Q: A very rare feat, Phison Electronics experienced continuous sequential revenue growth throughout 2009. And with strong orders coming in, the company is reportedly on track to have a prosperous Q1 2010. What do you attribute Phison's success to?

A: Phison achieved record revenue in 2009, and we are optimistic about Q1 2010 as the company continues to prosper with the growing momentum of NAND Flash. Phison's success is attributed to the uniqueness of the company; there is no other company in the industry with our business model. We are not simply a module house or fabless company—we act as both. Phison is a NAND Flash solution provider that supports brand name companies. With our advanced controller technologies and system integration expertise, we provide competitive products to our customers that allow them to focus on managing their brands and not worry about technical issues. Our customers view Phison as their research and development (R&D) center, manufacturing site as well as industrial designer. Moreover, Phison customers greatly benefit from our partnership with upstream Flash vendors; they never have to worry about NAND Flash supply shortages. A stable supply is guaranteed in this dynamic industry.

Q: Phison recently announced that it will make an advance payment of $50 million for NAND Flash chips, conveying that the company anticipates growth in the NAND industry. What markets do you see driving the growth of this sector?

A: As I discussed earlier, NAND Flash is a fast-growing market. In the past five years, the NAND Flash market grew at a compound annual growth rate (CAGR) of 16 percent. We expect this growth to continue at the same speed in coming years due to the emergence of portable devices. We believe this market is still young, and there will be an increasing number of portable device applications surfacing in the future. Currently, 70 percent of NAND chips are consumed in consumer markets (e.g., mobile phones, digital still cameras and MP3 players), and volume is still growing. We see NAND adoption in systems picking up as well. Solid-state drives (SSDs) and embedded memory in mobile phones are the killer applications today.

Q: Phison has remained successful primarily as a supplier of NAND Flash solutions; however, are there other memory technologies that the company is eager to explore?

A: Flash vendors are working on alternatives to Flash such as phase-change memory (PCM), resistive random access memory (RRAM) and 3D memory to ensure that cost-effective non-volatile memory (NVM) is available in the future. In other words, they are trying to keep up with Moore's Law. Other emerging memory technologies such as magnetoresistive RAM (MRAM) and ferroelectric RAM (FeRAM) have their niche in aviation, automotive and medical. These markets are less cost sensitive and are therefore not addressable by NAND Flash.

It is not clear which one of these alternatives will end up replacing Flash. NAND players are interested in technologies that provide high capacity and high performance at low cost and can compete with incumbent NAND Flash technology. In the next few years, NAND Flash will still be the most cost-effective NVM in the market. As a NAND Flash solution provider, Phison will support any kind of NVM as long as the chip is compatible with NAND Flash in terms of cost and performance.

Q: Apple recently unveiled its highly anticipated iPad, which relies heavily on NAND Flash. What impact will this product have on the NAND Flash sector?

A: Apple uses NAND Flash in all its products, making a great impact on the NAND Flash industry in terms of capacity and pricing. Apple certainly knows that NAND Flash provides better performance than heavy, power-hungry hard drives. It is very exciting to see Apple introduce new, revolutionary products each year and lead the trend in NAND Flash application. There is no question that there will be more electronic devices that follow suit and join the NAND technology bandwagon.

Q: The development of multi-bit-per-cell technologies, such as three-bit-per-cell (3bpc) and four-bit-per-cell (4bpc), has increased due to the technical challenges associated with process node migration and the surplus/declining pricing in the NAND Flash market. How long do you believe it will take to commercialize 3bpc/4bpc in Flash drives, memory cards, etc.?

A: It is already commercialized. Our controllers have been ready for 3bpc since 2008, and we are already using 3bpc chips in cards and Universal Serial Bus (USB) Flash drives. Phison's controllers are of the very few that can manage 3bpc chips. Other NAND Flash vendors and controller makers are lagging in the 3bps race. Eventually, everyone will be able to provide the same solution, but not with the same performance. We will continue to use 3bpc in consumer products, but not in systems. Single-level cell (SLC) and multi-level cell (MLC) will be used in SSDs. We are not comfortable using 4bpc technology. The 16-level 4bpc technology sacrifices too much reliability and performance and there is little cost benefit received. We believe it is only good for content.

Q: The demand for data security solutions has risen with the increasing amount of data stored in mobile devices. ABI Research predicts the mobile security market to surpass $4 billion by 2014. As a company that has recently begun to offer security storage solutions, do you feel that the integration of secure applications in mobile devices will soon be a requirement of consumer electronics suppliers?

A: Data security will definitely be a necessity in consumer electronics, and we have focused a great deal of our resources on this. We hope to provide a whole series of security products in the future as this is where the margins and market growth lies. However, it takes experience and reputation to address the security market as it is more closed than the open computer market. Phison currently offers security applications in cards and USB Flash drives. A series of SSDs with Advanced Encryption Standard (AES) crypto will join our offerings later.

The demand for authentication and security solutions will continue to drastically grow given the nature of cloud computing (i.e., all digital files stored in one area). We recently formed a joint venture with a veteran company in the security market which will leverage the strength from each company to successfully address the security market in cloud computing.

Q: According to C.J. Muse, an analyst at Barclays Capital, memory makers will finally increase capital expenditures in 2010 after a very difficult 2009, accounting for 42% of the chip industry's capital spending. What might this spending increase trigger, and what markets will benefit?

A: Overspending might trigger another price slump, which proves good for some applications such as SSDs as they rely on a low price point to take off. Many people believe SSDs will take a significant share of the hard disk drive (HDD) market and will be able to address the optical market in the long run.

This is a very dynamic world; you never feel the current spending is enough when demand is there. All we can do is remain cautious and be very vigilant about market vibrations.

Q: The transition from using HDDs to SSDs in today's industry promises increased performance and power value. However, the usage conditions and requirements of SSDs greatly differ from other devices that use NAND memory technology such as MP3 players and USB devices. Looking forward, what challenges do you feel SSDs will face with NAND technology?

A: I believe the performance of SSDs is much better than HDDs in terms of sequential data transmission, random input/output operations per second (IOPS), etc. However, the reliability of NAND Flash within SSDs is always a concern because SSDs are used in systems that store a large amount of important data. When the reliability of NAND Flash lowers as process scales, the SSD controller takes on the responsibility of maintaining system reliability. The SSD controller manages NAND Flash with advanced error-correction code (ECC), global wear leveling and multi-channel, which needs a large built-in cache. The challenge here is that when the cost of NAND Flash drops, the cost of the controller actually goes up. Not only is the built-in cache adding cost, but the R&D expense is also high, and it takes longer to develop the product.

Today, there are many SSD controller makers emerging, but I don't believe these companies will survive because their profit will not outweigh the heavy R&D cost. Phison is in a much better position than others as we provide SSD-finished products in addition to controllers.

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