SanDisk’s 128GB MicroSD Card Should Provide Near-Term Benefits

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Over the last few quarters, SanDisk (NASDAQ:SNDK) has witnessed a declining revenue mix of its core offerings such as removable flash memory cards for smartphones, tablets cameras and other digital media devices. [1] Meanwhile, the company’s enterprise-class solid state drives (SSD) sales have gone up due to strong demand for enterprise storage products, though the hype surrounding solid state drives has somewhat subsided in the last few months as software-defined storage seems to be gaining traction. SanDisk acquired software-company Flashsoft in early 2012 to bolster its software offerings, the company recently upgraded the software version to complement software-defined storage solutions.

In addition to focusing on software-based storage, SanDisk is looking to bolster its core product offerings with a newly introduced 128 gigabyte (GB) microSD card. This is the first capacity upgrade in a microSD card in over three years. Scaling up the capacity of the existing microSD cards from 64GB to 128GB was a difficult task, as the small dimensions of a standard card offered hardly any scope for expansion. This was evidenced by the fact that it took almost three years to come up with a technology to double the existing capacity; capacity per card has now increased a thousand-fold from 128 megabytes (MB) cards in 2004 to 128 GB now (1 gigabyte = 1,024 megabytes).

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The World’s Highest Capacity MicroSD Card

MicroSD cards are universally available in a standard 11mm*15mm dimension (1 inch = 25mm), which gives them the ability to be used across a number of devices such as tablets, smartphones, cameras and portable music players. Given the small physical size of microSD cards and minimal scope of scaling up, their capacity had been limited to 64 GB since 2011. SanDisk recently announced the launch of 128GB Ultra MicroSDXC card to finally break the capacity deadlock. To accomplish this, SanDisk developed a new propriety technology which stuffed 16 memory dies or semiconductor blocks into the card, each ‘thinner than a strand of hair’. [2] In addition to product sales, the new technology could fetch royalties for the company going forward.

With growing high-definition (HD) videos and music content, it is common for users to always seem to run short on memory. Recently, storage companies have come up with solutions to address memory shortage problems. Hard disk manufacturers such as Western Digital (NASDAQ: WDC) and Seagate (NASDAQ:STX) have come up with wireless drives or ‘personal cloud’ storage drives – basically unified storage which can be simultaneously accessed across a range of personal devices including laptops, computers, tablets and smartphones. Additionally, public cloud accounts such as OneDrive (previously called SkyDrive) and Dropbox have gained popularity among the users due to low investment and their ease of accessibility. [3] However, all these solutions involve a network connection (in case of public cloud options), proximity to the drive (for wireless drives) or a local-area connection (for personal clouds), which makes it less convenient for an average user.

The simpler solution, from the customer’s perspective, was to scale up the capacity of a single storage unit. With this in mind, SanDisk has rolled out product specifically targeting Android smartphone and tablet users. Traditionally, the main issue with high-capacity storage cards has been low data-transfer speeds, but SanDisk claims that the read/write speed of the Ultra MicroSDXC is higher than a standard microSD card. Although the company’s claims are true, comparing to class 4 or class 6 microSD cards, most of the latest smartphones and tablets use class 10 microSD cards. 32/64 GB class 10 microSD cards are almost twice as fast as their 128GB equivalent. [4]

In terms of pricing, SanDisk introduced the 128GB Ultra MicroSDXC for $200 initially, which translates to just over $1.50 per GB. Within a couple of weeks of its launch, the product price declined to as low as $120 as the card gained popularity. However, the 128GB Ultra MicroSDXC is still nearly three times more expensive than a 64GB card, which suggests steep pricing by SanDisk. Looking ahead, the prices are likely to decline further which could make the memory card even more likely to gain popularity among a majority of customers. Taking into account the growing need for data, we expect the storage capacity per unit sold to grow through the end of our forecast period.

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Notes:
  1. SanDisk Quarterly Metrics, SanDisk Press Release, January 2014 []
  2. SanDisk Introduces Highest Capacity 128GB Memory Card, SanDisk Press Release, February 2014 []
  3. OneDrive Pricing Plans, Microsoft Live, March 2014 []
  4. SanDisk 128GB MicroSD Card Review, Storage Review, March 2014 []