Kingston’s $4.25 million acquisition of the IronKey assets from Imation was a rare occurrence, as the fairly conservative company is not known for merger and acquisition activity. Kingston tends to favor internal development of new technology and products, and the company has met with resounding success in its efforts thus far. However, Kingston decided to procure the USB technology and assets when the IronKey portion of the Imation portfolio became available, but sold the IronKey external HDD business. This choice makes sense, as Kingston is a company built upon its core flash competency.
Kingston offered its own FIPS 140-2 Level 3 (the highest level) encrypted USB products for 12 years, but its encrypted USB products appealed more to the general client market and tended to be pricey. Kingston did not attain the traction that the IronKey brand gained with lucrative business and government customers. Kingston will integrate the full breadth of IronKey products into its portfolio, and the company will offer all of the existing and future IronKey products under “Kingston IronKey” branding.
Kingston bucks the long-held, and mostly accurate, industry predictions that indicate fab-less SSD vendors will fall to the wayside. It is incredibly hard to compete with firms that produce their own NAND, but according to the Trendfocus CQ2015 Total SSD Market report, Kingston still holds a commanding presence in the global SSD market. Surprisingly, its 10.1% share of the total global SSD market outweighs several of its fab-enabled competitors, such as Intel, Micron, Toshiba, SK Hynix and SanDisk.
Kingston innovates by staying on the cutting edge of NAND technology – it procures NAND wafers and processes and packages the raw NAND into packages, thus ensuring cost efficiency that allows it to compete with the fabs. NAND fabs are beholden to their own NAND, but Kingston has the flexibility of procuring NAND from a number of sources. This helps ensure that it has access to the best performance and price for each successive NAND generation.
Imation built its IronKey products on an older hardware platform. In the encryption market, reliability and security typically outweigh performance and cost considerations. In fact, Imation did not actually produce its own products; it sub-contracted that aspect of its business out to third parties. Kingston’s extensive experience and technology will allow it to upgrade the current IronKey products to new and more cost–effective controllers and NAND. This will allow Kingston to offer the IronKey products at lower prices, which should help foster wider adoption in diversified market segments beyond the core Imation business and government contracts.
The majority of Kingston’s purchase centers on the IronKey IP. Imation had no dedicated production facilities due to its third-party production model. Kingston will continue to use the third-party manufacturing for a short time as it spins up its own facilities. The manufacturing transition will obviously be a top priority, as it will lower cost and allow Kingston more control of the supply chain.
Melding the Imation IronKey technology portfolio with Kingston’s deep NAND experience, design expertise and manufacturing prowess should be a win for the consumer. Imation had a reputation for high-priced products, which Kingston’s scale should help remedy.
Kingston plans to extend its full global sales and support mechanism to all existing IronKey customers, and the promise of newer and more cost-effective solutions will bolster the long-term prospects for Kingston’s security-conscious USB products.
