No sooner had technology guru George Gilder returned to the US from Israel this week, after telling us what wonderful technologies we have, executives from Apple Inc. (Nasdaq: AAPL) the world's largest and most admired technology company came here to prove how right he was. They came to see first hand what they don't have, just as all the technology giants except Apple, have been searching here in the past few decades.
Flash memory technology has reportedly brought Apple to Israel and that is logical. Today, flash components of all storage sizes are top in terms of costs of assemblies in iPhones, iPads, iPods, and thin laptops based on flash drives (SSD). The Apple executives were acquainted with Israeli flash memory capabilities long before they came to the Holy Land, mainly via SanDisk Corporation (Nasdaq:SNDK), which like Apple is headquartered in Silicon Valley near San Francisco.
Apple never officially reports who its suppliers of components are, but at least in a NANO iPod that was recently dismantled there was a Sandisk flash component. It is reasonable to assume that they are also in other Apple products, at least over the past two years, when Apple's rivalry with Samsung has intensified.
I also heard about a conversation between Sandisk executives and Steve Jobs in which they joked with him about "something else that was missing from your gadgets" - a hint about his stubbornness over not putting in a "groove" in his products that would enable expanding flash memory cards, as there is in other company's products.
Flash cards to expand memory are Sandisk's bread and butter, and Jobs knew very well how the butter was spread. So at Apple, if somebody wants to upgrade the size of their memory, then they need to buy a new product and get charged an extra $100 for the memory, five times the cost of the Apple component. For example, Barnes and Noble's tablet has a "groove" for a flash card in contrast to the iPad and Amazon's Kindle, which sells cloud storage on its site.
They heard about Anobit's capabilities
Apple probably became acquainted with the flash capabilities of Anobit Ltd, which rumor has it they are interested in acquiring, via the Korean flash solutions provider Hynix. Anobit supplies Hynix with controllers attached to the flash and is responsible for managing performance solutions. For example, in the new iPhone 4, which has 64 Giga storage, Hynix solutions can be found, and it is reasonable to assume that Anobit's MLC chip controllers are present.
On the other hand, I understand that Anobit last year tried to supply Samsung with suitable controllers for its TLC (X3) chips, which would conform with Sandisk's standards, but did not succeed. In today's market, it is known that only Sandisk has significant cost advantages, and it is the only company with the unique controllers that it has developed, that can supply TCC chips of the highest standard. In other words, three bytes in one memory cell, compared with two in all the others, which are called MLC.
For obvious competitive reasons, Sandisk executives maintain secrecy over the proportion of TLC chips that they sell and only say that it is above 50%.
The acquisition of Anobit for hundreds of millions of dollars rather than buying a leading technology company like Sandisk with flash disk production lines, which would cost Apple $20 billion, again proves that there is no change in the late Steve Jobs' strategy of preserving the company's cash reserves, which will reach $100 billion in March 2012. Yesterday, Sanford Bernstein analysts recommended that Apple begin to pay dividends and thus persuade investors looking for value but who currently don't touch the "growth risk share" to buy the company's stock.
Regarding the acquisition of Sandisk, or any other flash memory giant, I assume that Apple's management knows what the entire flash market knows, that in several years NAND technology will be redundant and Apple will surely want to connect with the victorious technology that succeeds it. Today it is still too early to know what that technology will be. All the flash players are in the race because it is a market worth billions annually. However, it is known that Sandisk has advanced solutions in the pipeline, based on D3, which has no relation to Intel's technology of the same name.
Published by Globes, Israel business news - www.globes-online.com - on December 15, 2011
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