What memory technology is Samsung after?
Samsung Electronics recently made public its $5.8 billion offer for SanDisk, a major manufacturer of memory cards. There are plenty of possible business motives behind this bid including the hefty royalties that Samsung pays to SanDisk to use its flash technology, and SanDisk's strong retail brands and distribution. But I'll leave that to the financial analysts. The more interesting question is precisely what other memory technologies SanDisk possesses that enticed the world's largest producer of NAND flash memory to attempt an uncharacteristically large and risky acquisition.
SanDisk doesn't directly manufacture the NAND flash chips that go into cards. Instead it works with Toshiba through several joint technology and manufacturing agreements. SanDisk supplies some of the capital and its flash know-how, and Toshiba operates the factories, or fabs. In exchange, SanDisk gets a steady supply of chips from Toshiba's fabs, though when business is booming it also purchases a small amount of chips from other "non-captive" sources. SanDisk then puts these chips in products such as microSD cards for cell phones, SD cards for digital cameras, and USB drives.
The main technique for reducing costs and increasing the density of flash memory is to build chips using increasingly finer features. Today advanced NAND flash is manufactured using 40nm process technology. A single chip manufactured at this node can store up to 16Gb (or 2GB) of data. Micron is working on a 34nm 32Gb chip, and the rest of the industry won't be far behind. By using an advanced lithography technique called double-patterning to print the circuits, the industry can push it down to 20nm, but that's probably the end of the road for NAND flash, at least in its current incarnation.
If you can't shrink the cells anymore, then you need to increase the amount of data that can be crammed in each cell. In 2005, SanDisk and Toshiba developed the first 8Gb chip by using MLC (multi-level cell) technology, which stores two bits of information per cell. Today the vast majority of NAND flash is MLC, though costlier SLC (single-level cell) flash is still used for applications that require higher levels of performance or better endurance. SanDisk holds the key patents on MLC-based flash, which is why Samsung already pays them hundreds of millions in royalties each year.
The next logical step is X3, or three bits per cell, and eventually X4. As it turns out SanDisk has cornered this as well. Earlier this year SanDisk announced that it had begun mass producing the industry's first X3 NAND flash, a 16Gb chip jointly developed with Toshiba and manufactured at 56nm. The X4 technology comes from SanDisk's November 2006 acquisition of M-systems. X3 isn't as efficient as physical scaling because it requires some extra peripheral circuitry to make it all work--that's why SanDisk's current 43nm 16Gb MLC is still more cost-effective. If all else is equal (process node, density and wafer size), an X3 chip costs about 20% less to produce. That might sound like a lot, but in an industry where the average selling price of the chips has been dropping 60% each year, X3 is really only a stopgap measure.
Eventually the industry will need an entirely new technology, and SanDisk believes it has the solution in 3D memory, the technology it gained through the January 2006 acquisition of Matrix Semiconductor. The concept behind 3D memory is that you can simply stack arrays of cells vertically to increase storage density rather than increasing the size (and cost) of the chip. It's like building a skyscraper rather than expanding the footprint of a building. SanDisk says it has more than 200 patents around 3D memory, and it already sells a basic form of 3D memory known as OTP (one-time programmable) that is used in applications such as Nintendo game cartridges. TSMC, a semiconductor foundry in Taiwan, manufactures 3D OTP at 80nm, and is currently working on a version using advanced 45nm process technology.
The trick is figuring how to make a version of 3D memory to which you can write, erase and rewrite data (3D R/W), like with NAND flash. Last quarter SanDisk signed a long-term agreement with Toshiba to jointly develop 3D R/W, which it says will replace NAND flash "within a decade." There is no shortage of other contenders. Toshiba, Samsung, and Spansion/Saifun are all working on a technology known as charge-trap flash (CTF). And Numonyx, the spin-off of Intel and STMicroelectronics, has developed a phase-change memory (PCM). None of these seem close to commercialization.
There is one other major area where SanDisk has technology that may be attractive to Samsung. As flash memory becomes more complex, it requires increasingly sophisticated microcontrollers to keep track of all the data being written, read and erased to the storage device. The controllers perform critical chores such as error-correction and wear-leveling to compensate for some of the physical limitations of flash. There are companies that specialize in flash controllers such as Phison and Silicon Motion, but SanDisk has its own expertise in controllers for cards, USB drives and SSDs. This expertise should be especially valuable as more SSDs based on cheaper MLC flash start to hit the market.
