Have we reached the peak of demand?

Roberto Saracco July 4, 2017 Blog 283 Views

Lexar 512GB compact flash card was announced at the end of 2016, but its cost has not found a sufficient demand to make it profitable. Image credit: Lexar

Micron, the company that acquired Lexar, the maker of top of the line storage media -compact flash, SD, flash pen …- , some time ago, in 2006, has announced the termination of the Lexar brand and product: Lexar is one of the largest and most advanced companies in the solid state storage media, they announced at the end of 2016 their new top-of-the-line 512GB compact flash card. That card had a premium price of 1700$, although in June 2017 it plummeted to 1200$, which is not unusual for this market sector. Increased capacity goes hand in hand with decreased cost, although normally you see a 20% decrease in a year as a new product, with more capacity, is put on the market, in this case the drop was 30% in 6 months and was not triggered by the release of a better product, rather by a slow demand.

Storage has become a commodity, it has seen a decrease in margins after a rebound in 2010, and the continuous improvement in capacity, that used to call for a premium price generating increased margins, no longer work. It seems that we have reached a point where increase in compact flash/Sd card storage is no longer finding a market willing to pay a premium price.

It is not the only area. Television screens have become so big that you need to change your home to fit a larger one, hence we will be facing a slower demand and weaker revenues generated by larger screen through premium pricing. Likewise for bandwidth where we see companies charging the same independently if you get 100, 300 or 1,000Mbps.

Technology in its exponential progress is reaching a point where further progress is not perceived by the customer as worth paying for (or at least by a sufficient number of customers to create a worthwhile return on investment).

In the next decade we are likely to see increased performance demand, as result of AR (augmented reality), at least this is my bet. I mention AR and not VR because AR is going ot be used by a much larger audience that VR and hence it will create the volumes so desperately needed by ICT. This will fuel, for a few years more, the request for new devices and higher bandwidth. The problem on the bandwidth side is that most of the top offer today is already overshooting the needs we will have and it has come at a time where it is impossible to attach a premium price to it. It will be difficult to charge more in the next decade, just because, eventually, people will make use of it.