© daimy dreamstime.com Analysis | September 18, 2013
USB 3.0 Flash Drive market progressing slowly
The market penetration rate for USB 3.0 flash drives may only be 10% in 2013, which is weaker than expected.
Even though the size of the USB 3.0 flash drive market has yet to expand, a number of controller IC manufacturers are already starting to hasten their research developments and investments. This is among the reasons why the ROI for USB 3.0 products fell short of expectations, and why leading manufacturers may soon emerge within the market. In 2Q13, the USB 3.0 flash drive shipments reached 5-6 million units (the same as the previous quarter), whereas market penetration rate ended up at only 5% (see Figure-1). The unimpressive sales can mostly be attributed to the tightened NAND Flash supplies, the not-yet-refined controller IC solutions for USB 3.0 flash drives, poor PC sales, and the intensified price wars among the major USB 2.0 flash drive manufacturers. Despite the possibility of an improved NAND Flash supply situation in 2H13 and the upcoming release of the cost-efficient Crystal Free USB 3.0 Controller IC, the persistence of the USB 2.0 price competition and pressures of declining NAND Flash prices are expected to put a noticeable strain on USB 3.0 flash drive sales. In Q4, the USB 3.0 flash drive penetration rate is likely to only grow slightly to 10-15%. TrendForce projects that the 2013 USB 3.0 flash drive market penetration rate will increase from 2012’s 3-4% and arrive at somewhere around 10%. As more and more leading manufacturers begin releasing USB 3.0 products into the market, the penetration rate is likely to approach 20-25% in 2014. The UFD module manufacturers have, for a long time, longed to see the price difference between USB 3.0 and USB 2.0 products reduced. In order for this to happen, controller IC manufacturers need to not only be able to offer the aforementioned Crystal Free solution, but also begin migrating to the more advanced manufacturing technologies and increase their products' compatibility with different NAND Flash components. To attain these goals properly, the investment in technological and human resources will undoubtedly need to be greater now than it has ever been during the USB 2.0 era. However, given that the size of the USB 3.0 flash drive market has not been expanding as expected and that it has become increasingly more difficult for the investment efficiency of USB 3.0 controller IC to support the cost of developing next gen products, more and more manufacturers are beginning to face increased pressure on the business end. The controller IC solutions developed by Innostor, Phison, and Silicon Motion are currently the choices favored by most UFD manufacturers. These three companies currently have a combined market share of 85-90%.Due to the persistent draining of their financial resources, the uncertainties within the market, and the aforementioned three manufacturers’ continuous promotion of their USB 3.0 Crystal Free solutions, an increasing number of vendors have begun to contemplate steering away from the controller IC market, while only a few are believed to be capable of competing effectively. Taking into account the aforementioned development, TrendForce believes the USB 3.0 controller IC market will soon end up being in a similar state as the market in the USB 2.0 era. That is, only 5 to 6 major vendors are likely to be supplying the major controller IC products.