Why SSDs are still so expensive

news analysis We solid-state drive (SSD) lovers should throw a party and hire Jimmy McMillan to represent us. Because, you guessed it, the price of this type of storage device for computers is still just too damn high! So how high is high?

Though priced significantly lower than it was a few years ago, the SSD is still possibly the most expensive component inside the handful of high-end laptops on the market. Unless there's a rare deal or big promotion, a 120GB SSD generally goes for around US$200 to US$250 these days, depending on the connection type (SATA 2 or SATA 3) and speed.

It's worth noting that, for most computers, you'd need one that's 120GB or larger. This is because a 64GB SSD, though will get the job done, can hold just the OS, essential software applications, and not much else.

The price gets progressively higher as capacities get larger. A 240GB--which is the "sweet spot" that enjoys the balance of relatively large storage space while remaining attainable for consumers--now goes for between US$420 and US$550. Starting at 512GB, SSDs can cost thousands of dollars, too expensive for most of us to afford or justify.

Overall, you can easily find a budget laptop that costs the same or less than you'd pay for some SSDs. On the other hand, traditional hard drives are much more affordable, with 2TB drives costing just around US$80. Basically, based on the cost per gigabyte, SSDs are about five to 10 times more expensive than hard drives. Obviously, the comparison stops here, as traditional hard drives offer very little else for you to fall in love with. But the question remains: why are SSDs still so expensive, especially when the prices of system memory and thumbdrives have gone down significantly over the past few years?

To find out, I asked the manufacturers themselves. Most are tight-lipped on the issue, at least publicly. But in the end, I was able to glean enough information to say that there are two major reasons. The first is the technology itself.

According to Micron, maker of the Crucial m4, SSDs primarily use NAND Flash technology, which adheres to a completely separate pricing scheme than DRAM (used for system memory). SSDs, those that are used for computers, typically use higher-performing components, which sell at higher prices than the components used in USB drives and flash memory cards.

In addition, an SSD requires a complex process of assembly for its components to work well together. For example, the controller and firmware must be carefully integrated to get the most out of the design. On top of that, SSDs are generally put through hours of compatibility and stability testing. These steps add to the cost of making them.

The second reason is the general law of supply and demand. And in the case of SDDs this applies in two areas. The first one is the market itself. Since the demand for retail SSDs on the market is rather low, vendors make less profit--if at all--from them and therefore have to increase the price to cover the production cost. This is a catch-22, as the high pricing is also a reason why the demand is low, mostly because general consumers just can't afford them.

The second aspect, which is more interesting, is that large SSD manufacturers typically have direct access to the supply (or large contracts for it). This means they have the power to hoard the raw materials used to make SSDs, making smaller manufacturers forking out higher prices for their share. They in turn have to increase the price for the final product. This wouldn't be a problem, however, if the large manufacturers also focused on making SSDs, which they don't, at least for now. And there's a reason for it.

The majority of SSDs on the market come in the standard 2.5-inch design so they can be used where traditional hard drives would be. The most popular usage of SSDs among consumers is as the main drive of a computer. This market, however, has always been dominated by hard drives, so naturally, manufacturers would first want to find another market where there's less competition. And there just happens to be one: mobile devices such as smartphones and tablets.

Unlike computers, most if not all mobile devices use solid state as storage. Due to the compact design, all of them require SSDs in proprietary forms that can't be used in any other device. This, by the way, is something that can easily be done with SSDs, while impossible with hard drives. The success of the iPad and the iPhone as well as Android-based devices only prove that investing in solid-state storage for mobile solutions is currently a much more profitable business than making SSDs for computers.

Along these lines, HP's decision to kill the TouchPad only means there's a future for retail SSDs. How bright that future is going to be, however, depends on when the demand for tablets slows down. Until then, expect the price of SSDs to remain rather constant, with slow degradation as we've seen in the past few years.

The good news is that major hard-drive makers, such as Western Digital, Samsung, and Seagate, have also joined the SSD club, mostly because the hard drive seems to have gotten really close to its top potential in terms of throughput speed. Hopefully this will help drive the competition and help further reduce the price of standard SSDs.

In the meantime, it's predicted that prices of SSDs will likely drop a big notch by the end of the year, after the announcement of the iPhone 5. That's when vendors and suppliers have some idea about how much solid-state storage could be allocated for SSDs. Until then, don't forget to keep buying, because--you know it--prices also get lower with mass production, which is driven by public demand.