(iTers News) - Western Digital has signed a deal to acquire NAND flash memory chip-based data storage device maker SanDisk in a cash and stock transaction valued at US$19 billion, promising to stir ferments in the competitive landscape of global SSD or solid state drive market.

Under the deal, SanDisk’s outstanding stock was valued at US$86.50 per share.

The acquisition is the latest of HDD maker Western Digital’s spending sprees to buy secure the supply line of the most crucial technology building block in the SSD manufacturing ecosystem, as SanDisk is working together with Toshiba to jointly construct a 3D NAND flash memory chip fabrication facility.

The HDD maker is also spurring its effort to consolidate the manufacturing capacity and research operations of Hitachi Global Storage, as the Japanese HDD maker plans to recalibrate its Dalian, China HDD plant into the manufacturing facility for SSDs.

The spending binge is a culmination of its efforts to keep up with irreversible shift in demand for data storage devices, as SSDs are increasingly replacing traditional legacy HDDs in data center servers, desktop PCs, and notebook PCs.

The consolidation is also a harbinger of what will be going on in the global SSD market, as a growing number of data center server vendors are turning to SSDs to accommodate explosions in data traffic.

Coming built with NAND flash memory chips and memory controllers on a tiny substrate, SSDs far outperform HDDs in data read and write and per-space data storage density, promising to replace HDDs in huge volume and create new bonanza demand for memory chip makers. Yet, they are still costlier.

The higher per-bit costs of the SSDs have slowed down the adoption of SSDs. This explains why memory chip makers and SSD vendors are now turning to 3D NAND flash memory chip technology. Unlike 2D planar NAND flash memory chips, the 3D NAND flash memory chips are a lot faster in the data read and write speed, more durable, and, more importantly, are cheaper, because they can incorporate more of memory cells in a given silicon space.

Western Digital is cash-rich enough to finance the deal, as the company had recently secured investments from Tsinghua Unigroup of China.

The state-funded Chinese technology investment company invested US$3.78 billion  in the HDD maker for a 15% stake.

HDD and SSD vendors are well aware that the only way to compete in this business is to be vertically integrated.  About 80% of an SSD's manufacturing cost is NAND flash chips, and HDD makers feel very strongly that they need to produce NAND flash chips in order to remain competitive.
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