As the next-generation storage medium, SSDs have obvious advantages in performance and energy efficiency, and they have been capturing the market share of different types of disks in recent years. With SSD technology upgrade and cost reduction, SSDs have gradually replaced 15K high-performance HDDs, 10K high-performance HDDs, and PC HDDs. Now, only capacity HDDs maintain a certain market share. With the number of NAND flash layers exceeding 200, SSDs now offer greater capacity and lower costs. The time for fully replacing capacity HDDs is approaching. China's digital industry should leverage this trend to deploy advanced technologies and phase out outdated ones, addressing the lack of technological layout in the disk industry and enhancing the overall security of the storage industry's supply chain.

Part 1 SSD Cost Has Reached the Industry Sweet Spot, Making It Ready for Fully Replacing HDDs

Replacing old technologies with new ones doesn't require waiting until the new technologies are completely cheaper than the old ones. For example, HDDs replaced tapes not because they are cheaper, but due to their significantly higher performance. Consequently, the market for tapes shrank from tens of billions of dollars to several hundred million dollars. Even now, HDDs cost two to three times more than tapes. When the cost of a new technology reaches a critical point, known as the "sweet spot," it prompts the widespread adoption of the new technology over the old one, even if the new technology is not cheaper than the old one.

1. The sweet spot for a new medium to replace an old one on a large scale is about three times of the cost of the old medium.

SSDs built using NAND flash began to emerge in 2006. They have 100 times higher IOPS performance than HDDs, consume less energy, and make less noise. However, the price of such SSDs is 30 times higher than that of common SSDs and 7 times higher than that of 15K enterprise disks. Therefore, SSDs using NAND flash are not widely used at that time. In 2011, the cost of SSDs using NAND flash dropped to about three times that of 15K enterprise disks, leading to widespread replacement of 15K enterprise disks. By 2015, disk vendors ceased production of 15K enterprise disks. In the same year, the SSD cost fell to three times that of 10K enterprise disks, resulting in the latter's phase-out by 2018. By the end of 2021, the SSD cost was three times that of PC HDDs, causing PC HDD shipments to plummet from US$16 billion to about US$2.8 billion by 2023. As we can see, when the price of SSDs drops to about three times that of a specific type of HDDs, large-scale replacement occurs. Thus, the sweet spot for SSDs to replace HDDs on a large scale is three times the HDD price.

2. In 2023, the cost of SSDs fell below three times that of capacity HDDs, signaling the start of replacing capacity HDDs.

In the past two years, breakthroughs in NAND flash production technology have led multiple vendors to supply NAND flash cells with over 200 layers. In 2022, Micron announced mass production of 232-layer NAND flash in July and began shipments in December, and Samsung announced mass production of 236-layer NAND flash in November. China's Yangtze Memory also introduced its 232-layer NAND flash in November of the same year, becoming one of the first vendors to deliver such NAND flash for retail. The reduced cost of NAND flash has lowered SSD prices to just 2.3 times that of capacity HDDs, making SSDs a viable replacement for capacity HDDs.

Part 2 Disk Industry Is Monopolized by Foreign Investors, Posing Risks to the Supply Chain Security of China's Storage Industry

1. The overall disk market is shrinking.

The overall disk market is currently shrinking. The PC HDD market has declined from US$16.9 billion to US$2.8 billion and is expected to continue decreasing. The high-performance HDD market has also dropped significantly, from over US$4 billion to US$700 million, and these HDDs are likely to phase out soon. However, capacity HDDs still maintain a market space of about US$14 billion. With the advent of HAMR technology, the cost of capacity HDDs may decrease further. Consequently, capacity HDDs are competing with SSDs, whose costs are also falling due to multi-layer stacking technology.

2. The disk industry is monopolized by foreign investors, and China's IT infrastructure relies heavily on disks.

The disk industry is dominated by three major companies: Seagate (USA), Western Digital (USA), and Toshiba (Japan). No other vendors are significantly involved. China has minimal presence in disk technologies. Its read/write head, head control chip, platter, and magnetic powder technologies lag significantly behind and are constrained by patents. In recent years, China's data storage market has grown rapidly, predominantly using HDDs. Advanced storage, such as all-flash storage, accounts for only 24.7% of China's IT infrastructure, significantly lower than the 52.8% in developed countries. Many IT applications still rely on disk storage, posing security risks to the sustainable supply of China's IT infrastructure.

3. Developing China's own disks is not cost-effective from both business and technical perspectives.

Developing China's own disks faces three major challenges. First, significant technical barriers exist, requiring five to seven years to overcome and produce commercially viable products with good performance and lower costs. Second, patented disk technology is difficult to bypass, limiting Chinese disks that cannot circumvent these patents to small-scale sales. Third, the overall disk market is shrinking and may be replaced by SSDs within five to seven years, making it challenging to achieve commercial benefits from investments in developing China's own disks.

Part 3 Accelerate the Replacement of Capacity HDDs and Build a Secure Storage Industry Chain

Investing in outdated technologies like disk production is not an effective solution for the disk supply chain issue. A better approach is to adopt advanced storage and accelerate the transition from HDDs to SSDs, thereby building a secure storage industry chain.

1. The industry chain of China's own SSDs is complete, secure, and controllable.

The main components of SSDs are NAND flash cells and disk controller chips, with NAND flash cells accounting for the largest proportion. The technical advancement and cost of NAND flash are crucial to the competitiveness of SSDs. In recent years, China's Yangtze Memory announced the mass production of 232-layer NAND flash cells, achieved through continuous R&D and investment in production capacity. Utilizing its self-developed X-tacking architecture, Yangtze Memory has become one of the top NAND flash cell manufacturers. Currently, its production capacity accounts for 5% of the global total, and with planned expansions, this will increase to 15%, effectively ensuring the supply of China's NAND flash cells. As for disk control chips, many Chinese companies, such as Huawei, Maxio, and GOKE, have developed mature disk control chips for both consumer- and enterprise-level SSDs. The industry chain of China's own SSDs is generally secure and controllable.

2. China's all-flash storage systems leverage advanced technologies and are mature enough for large-scale deployment.

In recent years, China's storage market and all-flash storage technologies have both developed rapidly. Among China's storage vendors, Huawei has taken the lead in all-flash storage systems by leveraging its self-developed technologies across high-end, mid-range, and entry-level all-flash storage systems. Its notable technologies include high reliability (tolerating failure of seven controllers out of eight and NAS active-active) and SSD optimization (enabling 15-minute reconstruction with the FlashLink technology and write amplification reduction). Huawei has also entered the leader quadrant in Gartner's Magic Quadrant for storage systems. In the Chinese market, Huawei, Inspur, and H3C hold the top three positions in market share, with Huawei commanding over 40%. However, the adoption rate of all-flash storage in China remains low at around 24%, indicating a need for accelerated promotion. Globally, Huawei ranks fourth in all-flash storage systems (IDC 2022), demonstrating that Chinese vendors have the technological and product maturity for large-scale deployment.

3. Accelerate the replacement of capacity HDDs and build a secure storage industry chain.

With the rapid growth of emerging industries like 5G networks, artificial intelligence, autonomous driving, cloud computing, and the industrial Internet, data has become a core production factor in the digital economy era. To address the challenges of the data economy, the CPC Central Committee and the State Council of China issued the "Plan for the Overall Layout of Building a Digital China." This plan emphasizes consolidating the foundations of digital infrastructure and data resource systems, strengthening the capabilities of digital technology innovation and digital security, and optimizing the environments for digital development both within and outside China. As a core component of digital infrastructure, data storage facilities must be innovative and leading in technology, and secure and stable in supply. This ensures their competitiveness in both domestic and international markets.

China's SSD-based all-flash storage industry is technologically innovative and leading. The industry chain, from components to systems, is secure and stable, making it the healthiest and most advanced sector in China's IT infrastructure industry. China's data storage infrastructure faces challenges due to the widespread use of outdated HDD technologies and an unstable supply chain. With recent cost reductions in SSDs, China should advocate for advanced storage to replace outdated technologies. This upgrade will address issues of product innovation and supply chain security, accelerating the transition from HDDs to SSDs. It's time to replace disks with all-flash storage.