full swing in recent years. One of the core technologies in the industry is the storage controller industry that is a crucial link in the industrial chain.
Following the memory industry surge in average selling prices that led to a successful year in 2017, CINNO Research projects DRAM supply will remain tight in 2018. The tight market dynamics is largely driven by growing demand for servers, smartphones, and cryptocurrency mining machine. It is expected that DRAM market will have another 30% annual growth along with upward ASP trend. NAND flash and SSD growths remains strong, the increase in 3D NAND flash supply is estimated to drive the NAND market value up another 20%.
Enter premises have mostly been attracted by NAND flash and DRAM’s huge production capacity and value. However, the storage medium chip technology is controlled by a few leading international companies including Samsung, Intel/Micron, Toshiba/Western Digital, and Hynix. Although, Tsinghua Unigroup (Unigroup) invested billions of dollars to acquire the required technology from international companies, following a failed acquisition it has redirected its focus to in-house R&D. The outcome of its chip R&D is uncertain. According to industry sources, as time passed Unigroup was under growing financial pressure, as interests from large investments piled up and depreciation. Moreover, Chinese investors demanded immediate “results”. The company became increasingly aware of the importance of accumulating technology and the current market pressure. For the interim phase, Unigroup has turned to Intel for wafer supply support that is then packaged and promoted by the Chinese company on the market.
Storage controller is an essential IC component in the memory industry
“The relationship between the memory industry and Taiwan IC industry is not that significant,” said Sean Yang, Vice President, CINNO Research. Only a few Taiwanese IC design companies in the wafer OEM and package manufacturers are related to the industry, such as TSMC and UMC. Taiwan’s main role has been in the storage controller industry; hence these fabless manufacturers have the greatest influence in the local semi conductor industry and the greatest say.
Although, memory chip sales have agreat impact on the industry, its application must be compatible and comprise astorage controller IC to become the final product (please see attached diagram1). That is, the storage controller chip is an essential IC component. For example, Solid-State Drive (SSD), one of the main flash targeted marketsrequires controllers and a flash chip to form the targeted product. Another example is a smartphone EMMC chip which requires multi-chip package (MCP) of acontroller chip with a flash chip.
1. HDD controller is a mature traditional storage medium
Hard Disk Drive (HDD)controller chip needs to exercise precise control to read and write a disk.U.S. based Marvell has a near monopoly in this field. The company’s market monopoly remains unchallenged since SSD has gradually replaced HDD leading tothe lack of new competitors in the market. Marvel is still the biggest HDDcontroller chip manufacturer.
2. Memory card controller is the main storage mediumin consumer electronics
The interfaces are mainly based on CF/SD/MMC/UFS and the main stream form of SD cards are TF cards and Micro SD cards, while eMMC and UFS for embedded applications can be found indigital cameras and smartphones. SanDisk, once a leading company in the industry, has been acquired by Western Digital Corporation. Additionally, Samsung and Toshiba both have in-house manufactured and sold controllers and cards (including eMMC/UFS module). This is no longer just a single controller chip competition, most of this type of controller chip on the market can be purchased from SMI. German veteran flash memory controller manufacturer Hyperstone and its CF controllers still have a considerable market share in industrial applications. Meanwhile, Chinese manufacturer Shenzhen Silicon Gopossesses SD controllers and longsys card production. Additionally, Silicon Gohas acquired Auspitek to establish Yeestor to deploy a wider variety of flash controller chip products. In contrast, Sage is focused on information security encryption market, and has released only one industrial CF controller. It can be observed Taiwanese companies are still leaders in memory card controller segment.
3. UFD controller chip leaves PC external storage devicesbehind, and enter new blue sea of data encryption
The USB interface controller chips are mainly applied in USB flash drive. Taiwanese manufacturers are still the main drivers in this market sector with SMI and Phison being the top players in the market. These two companies along with Taiwan’s AlcorMicro and Chipsbank from Shenzhen, China once held large market shares, but these companies have now lost market share. Especially, the former leader of the pack Chips bank lost large chunk of market shares during the upgrade from USB 2.0 to USB 3.0, and has not released any competitive products since. Additionally, Chinese companies C*Core Technology and Sage also have similar uncompetitive on sumer market products, and their products are limited to information security UFD applications.
4. SSD controller chip is the rising star of next generation storage
Competition in SSD controller chip segment increasingly resembles that of the memory card controller one. Large international companies developing chips in-house include Samsung, Micron and Toshiba, while Seagate and Western Digital have respectively acquired SandForce and SanDisk. These international big shots are using their flash resources as the foundation for possessing controller technologies that decide a SSD’s functions and reliability. In turn these have created a considerable controller chip consumption volume for each company.
Moreover, global SSD controller makers are also gradually finishing the process of survival of the fittest, acquisitions, and consolidations.
Although, Taiwan based SMIis still the leading company in the SSD controller industry, Phison and Toshib aare also close at its heels. Meanwhile, despite U.S. manufacturer Marvel’s monopoly in the HDD controller market, it has been losing ground in the SSD market.
Historically, Taiwanese manufacturer JMicron was a leading manufacturer in JM605 model controllers. Since its recent restructure, however, the company has exited the SSD controller business. JMicron has spun off part of its company to form SSD controller company Maxio in China. Maxio has received investments from HIKVision.
Sage was one of China’searly pioneers in SSD controller designs, and released its first SATA-2controller on the market in 2013. The company has a considerable market sharein China, and is one of the few Chinese chip companies to have been able tobreak into the international market.
Other top performing Chinese chip companies include Shannon, and the later emergence of Memblaze and Starblaze. Shanon’s outstanding performance in the enterprise market sector led to its acquisition by SMI, while the other two Chinese compatriots are alsofocused in the same enterprise market sector. These companies are positioned inthe high end SSD design and have been frequently promoting themselves with in the industry and have high media exposure.
Hisilicon also has SSD controller chips that are mainly used for its internal server/data center products. The company has not sold its controllers to the market, and there are market rumors of its good performance.
Since SSD controller designs involve advanced analog circuit design, the interface protocol is very complicated and involves different types of flash algorithms. This requires ateam with mature technology background to make it, and contrasts with the unrealistic flashy technology advertised by a small group of Chinese companiesfor financing purposes.
5. Bridge controller is a necessity in portable storage devices
Bridge controller is listed because the chip is the foundation for portable storage devices,including in portable DVDs and portable optical drives. Small storage servers require bridge chips to be directly used on motherboards to drive a series of HDDs or SSDs. Backed by notable computer brand ASUS, ASMedia is currently the leading manufacturer in the industry. Its bridge controller chips have a firmhold on the market, while JMicron trails in second, and China’s Sage is placed third. In 2015, Sage completed negotiations for acquiring Initio bridge chip product line, IP, and client resources, which cemented its position as a top three company. VIA also shortly entered the competition and is working hard.
6. Server/data center storage advanced controllers are key components in sophisticated storage equipment
This application mainly points towards servers or big data (cloud) storage applications. These types ofchips usually require a type of frame work that surpasses a simple hard disk frame work’s speed performance, for example it might require RAID features. NVME technology’s focus in high end applications has recently become a trending topic, and the company is further processing JEDEC standards with on going NVDIMM technology. The company is innovating with its attempts of integrating flash with DRAM.
Unfortunately, this is a sector monopolized by U.S. companies. Taiwanese manufacturers are less familiar with the server sector since they have been focused on PC accessories applications and technologies. Moreover, the Taiwan server market and big data system is rather narrow with little room for developments.
Meanwhile, the server field extends into fiber optics, storage control, and ethernet. These new storage control structures basically require communication technologies, a field in which U.S. companies are leagues ahead of competitor with PMC and LSIbeing the main players. Texas Instrument and Marvell also hold places and havebuilt on their foundation in the communication industry and high-speed chips. These companies have survived industry restructures, for example Micro Chiprecently acquired Microsemi. The latter company previously acquired PMC, while LSI was sold to Avago. Seagate would later go on to acquire Avago. These companies have a near total control over high-end storage chips and Raid-Arraychips. Basically, Taiwanese manufacturers have not entered this market, while Chinese companies have deployed a wider market strategy. China’s domestic market possesses optical fiber system, switch systems, big data cloud storage industry base. Hence, Huawei’s SSD controllers are not a highlighted retailproduct but rather a storage system component, which includes its outstandingarray chip technology.
In general, controller manufacturers can be separated into two major groups. The first group are firsttier international manufacturers that have flash resources, the classical example would be Samsung. The other major group are independent fabless chipdesign manufacturers, such as Taiwanese manufacturer Silicon Motion. From the table below it can be observed that manufacturers aside from top tier companies with a strong background in flash or those directly manufacturing flash and controllers as a finished product to be promoted. Clients on the market can choose to mainly use Taiwanese manufacturers controller chips, such as those headed by Silicon Motion, ASMedia Technology, and Phison. Among this group of companies, Phison background is bounded in flash storage and is not amanufacturer that is solely relying on competitiveness of its controller chips.
China memory industry has beenignited by Tsinghua Unigroup rush of investments in the sector that has resulted in the emergence of many storage controller makers. After a year or two in the market, many manufacturers have disappeared because of the lack of technology, while some were just concept hypes that led to immediate rise anddemise. Yet, this is not an indicator that Chinese companies lack substance,for instance Huawei is an enterprise that Taiwanese manufacturers can not really challenge. China’s closed market also changes the competition method. For instance, Sage has been established for nearly eight years, and its promotionstyle is entirely different from other Chinese competitors that try to cover everything. Sage has steadily established itself in the SSD controller and bridge chips market. It is one of the few Chinese storage controller chip manufacturers that can compete in the international market, under the backdrop that the nation is overall still highly reliant on chip imports. Moreover, Maxio which has recently left Taiwan has also reinvented speedily and started shipping new chips. Considering Maxio was spun off from Taiwanese manufacturer JMicron it is more familiar with Taiwan’s ecosystem and is more market competitive in the eyes of local manufacturers.
China storage controller chip speed updomestic manufacturing.
U.S. President Donald Trump recently dealt a huge blow on ZTE that in turn impact China and highlighted the need for the nation to speed up its technology industry supply chain localization policies. Flash chip hold huge market value potential and are valued by Tsinghua Unigroup and the Chinese government. The future seems bright. However,the controller chip is the decisive component that determines the finished product’s performance and information security valued by the government rather than flashchips. Therefore, it is only a matter of time before decision makers become aware and value the importance of the controller chip industry and its key values.
In CINNO Research opinion, the chaotic international economy and industry competitions has presented manufacturers with more adjustment opportunities. China’s strong development inthe storage industry has spurred the market’s overall supply chain development, especially the storage controller industry has given manufacturers a rare opportunity. Investors should stay tuned to controller chip manufacturers future dynamics.
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