X3

This post is a follow on to my post on SanDisk’s Adaptive Flash Management (AFM) which in turn was a follow on to the previous post on OEM and in some respects to the post before that- on SSDs .

AFM makes X3 go. SanDisk’s X3 expertise is reeling in the Mobile OEM wins. If SanDisk can deliver an X3 SSD, all past SSD sins will be forgiven.

X3 is 3 bits per cell NAND. MLC (X2) is 2 bits per cell NAND. SLC (X1) is 1 bit per cell NAND. More bits per cell means lower costs, but also lower performance and reliability.

No free lunch.

The most important twist is that not all X3 is created equal. SanDisk seems to have figured out how to deliver an X3 solution satisfying customer requirements, where others haven’t.

How is SanDisk delivering where other’s are falling short? The answer is twofold: AFM and SanDisk’s X3 chip design.

Adaptive Flash Management (AFM)

The slide below illustrates how AFM can bridge the gap between raw the performance of the raw 32nm X3 NAND memory (light blue five-pointed polygon) and the requirements of the application target specs (the five-pointed red line polygon).

SanDisk has coined three terms to describe the rough outlines of how AFM works: Smart Caching, SLC Emulation, and High Performance Mode.

SanDisk’s AFM uses Smart Caching to improve the performance of Random R/W and improve endurance.

Smart Caching is creating an area within the flash “which is like a sketch pad for the user. The user meaning the handset- the OS, the chip set. Being able to use that as an area that is constantly using [being used for] small quantities of data, fast moving data that you constantly need to use.”

To improve Data Retention SanDisk’s AFM uses SLC Emulation: “But if you consider the flash and you take a small portion for the code- which at the end of the day, out of the whole capacity is a very small part- if you take that capacity and allocate to it a small quantity and you consider [configure] it to work as similar to an SLC mode, then you’ve got the reliability that you need. There is no issue. There is no reason to add another component, which would be the SLC or even NOR- if you go even further back. You save the cost of that component. Therefore you have a much more competitive solution.”

To improve the performance of Sequential Write SanDisk’s AFM uses a High Performance Mode: “ Working with the system. Understanding the environment that we are in. Not being just a dumb memory device. Understanding the environment that we are in and having a dialog with the chip set or with the OS or the application. Having that dialog allows us to do a lot of things that before we could not.

SanDisk’s X3 chip design

While AFM is a big deal, it’s not the whole X3 story.

To my mind, SanDisk would be well served to make more of its X3 chip design. Pretty clever stuff.

The graphic below is a 32 Gb X3 chip illustrated in a paper presented at the ISSCC in February of 2009.

The key to the chip is its ALL Bit Line (ABL) architecture which uses double column logic, allowing simultaneous access of two word lines.

ABL provides an energy efficient system. Its fast with improved reliability. And its patented. SanDisk claims that its X3 approaches the write speeds of other’s MLC.

The slide below, from ISSCC 2008, gives a sense of what ABL can achieve, even though it doesn’t include X3.

Sanjay’s X3 Investor Day 2010 Presentation

Sanjay Mehrotra, SanDisk’s President & Chief Operating Officer, spent significant time in this year’s Investor Day talking about X3. He covered a lot of ground including the value of X3, the difficulties of deploying X3 in volume, SanDisk’s utilization of X3, SanDisk’s Roadmap, SanDisk’s Cost Reduction, and Cost Reduction Outlook.

I have decided to let Sanjay speak for himself:

“Of course X3 is extremely valuable. Let me share with you why so. For 32nm if you look at the die size, of our 32 Gbit memory with X2 is about 140mm squared. If you look at the die size of our X3 memory at the same technology node, 32nm and the same capacity, 32Gbit, the die size is 113mm squared. Obviously this translates to approximately 20% more GB per wafer.

That leads to substantially lower costs [missed words] it does not require any additional capital expense over the production of X2 memory. And no additional process complexity to produce the X3 memory.

On top of that SanDisk’s system expertise is able to leverage X3 in the product meeting the specs, specifications, that are delivered by others, in similar products using X2. So clearly we can price our products that use X3 at levels similar to the products that are supplied by competitors with X2.

So essentially the pricing is alike between our X3 products and competitor’s X2 products. So this leads to the obvious gross margin expansion for SanDisk due to being able to maintain pricing with the ability to reduce costs and provide the highest ROI on our flash memory production.

X3 is extremely valuable, if you are really able to deploy it in large volumes. So for Q4 2009, I’m showing you here Gartner’s projections of X3 bit production by various suppliers. So you can see here that SanDisk has a significant lead over others.

In fact Toshiba our R&D partner as I told you , but in the fab output [??] of X3 we have significantly over them as well. And the rest of the players for X3 production output in 2009 Q4 timeframe are extremely small.

Again I want to point out that its not only about designing the X3 memory. It is the system that goes with that X3 memory with all the algorithms to manage the performance, to manage the reliability, to ultimately make it a product that meets the specifications that the market requires…

SanDisk has applied X3 across all of our end markets. Of course across all our products  addressing our major end markets. So in terms of Mobile for Q4 2009, approximately 50% of our bits came from X3. In terms of Imaging also approximately 50% and in USB drives approaching 85 to 90% range.

There are certain products, such as lower capacity products, some embedded products, as well as products like SSDs and high performance cards such as Extreme cards, the highest performance cards that do not yet utilize [X3] because of the requirements of those applications.

So we have really optimally applied X3 as aggressively as we can across our multiple product platforms. We have started to apply X3 in our embedded products as well, some of the embedded products, such as some iNAND products.


On our technology roadmap you see that X3 is an integral part of each technology generation. Moving from 32nm, ramping it up, into production with X2 and X3 and continuing to drive aggressively utilization [??] of X3 to 24nm coming on production in late 2010 in Q4, the timeframe.

And of course we have X3 in the 24nm transition as well. And then we are working on the 1x flash memory and that is targeted at this time for production some time in the second half of 2012…

2008 was 56nm technology as the workhorse. 2009 was 43nm. More than 50% came from technology transitions of the memory cost reductions and approximately 20% came from transitions to X3 and X4 memory in 2009 compared to 2008.

In 2008 if you recall our X3 and X4 utilization for the year was around 10% of the bits. In 2009 X3 and X4 utilization was approximately 50%. So that is how the rate of utilization drives costs lower and contributed about 20% of the memory cost reduction.

Looking ahead at 2010, we expect the cost/GB reduction to be in the range of 30 to 40%. X3 contribution, production output, is expected to be greater than 50%. And the key driver of cost reduction in 2010 will be the 32nm transition.

We expect the 32nm transition as we are ramping up during the course of this year and expect to achieve complete transition to 32nm by the end of the year. We expect that transition to yield us about 70% of our total bit production in the year coming from 32nm.  So that will be a driver for cost reduction during 2010 and of course continuing to drive lower non-memory [missed word- average??] costs as well…”

Lots of good stuff in Sanjay’s X3 presentation, and I’m tempted to add commentary. This post is long enough as it is. One note though.

The one slide that jumps out is the NAND Roadmap. The gap between 24nm and 1xnm is about a year.

This has many implications. Not the least is that bit growth due to technology transitions will be zero in this stretch. NAND world has become accustomed to 30 to 50%± bit growth on technology transitions alone, every year.

NAND is slowing down.

This stretch between the 2H 2011 and the 2H of 2012 appears to be shaping up as something new.

The Competition

So what’s the competition delivering on the X3 front?

Not Much.

In 2009, 50% of SanDisk’s NAND production was X3. The competition weighed in at less than 5%.

This year, 2010, Gartner estimates (Q4 2009) the average across all the other players will be 10%, and that it will take at least until 2012 for the competition to reach 50% X3 bit share.

If X3 is so valuable then why is the competition so slow?

SanDisk’s explanation is that X3 is not easy. X3 chips have specialized requirements, which SanDisk has met with all bit line architecture (ABL). Flash management is even more critical. SanDisk’s solution is adaptive flash management (AFM).

I would add two more reasons. With today’s tight supply, the competition doesn’t need to fight the X3 battle. They can already sell all the MLC they can produce.

Sterne Agee’s recent note:

“07:27 SNDK SanDisk: Samsung cutting back 3-bit output, AAPL MLC demand picking up, positive for SNDK – Sterne Agee (42.07 )

Sterne Agee’s checks in the NAND supply indicate NAND Supply continues to be constrained and inventory at normal levels. Firm believes Samsung is potentially cutting back on its 3-bit NAND output for 3Q10 as it caters to strong AAPL high density MLC demand. AAPL demand for 16-32Gb MLC picking up substantially as those are the key NAND components for the ramping builds on iPhone4 and iPad. Firm believes the mix shift at Samsung back to MLC plays well for Sandisk, as SNDK is the key player at 3-bit per cell.”

And then there’s IP. According to some, SanDisk owns critical IP for X3. Those like Micron (IMFT) who haven’t licensed with SanDisk might have to walk through a potential IP mine field for X3.

Of course, no one’s going to say that, better to attribute retreat to reliability issues, which may also be true- for those who don’t have what it takes for X3.

“Last August [2009], IMFT announced a new three-bit-per-cell, NAND flash memory technology using its 34nm lithography process. the advancement represented an 11% reduction in NAND flash size. however, because of reliability issues, IMFT chose to discontinue production of a three-bit MLC NAND flash product, Kilbuck [director of NAND marketing at Micron] said.”

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12 Responses to X3

  1. Chingadera says:

    Hi Savo, It has been some time since I have posted, I hope you are well. If SanDisk has managed to get X3 to the same reliability as X2, then this probably is the reason TLC prices have been falling. Our best hypothesis is that our competitors have been dumping their x3 at close to cost due to performance issues and we are able to keep our pricing firm. Basically giving SanDisk the free lunch. I would not be one bit surprised if we see 1.20 or higher this quarter and exploding margins. Thank you for what you do and have a nice week. Chinga

    • savolainen says:

      Hi Chinga,

      It makes sense that Samsung would pull back on X3 to cater to AAPL for MLC. This may at least partially explain the current weakness in TLC pricing. Another factor may be Toshiba which doesn’t appear to have the system side of X3 knocked and may need to lighten inventory.

      In any case I’m with you on earnings- over $1.20 with nice margins. As is so often the case, guidance will be key. I’m expecting a nice boost.

      It should be an interesting call. The bulls will be listening for strong guidance based on allocation whereas the bears will be listening for hints on weak TLC pricing and the potential for 2011 oversupply.

      On a side note, from what I gather, SNDK has very strong X3 IP.

      IMFT apparently stopped working on X3 last year. I am wondering if one of the big reasons that INTC is (supposedly) talking to SDNK is to license X3 IP? As NAND slows down X3 (and X4) are going to be become even more important.

      Best,
      Savo

      • dealsfusion says:

        Savo,

        Nice post. I would say different companies may have different strategies to increase GB per wafer. IMFT leads in process technology, therefore, it makes sense for them to aggressively bring up their 25nm MLC part, which essentially double the density compared with the old 34nm part. Of course, the story could be different had they have similar know-how in X3

      • savolainen says:

        Hey dealsfusion,

        Yep different companies have had different strategies to increase GB per wafer.

        It will be interesting to watch how the game plays out now that NAND shrink is slowing.

        I found it very encouraging that in the 2Q cc Eli said that he is confident that SNDK can drive the current (non EUV) NAND technology below 20-nanometer and with X3.

        This is a big deal particularly for ROI.

        Regards,
        Savo

  2. Joncon63 says:

    Savo,

    Days like today are painful. The stock is getting hammered when there appears to be more positives on the horizon than negatives. Appreciate your in-depth articles.

  3. bob77977 says:

    hi savo,
    deciding to participate in fub 5 probably ends discussions regarding future directions within sandisk’s board.
    eli’s suggestion was not accepted ?

    • savolainen says:

      Hi bob77977,

      I am inclined to think that fab 5 has always been part of SanDisk’s planning and that SNDK finally decided to announce. Now, because there is no question that it is needed.

      Particularly with 3D R/W waiting in the wings. I particularly liked Eli’s cc comment: “… we also see it as possibly our ***first*** fab for 3D Read/Write when this technology becomes ready for commercialization.

      My sense is that Eli really likes fabs. The bigger and the more complicated- the better. After all Eli is an engineer and scientist at heart. Fabs must feel like big toys.

      Eli’s retirement surprised me, but I suspect it has been in the plans for a while. Over the last couple of years Sanjay and Judy have taken over more and more of the investment conferences- or at least that is how it has seemed to me.

      The question is why retire now? And why also step down as chairman of the board?

      There are many angles and possibilities, which would probably make for an entertaining post one of these days.

      Complexities aside, it could be as simple as Eli wanting some time to enjoy himself and his family while he is still young-ish.

      If I were in his shoes, this is what I’d do.

      Regards,
      Savo

      • bob77977 says:

        thanks savo,
        it looks to me somehow that eli wanted to go on with 3D but the board decided to sell it out. sandisk will produce 3D latter on but won’t be the owner of it.
        as you said, eli is a technology freak and 3D is his baby, he would rather go on with it than go fishing with his grandchildren. it’s just my feeling.

  4. Chingadera says:

    Hi Savo, It is eerily quiet. I think something big is about to happen.

    • savolainen says:

      Hey Chingadera,

      Something does seem to be cooking, though my guess is we won’t get news for a while. Maybe not until next year.

      On the 18 August, Eli is a Flash Memory Summit keynote speaker.

      Abstract: The Flash Memory Industry at the Crossroads

      Flash memory is currently being used in every mobile device in the world—that’s more than 5 BILLION devices. Now more than ever, we rely on our smartphones, tablets, and mobile Internet devices to get us through the day – and these devices, in turn, rely on flash! As users continue to consume ever more massive amounts of data on mobile devices, demands for higher capacities and faster speeds are increasing. Flash memory obviously will play a significant role in advancing devices to the next level. SanDisk CEO Eli Harari will discuss the current trends in flash and what the future has in store. He will show why flash will be even bigger than you think in the coming decade.

      Hopefully we’ll get a look at the slides. Last year Eli made some waves over the disconnect on expectations, I suspect he’ll have something provocative to say this year as well.

      Best,
      Savo

  5. WOXBERRY says:

    does sandisk license its x3 and collect royalties or only x2 ? seems like no one else can get the same performance from x3. samsung is paying sandisk royalties – does that include for x3 ? isn’t that a reason they wanted to acquire sandisk? what about x4 ? and m-systems invention ?

    • savolainen says:

      Hi Woxberry,

      I just checked the Samsung agreement call transcript and Eli said the agreement covers any number of bits- including four-bit-per-cell. So the Samsung agreement covers SLC, MLC, X3 and X4.

      BTW, it doesn’t appear to cover 3D R/W.

      I found this exchange regarding X4 from the Q4 2010 cc interesting: “ Kate Kotlarsky, Goldman Sachs: And then can I also ask what your current plans are for 4 bit per cell or X4 going forward?

      Sanjay Mehrotra: In 24 nanometer, as well as in 32 nanometer, all of our production has been and will be 2 bit per cell and 3 bit per cell technology. We are not producing 4 bit per cell in these technology nodes. But of course, a lot of the techniques that we learned from 4 bit per cell, we are able to apply then to 3 bit per cell products and those are some of the techniques that actually end up giving our 3 bit per cell products superior performance and a functionality and application compared to other 2 bit per cell products.”

      It appears that X4 technology has been important for X3 performance. This is the first time that I know of where SanDisk has explicitly has said so.

      Best,
      Savo

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