Hard drives or HDDs are magnetic storage methods that are a few decades old. They are reliable and you can store a lot of data on them. Their size is due to the mechanical components in them and partially due to standardisation. For example, you can find laptop hard drives that are very small. No need to make them smaller as they are quite slow and the machines that use them are servers or desktop computers.
Solid state drives SSDs have no moving parts and they store data in small memory chips. Their size is the same as a laptop hard drive and this is due to standardisation as well. If you open one of these up, you’ll see it’s mostly empty space with a tiny board a few chips in them. There is no need to make them smaller as most devices have bays where these need to fit. Standards again.
M2 drives are the next gen of SSDs. They are faster than SSDs and as robust, but they are smaller than an SSD. They don’t have any casing which saves a lot of space and the new standard allows for a smaller form factor. So thanks to technology, the industry has agreed to make drives a bit smaller for the next gen of SSDs.
MicroSD cards are tiny yes, but this is because the devices that require them are fairly small as well like your mobile phone. Some of the hardware required to make them work is also on your device so that saves space. They are also limited in terms of input/output. Going smaller than this is probably not practical as they are delicate enough to crack or get lost.
In short, storage gets smaller as technology advances but some of the form factors you see are due to industry standards. While I’m sure they could make an SSD the size of your fingernail, it all depends on what devices can support. It usually takes a few years for different manufacturers to agree/adopt new form factors.
In SD card technology software on the phone or device acts as the hard disk controller allowing the physical chip to be smaller.
In an SSD hard drives a motherboard which also contains the NAND chips acts as the controller. The SSD NAND hard drive is also a slightly more advanced NAND storage medium (think extra features) requiring a larger die size.
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