Hands-On Testing and Analysis

Western Digital Goes back to the Future – Buys SanDisk


In what is both a return to the company’s roots as a semiconductor vendor and a step into the solid state future of storage, Western Digital this morning announced that they’re buying flash vendor SanDisk for about $19 billion dollars.  The combined company will be a one stop shop for storage media from traditional hard drives to SSDs.

The folks at Western digital have been busy lately, just last month China’s Unisplendor bought 15% of the company. Just a week or ten days later China’s Ministry of Commerce (MOFCOM), in what everyone swears was a completely independent decision, finally allowed WD to integrate HGST three years after WD bought HGST from Hitachi. The Unisplendor deal provides almost 4 billion of the 19 billion WD is spending for SanDisk, if the Unispledor deal closes before the SanDisk deal WD will pay $85.10 per cash and 0.0176 Western Digital shares for each share of SanDisk share; if the Unisplendour deal doesn’t close the deal changes to $67.50 in cash and 0.2387 share.

It should be a secret to no one that things have been pretty rocky in the disk drive business over the past few years.  Falling flash prices are killing off the highly profitable 10 and 15K RPM enterprise drives, global PC sales, and therefore disk drive sales to PC vendors, are falling at about 5% a year and the hyper scale datacenter operators like Amazon and Facebook who pay rock bottom prices are buying so many drives that overall profitability is a continuing issue.

At the same time the perpendicular recording that gave us multiterabyte drives has hit a capacity wall. Most recent capacity gains have come from tricks like shingled recording and cramming another platter into a drive by filling it with helium instead of plain old air. The long term solutions like HAMR and bit patterned media will require multibillion dollar capital investments which lead Samsung and Hitachi to give up on disk manufacturing.

While I can’t agree with the disk is dead crowd, including NetworkComuting’s own  Jim O’Reilly and Violin Memory, organizations large and small are rapidly shifting the storage for their latency sensitive applications from disk to flash leaving vendors like Seagate and WD selling an increasing nichey product. Both companies have dipped their toes into the SSD market with small acquisitions, like Seagate’s buying LSI’s flash assets and WD gobbling up STEC and Virident, but the SanDisk deal makes WD a major player in the flash world in one fell swoop because SanDisk is more than just an SSD vendor.

Just as Intel and Micron do joint development of nonvolatile memory technology from flash to 3D-Xpoint through their IMFT joint venture SanDisk and Toshiba do joint development of flash and run several flash fabs through their Flash Forward, Ltd joint venture. While Seagate has a supply agreement with Micron the vertically integrated flash vendors that take sand, OK blank silicon wafers, in one end of their supply chain and pump SSDs or storage systems out the other end have cost and R&D advantages the Seagates and Kingstons of the world who have to pay closer to retail for their flash chips will find hard to surmount.

With the SanDisk acquisition WD has grown from selling the floppy disk controller chips I used to write CP/M and MP/M drivers for back in the ‘80s to a leading supplier of storage media from thumb and SD cards to spinning and solid state disks.  While users shouldn’t see any significant changes in the short term I think this deal is good for WD and for the industry. In the short term WD has to complete the HGST merger and absorb SanDisk but the combined company will be in a unique position as a leading provider of both spinning and solid state disks.