Mini Storage Drives Poised to Make Waves

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USB flash drives, those tiny storage devices no bigger than a pack of gum, are steadily gaining momentum as a
fast, reliable and convenient tool for taking files such as digital audio
and video clips from one computing device to another. But experts say USB
flash drives face an uphill battle for widespread acceptance, as manufacturers scramble to educate the
populace about them and ease their security concerns.

A USB flash drive (UFD) is a portable piece of memory — sometimes about the size of magic marker, that lets users store and transport
computer data.

The plug-and-play devices allow users to use a drive that is incredibly
simple but yet enjoys widespread compatibility via the USB interface.

Analysts and flash memory specialists say USB flash drives, based on the USB
adapter standard, are popping up with increasing frequency in
the U.S. as a modern-day version of a floppy disk or CD-ROM.

Gartner analyst Joe Unsworth said some 15 million units will have shipped
before by the end of 2003. Unsworth told internetnews.com that
although the market remains in its infancy, drastic declines in the flash
memory chip costs in 2002 and the first half of 2003 stimulated consumer
adoption.

The devices, which typically store from 8 to 512 megabytes and cost anywhere
from $10 to $100, are extremely popular in Asia, according to analysts.

Jim Handy, director of Nonvolatile Memory Services at Semico Research, said
they are everywhere in China, where the popularity is driven by people who
don’t own computers and rely on computers at Internet cafes to create files.
The drives, which are multi-colored and come in pen shapes and other form
factors, come in handy there.

Handy said Asia is spurring the growth and innovation of this burgeoning
removable storage market. There, he said, it is customary to build devices
that perform multiple functions. Handy was recently in Taiwan, where he saw
some flash drives with MP3 players, FM radios and voice recorders built into
one unit.

While USB flash drives in Asia appear to be in full swing, with companies
such as Trek, Netac, Luwen and Apacer pumping them out en masse, the U.S.
has been a bit to slow to recognize them as useful mediums for moving data
between computers.

To spur adoption, several USB flash drive makers recently formed
the USB Flash Drive Alliance
(UFDA). Founding members include Samsung Semiconductor, Genesys Logic,
Kingston Technology, Lexar Media and PNY Technologies.

Darwin Chen, a business development manager who leads the flash memory team
at Kingston Technology, said one of the biggest problems the manufacturers
have encountered occurs when the drives leave the factory. Retail stores
such as CompUSA or Circuit City have been grappling with what shelves to put
them on in their stores.

“They get them and wonder “should I put them in the flash section, or the
storage section, or is it a peripheral?'” Chen told internetnews.com.

This is one big barrier to adoption, agrees Blaine Phelps, worldwide
marketing manager for M-Systems’ DiskOnKey business unit, which Gartner’s
Unsworth said is the USB flash drives market leader. So, why doesn’t
M-Systems join the UFDA to help clarify the market?

Phelps said M-Systems introduced these flash drives to the market in 1998
and the company has been mired in lawsuits ever since over its
intellectual property. M-Systems owns many of the patents associated with
the mini drives.

Accordingly, Phelps said M-Systems wouldn’t feel comfortable joining the
UFDA because “for us to join the UFDA, it would legitimize their [the member
companies] right to our IP and we have spent so much time defending it.”

Still, Phelps said M-Systems sees a huge future for USB Flash
drives.

While many serve as basic “dumb” storage, meaning they just house files and enable them to be transferred, Phelps said M-Systems is taking steps to
make them “smarter” by crafting them to run applications, such as Microsoft
Exchange, or security software from Symantec. M-Systems’ flash drives can
plug into the company’s MP3 player and voice recorder device.

While the lack of marketing thrust has been a thorn in the side of
manufacturers, perhaps the greatest obstacle to widespread adoption
among corporate users is concern over security.

How easy are flash drives as tools for data theft? In the 2003 movie
thriller, “The Recruit,” one of the characters concealed a USB flash drive
device in the bottom of a travel coffee mug and used it to steal and store
sensitive materials.

Also, because the devices are so small, they are notoriously prone to
getting lost. A user who recognizes what a USB flash drive is and knows how
to use it can pick it up, plug it into a computing device and, with a few
key strokes, read, or worse, copy those files.

Kingston’s Chen and Phelps said their companies are hard at work encrypting
their devices to make them more difficult to crack into.

Chen said Kingston provides corporate users with an evaluation unit, so they
can test what they are thinking about buying to make sure it is secure. Chen
also said some companies are also working on a biometric USB flash drive
that scans finger prints before it can be used.

Going forward, Gartner’s Unsworth sees the market bifurcating into two
categories: Dumb drives that purely transport and storage content and smart
drives with processors that power software, allowing intelligent
functionality.

Unsworth said newer, more secure smart drives will run small applications,
including e-mail and instant messaging, as well as input/output abilities
such as BlueTooth , Wi-Fi , GPS , MP3 players and digital cameras.

“These drives would be targeted towards a high-end audience and command a
higher price as well,” Unsworth said. “Declining prices in the retail
channel and the incredibly simple use by the consumer will help this market
grow in the short term, but look for new features and functions to fuel the
market in the long term.”