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Experts caution low NAND prices won't keep array prices down

Competitive pressures, speed and data reduction features, and a storage system's architecture figure into all-flash storage arrays, regardless of the price of raw NAND.

SANTA CLARA, Calif. -- Just because an oversupply is keeping NAND prices low, that doesn't necessarily mean your next flash storage array will cost less.

Storage vendors maintain that the raw price of flash is hardly the only factor in how they price arrays to their customers. Competitive pressures, performance benefits, market conditions and good old Moore's Law all contributed to pricing, vendor representatives said during a panel session this week at the Flash Memory Summit.

Whatever the impact of the current NAND pricing on array buyers, the low costs are expected to last for a while. Jim Handy, chief analyst at Objective Analysis, opened the conference by predicting the current oversupply will last at least into 2021 and maybe into 2025. That can be seen as bad news for flash manufacturers and good news for customers, but more goes into pricing an array than raw NAND prices.

Eric Herzog, chief marketing officer and vice president of worldwide storage channels at IBM, said the vendor released new Storwize midrange flash arrays in April that were priced 10% to 30% lower than previous models, reflecting the lower cost of NAND. He said competitive pressures may have more impact than the cost of NAND on array in the near future.

'Other things are out of our control'

"We got a big saving, and we passed it on," Herzog said of the Storwize launch. "But there are other things that are out of our control, including all of the vendors' financial performances."

NetApp, the No. 2 storage vendor in market share, recently said its revenue last quarter fell far below expectations. IBM, Dell EMC and Pure Storage have also had disappointing recent quarters. Herzog said if that trend continues, it could play a bigger role in lowering prices than the raw price of NAND. He said large vendors may drop their prices to keep their market share, which would prompt smaller vendors to have to do the same to compete.

"There's a big unknown now, given this huge miss from one of the big storage companies," Herzog said. "If the other big guy misses, then you may see a roll down in prices. That's what tends to happen in the storage business; there tends to be a price war roughly every four or five years. And we haven't had one for a while, so we're due for a price war."

Because of flash's performance advantage, solid-state storage will always cost more than spinning disk systems. But flash storage vendors try to emphasize other advantages that can lower the price gulf. Chadd Kenney, vice president of products at all-flash vendor Pure Storage, said vendors can lower per-gigabyte prices regardless of the NAND cost by adding better data reduction capabilities and building more dense arrays.

There's a big unknown now, given this huge miss from one of the big storage companies.
Eric HerzogChief marketing officer, IBM storage

"We see a mixed bag," Kenney said of pricing factors. "There are some market pressures that don't allow us to drop it down to the lowest possible price. But data reduction starts to alleviate a lot of the challenges so we can continue to play in the safe price space. Depending upon data reduction performance, you can stay in good economic territory to satisfy most workloads."

Ken Steinhardt, field CTO at Infinidat, said flash and other new storage class memory devices such as Intel Optane drives will fall as they hit critical mass. But he pointed out that flash will never become as cheap as hard disk drives. Unlike most primary storage vendors, all Infinidat systems use hard disk drives and deploy flash only to cache data. It relies on DRAM -- which is faster but more expensive than flash -- for performance.

"We've all seen throughout the history of IT infrastructure that the cost of all this stuff -- regardless of the technology -- continues to fall," he said. "The cost of NAND has certainly gotten a lot closer to the high end of conventional drives, but according to most analysts there's about a 10x delta between NAND flash and nearline drives. Regardless of the technology, it's an ultimate tradeoff -- cost per capacity versus performance requirements."

Walt Hinton, chief marketing officer at all-flash startup Pavilion Data, said storage media follows similar pricing patterns as other components such as processors.

"I think we've seen a similarity to Moore's Law consistently with data storage," he said. "Capacities will continue to increase, and the cost will come down relative to capacities."

Hinton said as with hard disk drives, as larger capacity flash drives hit the market, they will lower the per-gigabyte cost. But the drop may not be as great, because flash performance does not degrade in higher-capacity solid state drives.

"When you make a hard drive bigger, it gets slower," Hinton said. "When you pack more into a 2.5-inch SSD form factor, it actually gets faster. The bigger we make NAND systems, the faster they get."

How long will NAND prices stay low?

Handy said the current down cycle in NAND prices is part of a pattern where vendors react to demand by overproducing NAND, then stop producing and have shortages. Prices are low during oversupply periods and high during shortages. He predicted that the oversupply period currently keeping prices low will last for at least two years.

Other factors come into play, however, including a trade war between Japan and South Korea, China's move into the semiconductor market and a recent power outage in Japan that caused Toshiba and its partner Western Digital to lose six exabytes of NAND production. Because of these factors, not everyone agrees with Handy's forecast.

"A lot of people don't realize that the surplus ended a couple of months ago, partially because you had a power outage at a Toshiba plant," said Marc Staimer, president of Dragon Slayer Consulting. "Toshiba, by the way, provides one third of all the NAND flash in the world. The surplus is gone. In fact, there's actually been a tightening of the NAND flash. I'm not saying that prices are going to go up, but they might."

Handy said the Toshiba outage caused only a slight increase in NAND prices because suppliers had huge inventories that mitigated the impact. He predicted any changes from the Toshiba outage will be short-lived.

"There really wasn't much of a change" in pricing, he said. "These are not big changes compared to the collapse in price that we've seen, and they're probably not going to last for very long."

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