Jiwei Network reported that on April 25, it was reported that The world's largest supplier of NAND Flash control chips and the largest SSD master shipper, Silicon Motion, is exploring potential sale transactions, and some acquirers have expressed interest. In response to this news, Huirong Technology quickly responded: we will not respond to any market rumors.
This simple and official response is also quite meaningful, Huirong Technology did not directly deny the acquisition rumors, it can be said that it leaves enough room for its future changes. As the industry leader of today's SSD master control chips, what is the logic behind the rumored sale of Huirong Technology? If the sale is successful, what changes will it bring to the entire storage market, especially the domestic storage master control chip manufacturers?
There are two major logics behind the rumored sale
For the above news, Jiwei Network interviewed Lin Wen (pseudonym), a veteran in the industry. Lin Wen admitted that it was indeed more unexpected to hear this news. In fact, Huirong Technology has been developing in the industry for more than twenty years, and has never heard the news that it is going to sell. And Huirong Technology is also more special, it is a company headquartered in Taiwan, but it is listed in the United States. According to his understanding, the shareholders of Huirong Technology are also relatively scattered, in fact, the shares of its management may be relatively limited, so his control over the company is certainly not so strong. Therefore, "I personally prefer to think that there are companies in the industry that want to acquire Huirong Technology, rather than Huirong Technology itself taking the initiative to sell." Lin Wen said.
Solid-state drives (SSDs) are mainly composed of three parts: the main control chip, the flash memory particles and the cache unit. Among them, the most core components of the main control chip, but also the highest technical content of the part, which undertakes to communicate with the host, control the data transmission of flash memory and run FTL algorithms when the hard disk is working, etc., the role in the solid-state drive can be compared to the computer CPU (the main control also has its own CPU chip), which has an important impact on the performance, service life and reliability of the solid state drive.
Huirong Technology is one of the main manufacturers of SSD master control chips. Founded in 1995 and brought to Taiwan from Silicon Valley in the United States, the IC design company has experienced many crises such as mergers, financial crises and lawsuits, and is now the world's leading design company for flash memory (NAND Flash) control chip devices.
It is understood that Huirong Technology has a full range of products on the consumer SSD controller, covering SATA to PCIe. In the consumer controller chip market, at present, Huirong Technology and Qunlian in Taiwan have a relatively large influence, of which Huirong Technology's market share is as high as 30%.
Observing the recent financial report of Huirong Technology is also very eye-catching. According to publicly available data, Huirong Technology's revenue increased by 71% year-on-year in 2021, mainly due to the growth of its SSD controller sales. The company expects revenue to grow again by 20-30% in 2022, when its 12/16nm products will be the main growth driver.
From the perspective of market action, in February this year, Huirong Technology confirmed that it plans to launch its first PCIe Gen 5 SSD controller for enterprises before entering the consumer field. PCIe's 5th Generation SSD Controller will be available later this year. It can also be seen that Huirong Technology, which has a "name" due to the consumer electronics field, is also preparing to enter the enterprise field and data centers.
The above facts also reflect that Huirong Technology's revenue continues to remain stable and there are no operational problems. In this way, Huirong Technology really has no need to sell. So, what is the logic behind the sale of Huirong Technology? Lin Wen believes: "Huirong Technology may be sold by the following two logics: one is to be bought by particle factories such as Micron, Hynix, Solidigm to strengthen their strength in the storage field; the other is that it may be bought by CPU companies, and by taking down Huirong Technology, they can eat all the two major areas of computing and storage." ”
In an interview with Luo Ting, marketing director of Shenzhen Deyi Microelectronics, he analyzed: "On the one hand, a larger company is willing to acquire (Huirong Technology), indicating that the value of storage master control chips in the semiconductor field is recognized, and its development prospects and potential are also very promising." On the other hand, there are not many incremental areas in the semiconductor industry now, the largest incremental area is the data center, and Huirong Technology is also prepared in the data center, so I think the acquirer first values the value of storage, and the second is the value of the data center. ”
SSD market potential is endless Domestic manufacturers or to meet the development opportunities
From a market perspective, solid-state drives (SSDs) do have a "bright future." Due to the smaller size and lower power consumption of SSDs, mechanical hard disk drives (HDDs) are gradually being replaced by solid-state drives (SSDs). In recent years, HDD hard disk shipments have been declining, but SSD hard disks have been growing at a high speed. According to the 2020 annual data released by Trendfocus, the total shipment of SSDs in 2020 was 330 million units, an increase of 20.8% year-on-year. In the same period, HDD was 259 million pieces, down 18% year-on-year, and SSD shipments exceeded HDDs. By the first quarter of 2021, SSDs continued to exceed the HDD trend in shipments, and the gap between the two sides began to widen. The three major hard disk drive manufacturers shipped a total of 64.17 million HDDs in the first quarter of 2021, while major SSD suppliers shipped a total of 99.438 million SSDs in the quarter. The shipment ratio is close to 2:3.
In the long run, the size of the SSD market is expected to continue to grow. Research and Markets forecasts that the global SSD market size will be $34.86 billion in 2020, and this figure is expected to increase to $80.34 billion by 2026.
Chart: Global solid-state drive (SSD) shipments, quarterly, from 2013 to 2021; source statista
As one of the three major pieces of SSD, the role of the main control chip is self-evident. In recent years, the SSD master control market is also a changeable situation, american companies are the pioneers of the SSD master control industry, but declining, the followed by Taiwan companies with better cost performance to become the mainstream, while benefiting from the country's recent support for chip localization, Chinese mainland market has also risen a number of SSD master control manufacturers, is becoming the main battlefield of the third wave of SSD master control.
So, with the sale of Huirong Technology, what is the impact on domestic storage control chip companies? Lin Wen believes that "if Huirong Technology is sold, no matter who the acquirer is, it means a change in the market." As a result, customers will need more options to guarantee supply in order to maintain a stable and balanced supply. This is undoubtedly a good opportunity for domestic enterprises to develop. ”
In this view, Luo Ting is deeply convinced: "The development of domestic storage control chip enterprises is very fast, and domestic manufacturers have blossomed and shown their magic." ”
He went on to mention that on the whole, there is still a gap between Chinese mainland manufacturers and overseas manufacturers in terms of company size and globalization. However, compared with industry leaders, there is basically no technical generation difference in the domestic storage control chip industry, but only the difference in the size of the enterprise. "In fact, from the technical point of view of the market segment, in the past, overseas manufacturers can do it, but Chinese mainland companies can no longer do it." At present, the technical level that the industry's leading enterprises can achieve can be achieved by domestic enterprises. In the past three or five years, the rise of Chinese mainland semiconductor power has brought an impact to the industry, and overseas manufacturers have to consider mergers and acquisitions to continue to maintain their overall advantages in the future competition. Luo Ting analyzed it like this.
Looking at the global control chip market, Samsung and Western Digital-based original manufacturers occupy about 45% of the market share; Huirong Technology, Qunlian Electronics, Marvell and other manufacturers occupy a total of more than 40% of the market share; however, it is worth affirming that the current domestic SSD master control chip manufacturers include Deyi Microelectronics, Guoke Micro, Lianyun Technology, Hualan Micro, Yingren, Yixin, Derui, Jiangsu Huacun, etc. are constantly expanding their influence.
The storage master control manufacturer Deyiwei also publicly stated in March that it was preparing for an IPO. It is understood that the enterprise-level/data center PCIe5.0 SSD controller of Deyi Micro will be released in 2023. The consumer SSD field has formed a multi-product portfolio of PCIe4.0, PCIe3.0 and SATA and large-scale shipments, which has a huge impact on domestic storage. The market share of embedded storage eMMC/UFS is also increasing.
Therefore, when it comes to the future opportunities of domestic memory control chip manufacturers, Luo Ting added: "For domestic semiconductor manufacturers, the biggest opportunity is the market recognition of domestic semiconductors. In the past, Chinese system manufacturers were often more willing to choose overseas head suppliers, but now whether it is mobile phone manufacturers or server manufacturers, they pay more attention to the diversification of the supply chain, and also recognize the development and innovation of domestic suppliers. On the other hand, China's market is also large enough, for example, in terms of cloud services, it is understood that in 2021, the scale of the mainland cloud service market will exceed 170 billion. ”
However, Luo Ting also pointed out: "Domestic semiconductor manufacturers still have two major challenges to face, one is that the entire domestic semiconductor talent volume is still relatively small, and the head manufacturers that run out have greater attraction to talents." The second is the international pressure faced by domestic manufacturers, and international expansion is the general trend of the future. ”
(Proofreading/Holly)