Before installing ESXi, you need to decide where to store the ESXi files. A local disk, SD card, SAN (LUN), FC, or USB device are all possible destinations you can use for ESXi but what solution is the best and what you should use is very hard to say. The choice to make depends on your infrastructure design, network configuration, and the installed devices in your target machine.
You can use a SAN (LUN) to install your ESXi but if the server on which you are going to install ESXi doesn't have iSCSI hardware initiators, it excludes the SAN option as a booting device. An extra configuration is anyhow required to set up LUNs and zoning (zoning configuration can be avoided if is used the iSCSI boot from SAN mode). Anyhow, the use of SAN LUN creates a dependency on an external storage array that, in case of failure, makes the ESXi unusable.
Using local disks as the destination for the ESXi files is a solution that, until a few years ago, was popular in most ESXi installations because it is a cost-effective solution and doesn't require any extra configuration. If the local hard disk is your choice, I strongly recommend configuring RAID 1 to provide fault tolerance. I won't consider the use of SSD as a booting device due to the high cost. Perhaps SSD would be a better choice for caching purposes using the HDD to boot from instead.
A valid alternative to HDD is the use of SD cards that offer better performance and compared to years ago, are now bigger and more cost-effective. To use SD cards, the target server needs to be equipped with Secure Digital (SD) bays but if your server has only one bay available, it won't be able to provide fault tolerance. Luckily, certain hardware manufacturers, such as Dell and HP, provide servers equipped with double bays for SD cards you can mirror like you would an HDD and fit perfectly in this installation method.
The downside of using SD cards is the requirement of some additional configuration. The scratch partition of ESXi (which will be covered in Chapter 5, Configuring and Managing vSphere 6.5), needs to be placed in a persistent storage (VMFS or NFS volumes attached to the server) to store vm-support output, which you need when you create a support bundle. Also, it's not supported for hosts with 512 GB or more, if you use vSAN.
The USB stick is another possible option you can use for ESXi installation. It is the most economical destination device but for production servers, I don't recommend its use since you don't have any redundancy in case of failure. As with SD cards, for USB sticks, no log files will be stored locally (a scratch partition needs to be configured). Although a 1 GB USB or SD device suffices for a minimal installation, it is recommended you use a 4 GB or larger device.
Did you notice that fault tolerance is a recurrent caveat for devices? Is there any reason for that? Yes, of course. Let's talk for a minute about the importance of having fault-tolerant components. What happens if you use just one device for your ESXi installation and suddenly the device fails? The ESXi simply stops working, stops providing its resources, and in a situation of a poor infrastructure design, the network services may be no longer available to users. For this reason, a good design for ESXi should consider the use of two devices configured in mirror RAID1 to provide fault tolerance and performance.