Phison CEO Predicts Severe NAND Memory Shortage Through 2035 As AI Surges
The rise of artificial intelligence (AI) has pushed unprecedented demand for data center hardware, both in terms of graphics chips capable of powering large language models and large-scale data analytics (among many other tasks) , and high-speed, low-latency storage. As such, Phison CEO Pua Khein-Seng claims a severe NAND storage looms. He also predicts that mechanical hard disk drives (HDDs) are on the path of obsolescence.
While one could view the predictions as knee-jerk reactions to a sudden flurry of demand and industry-wide obsession with all things AI, Phison is in a unique position to assess the landscape. Phison is a giant in the storage space, offering a wide range of NAND flash memory chip controllers (like the E28 we previewed in June) for solid state drives (SSDs), memory cards, and USB flash drives.
During an interview with CommonWealth Magazine, Khein-Seng was asked for his take on a recent prediction by U.S. investment bank Morgan Stanley that the memory chip industry is on the verge of entering a "super cycle" driven by the AI boom.
"NAND will face severe shortages next year. I think supply will be tight for the next 10 years," Khein-Seng told CommonWealth Magazine in an interview.
His 10-year forecast is longer than what Morgan Stanley is predicting, and he offered up a pair of reasons why he feels that way.
"First, in the past, every time flash makers invested more, prices collapsed, and they never recouped their investments. So companies slowed spending starting around 2019-2020," Khein-Seng said. "Then in 2023, Micron and SK hynix redirected huge capex into HMB because the margins were so attractive, leaving even less investment for flash."
The potential wrinkle in his assessment is that demand for AI hardware is largely centered on DRAM-based HBM, not flash memory. But according to Khein-Seng, companies that invested heavily into HBM for AI training and burned through a lot of capital will soon begin to pivot spending on inference to make their money back. This is where demand for storage will kick up a notch.
"To make money, you need users. Users create data. Data needs to be stored. Which means data centers must expand storage for the next decade. After all, a data center's core function is storage," the CEO points out.
This plays into his second prediction, which is that HDDs are going out of style as SSDs become cheaper and more readily available.
"Inference is driving massive storage needs, and HDDs are still cheapest. So hyperscalers rushed to buy HDDs. But HDD capacity is finite. After COVID, the entire supply chain was damaged, production was cut, and no one is expanding now," Khein-Seng says.
From his perspective, HDD supply has a hard cap as well as lead times that can extend out up to two years. And as companies that invested big on GPUs discover that they need to more storage to monetize their investments, they will turn to SSDs.
According to Khein-Sheg, SSDs will replace HDDs as mainstream storage in data centers when prices drop to twice that of HDDs. He points out that in 2020, HDDs were priced at around $0.016 per gigabyte, versus $0.020 for SSDs.
"Today, SSDs are down to $0.05-$0.07 per gigabyte, while HDDs have risen to $0.02. The crossover is coming," Khein-Seng says.
Furthermore, he says when, not if, the price gap between SSDs and HDDs become null, HDDs will officially be obsolete. That shift, he says, is "inevitable."
They are interesting predictions and he had a lot more to share in his interview. It's paywalled, but you can sign up for a free 7-day trial to access the full article.
