SSD maker is on the cusp of a prosperous year
The office doesn’t look fancy for a tech company, resembling more of a computer repair shop with half-built computers and clumps of tangled wires on tables.
The researchers sitting in front of their monitors look like graduate students, dressed casually in jeans and shirts. Some walk across the office in flip flops holding a paper cup of coffee.
Although it may not be as high-end as Apple, Google or even Samsung Electronics, the start-up has made a global achievement in the five years since it was founded. And it plans to improve its market share to become a leader in the digital storage controller market.
The controller used HyperLink NAND (HLNAND) Flash technology that the company jointly developed with Conversant, formerly Ottawa-based Mosaid Technologies.
The achievement was huge because the biggest controller capacity available in the market even today is 2 terabytes.
However, the SSD controller did not go into mass production as it was not compatible with small-sized SSD.
Novachips recently succeeded in developing a controller that can hold 8 terabytes on a 2.5-inch SSD. The company is planning to mass produce the device and CEO Kim Jin-ki said it will raise the company to become a major global player with a huge market share next year.
“The controller is the brain of the [storage] system,” Kim said. “Without it, the memory is nothing but dumb and useless.” He said a controller plays a significant role because digital devices are getting more advanced and must meet customers’ higher demands.
Kim believes Novachips has the potential to grow into a company worth $1 billion, as it has both the hardware and software technology necessary.
Currently, Novachips is not a major player because competing companies such as U.S. chip maker Marvell and Taiwanese manufacturers dominate the market.
According to DRAMeXchange, LSI and Marvell currently hold more than 90 percent of the shares of outsourced orders for SSD controllers from major clients like Sandisk, Intel, Toshiba and even SK Hynix. Samsung Electronics makes its own controllers.
But Kim is confident that the tables will turn in favor of Korean tech start-ups.
“Other than Samsung Electronics, which is the market leader with a global share of nearly 30 percent, Novachips is the only company in the industry that provides next-generation flash memory [the HLNAND Flash technology] and SSD controller hardware with firmware [the program code solutions essential in SSD controllers],” Kim said. “What really separates Novachips from competitors is NAND Flash expertise. Novachips’ approach to flash storage design is to start from the lowest level.”
The global industry has taken a huge interest in the growing storage market as the world is now entering into a new phase of Internet and IT businesses, moving into cloud computing, Internet of Things and big data.
Next year is expected to bring a particularly large boost in the market. A report by KT Economics and Management Research Lab projected that the race to take the biggest share in the SSD market would kick off between major players including Samsung Electronics, Apple, Google and Facebook.
“The enterprise SSD market demand has been on the rise in recent years due to growth in mobile devices and cloud computing,” noted a DRAMeXchange report in May. “Because enterprise SSD customers have very high requirements for storage device performance, data encryption and preservation, as well as customized specifications, manufacturers are merging or making purchases of other companies to increase their competitiveness in addition to strengthening controller chip and Firmware capabilities.”
In a report released this month, the researcher projected that demand for enterprise-level SSDs will grow.
“Looking ahead to 2015, DRAMeXchnage projects that the adoption of SSDs among notebook PCs will increase to approximately 26 percent,” the report stated. “The usage rate of Enterprise SSDs, meanwhile, will remain strong on the back of the industry’s rising cloud computing demands, the needs of business smartphone users to retrieve and save data efficiently and the growing demand for higher storage capacities from data centers and server businesses.”
Korean companies like Samsung Electronics and SK Hynix are global leaders in SSDs, but when it comes to controllers and firmware, other than Samsung, many companies struggle to succeed in both areas.
Kim said that firmware development is the most difficult area.
“In the case of some of the companies, they have invested billions of dollars in trying to develop the solutions and even went out to acquire smaller competitors but to no avail,” he said.
Unless they can secure both controllers and solutions, Kim said existing NAND flash businesses would eventually hit a wall.
“In the past, companies only needed to manufacture NAND flash but today they need to sell it in a package with the controller and solutions all wrapped together,” the CEO said. “Only then can the user have a product without any glitches or problems.”
Kim said that the company has proven that its controllers are high quality because Samsung let the start-up use its high-end equipment to help make some devices, and manufacturing Novachips’ SSD controllers in 28nm process technology.
“If we were just another small company whose technology and products weren’t considered to be advanced and unique, would Samsung have given us the opportunity to use their advanced process technology?” Kim asked.
Interestingly, the CEO himself only recently joined the company although he had known about Novachips and worked with the Korean start-up on and off since 2012.
Kim is an engineer and played a key part in developing the foundation of Korea’s first NAND flash memory at Samsung Electronics. One of his close former coworkers is SK Group Vice Chairman Lim Hyung-kyu.
But Kim unexpectedly left Samsung in 1997 after 12 years to join Conversant, formerly Mosaid. He worked at the Canadian company for 17 years and served as vice president of the company’s research and development until July. In August, he became CEO of Novachips.
He is a well-known expert in the SSD field with over 500 patents under his belt.
Novachips was founded by Daniel Kim in 2009 with just five employees. Today, it has 50 or so employees, nearly half of whom are researchers. According to the company, half of them are experts who worked at major Korean conglomerates including Samsung and LG.
Daniel Kim, who worked at SK Hynix and Samsung Electronics, is the company’s CTO.
“Daniel is more into engineering than management,” Kim Jin-ki said. “Like many start-ups created by engineers, they are more focused on development and research rather than public relations.”
So despite Novachips’ advanced technology, Kim said the biggest problem of running a start-up in Korea is the so-called “Korea discount.”
The CEO said that Novachips is discredited because its headquarters are in Korea.
Even though Novachips has exclusive technology it is overlooked as even Korean conglomerates look for M&As outside the country.
“If Novachips started off in Silicon Valley it would have already emerged as a leading global company,” Kim said.
He stressed that because of the company’s setbacks, it is crucial for the company to gain the respect of larger companies and the market over the coming years by taking a major stake in storage systems.
“We need to create an environment where there’s a premium instead of a discount on start-ups created and operating in Korea,” Kim said. “If you look at our partners like the company that makes the package for our HLNAND Flash and SSD controller, one would notice that they are really good at what they do. You can’t find such good quality outside of Korea and the problem is that many companies are discredited just because they are in Korea.”
He said the government-led policies to create an environment favorable to start-ups are welcome but that it is more important that the industry makes its own changes.
He added that young people are too focused on working for a conglomerate.
“For me and many of our staff who have worked in conglomerates, we know what it is like to work at such large organizations but many of the young people, especially due to social pressure from friends and parents who keep asking why aren’t you working at Samsung or LG, continue to aspire to work at such large organizations,” Kim said. “But in North America, you learn that young people there prefer to work at smaller companies or start their own business because the work that they do wouldn’t be noticed or encouraged at a large organization.”
Kim said the overall investment environment poses another problem because Korean investors are small and lack expertise.
“The investment scale comparing North America to Korea is about 10 times as big,” Kim said. “Even attracting 2 billion won in investment from a Korean investor is considered a great achievement for a start-up here. But if it were in the United States, that investment would have been 20 billion won [$18.2 million].”
But he said expertise was the biggest problem.
“Investors in Silicon Valley are mostly people who have started their own company and succeeded or those who are an expert in the field. When they look into a project, they know right away if that business proposal would work or not,” Kim said. “In Korea, it is more about relationships. Huge amounts of investment can go to a start-up whose technology is questionable and that has no products to show. But when you look into the reason, it turns out that the CEO of the start-up happens to be a relative of a prominent figure like a conglomerate chairman.
“It’s surprising how investors wouldn’t even question the viability of a business before placing their investments.”
Kim advised others who are planning to start a business not to jump in without a specific technology or business plan. “Unless you have a specifically unique technology and a business model, you wouldn’t succeed because someone else would have already been doing the same business that you have been considering,” Kim said. “When everyone is doing a business that is very much alike, what happens is that it would turn into a competition of price and at the end, the bigger company with better funding will always win.”
He also said start-ups need to have a better understanding of intellectual property and patents in order to protect against larger competitors.
“Novachips has almost 300 patents and a strong product that is certified in the market, which makes it difficult for conglomerates to overrun us,” Kim said. “To any major conglomerates that try to squash us in the market, we say bring it, because we can defend ourselves strongly with the patents we have and the products we have developed.”
BY LEE HO-JEONG [firstname.lastname@example.org]
More in Industry
From Europe with love
SK Holdings creates hydrogen investment business unit
'Netflix law' to go into effect from Dec. 10
LG Energy Solution launches, aims for ￦30 trillion sales by 2024