SanDisk’s Latest Flash Storage Solutions Target The Auto Market

by Trefis Team
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SanDisk Corporation (NASDAQ:SNDK) had a solid year on the back of a robust performance from its solid state drive (SSD) storage division, with divisional revenues growing by over 60% on a year-on-year basis to $1.91 billion for the full year. On the other hand, the company saw weakness in its retail channel near the year-end, which restricted revenue growth in that division. Similarly, embedded storage (excluding SSD products) revenues also witnessed a 10% y-o-y decline over the previous year to $1.49 billion. Despite a decline in embedded and removable storage revenues, SanDisk’s full year revenues rose by 7.5% over the previous year to $6.6 billion. The company recently announced its intention to manufacture and sell embedded NAND flash drives and SD cards for the automotive industry, to be used in next-gen cars and other vehicles. [1] Below we take a look at the potential market for automotive-grade NAND flash and how it could impact SanDisk’s embedded and removable storage divisions.

See our complete analysis of SanDisk here

Automotive iNAND Flash Storage Solutions

SanDisk announced the launch of its iNAND flash storage drives and SD cards to be used in automobiles earlier this month. [2] The NAND flash drives will be embedded in cars and vehicles to support various features such as GPS navigation, 3D mapping, entertainment systems and advanced driver assistance systems (ADAS). Most of these features are increasingly being included in the latest car and truck models. NAND flash solutions are crucial to cars connected to the internet and to their auto infotainment solutions. According to a Gartner report, there could be as many as 250 million “connected cars” on the road by 2020, up from its previous estimate of 150 million. [3] This roughly translates to about 20% of the on-road traffic. The addressable market for storage in automobiles makes NAND flash solutions for the industry a massive opportunity for SanDisk to venture into.

As new car models increasingly start offering Wi-Fi in cars to help users download important information and applications while driving, there will be the need for higher cache memory to store and access data. SanDisk’s Automotive iNAND embedded flash drive has a capacity of up to 64 GB and sequential read/write speeds of 120/30 MB per sec. The Automotive SD cards also have a capacity range of up to 64 GB with read/write speeds of up to 20 MB per sec. Both the flash drives and the SD cards meet the AEC-Q100 automotive specifications laid out by the Automotive Electronics Council, and can run in temperatures ranging from -40°C to 85°C (-4°F to 185°F). [4] The introduction of automobile storage solutions can simultaneously benefit SanDisk’s removable storage and embedded storage divisions.

Impact To SanDisk’s Embedded And Removable Storage

SanDisk is one of the largest global manufacturers of NAND flash products, which are used as embedded storage in smartphones, tablets and other consumer electronic devices. Embedded storage products generated about 22% of SanDisk’s overall revenues in 2014, but the segment makes up approximately 12% of SanDisk’s value, according to our estimates. [5] According to SanDisk’s estimates, its total addressable market (TAM) for smartphone, tablet and other portable device embedded storage is expected to grow from over $12 billion in 2013 to nearly $18 billion by 2020. The growth in the number of smartphones and tablets sold worldwide should contribute positively to the total storage units sold by SanDisk. The number of smartphones in use is expected to increase from around 2 billion currently to around 6 billion by 2020. [6] However, since much of the growth is expected in Asia Pacific region with low-end smartphones driving growth, it is likely to restrict revenue growth. [7] As a result, SanDisk intends to expand its presence across other avenues (such as the automotive segment) in the coming years. We currently forecast SanDisk’s share in its embedded storage addressable market to decline from an estimated 11% in 2014 to under 8% through the end of our forecast period. If the total addressable market rises to over $20 billion by the end of the decade, with SanDisk’s share in the market stabilizing to about 9% of the market in the same period, there could be a 5-6% upside to our valuation for the company.

On the other hand, SanDisk’s removable storage sells USB flash drives, storage cards for imaging devices and SD/micro SD cards for use in various consumer electronic devices. Net revenues generated by SanDisk’s removable storage division have declined at an average of almost 7% since 2011. According to our estimates, SanDisk’s Other Removable Storage division (which includes storage other than USB and imaging storage) has witnessed a 10% annual decline in revenues through the same period. The company intends to reverse the trend, as evidenced by the introduction of a revamped product line in the last few months. The company launched the iXpand flash drives for Apple devices and USB flash drives for Android-based devices in an attempt to boost product sales. With the introduction of the Automotive SD card, the removable storage revenue stream could get an additional lift. We currently forecast SanDisk’s Other Removable storage division revenues to be around $1.2-$1.3 billion through the end of our forecast period. If the revenues rise to over $1.5 billion by the end of the decade, complemented by a rise in margins, there could be a 5% upside to our price estimate for the company. You can modify the interactive chart below to gauge the effect a change in removable storage revenues can have on our $89 price estimate for SanDisk.

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  1. SanDisk Introduces Automotive Grade Flash Storage Solutions for Infotainment Systems and the Fast-Growing ‘Connected Car’ Market, SanDisk Press Release, February 2015 []
  2. SanDisk enters the auto industry, sets sights on wearables, Computer World, February 2015 []
  3. Gartner Says By 2020, a Quarter Billion Connected Vehicles Will Enable New In-Vehicle Services and Automated Driving Capabilities, Gartner Press Release, January 2015 []
  4. Automotive Storage Solutions, SanDisk Product Description, February 2015 []
  5. SanDisk Quarterly Metrics, SanDisk Investor Relations, January 2015 []
  6. 6 billion Smartphones in Use by 2020, Yahoo News, September 2014 []
  7. With Mobile Internet Ad Spending Growth of 210%, China Is The New Leader In The Industry, Daze Info, September 2014 []
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