Apple's buyout of Israel-based solid-state drive (SSD) manufacturer Anobit Technologies will give the company a significant technological boost in the mobile market, and the deal could yield huge cost savings.
Apple is the industry's largest NAND flash consumer , so acquiring Anobit gives it a means of addressing the reliability problems that arise as solid-state memory shrinks in size.According to published reports , Apple will pay around $500 million for Anobit. It sees the purchase of a NAND flash technology developer as key to its product strategy going forward. The acquisition of Anobit would be Apple's largest purchase since it bought NeXT in 1996. NeXT, which produced high-end workstations, was founded by Apple co-founder Steve Jobs after he was fired from Apple in 1985.
Apple has been using NAND flash memory in its products since 2005, when it began selling the iPod Nano media player. It has continued expanding its use of flash with an all-flash MacBook Air, the iPad tablet and SSD options for its MacBook Pro line of laptops.
The purchase of Anobit addresses several issues for Apple. It frees the company from dependency on flash component makers such as Samsung and Intel , which lead the market in NAND flash production. Using Anobit's controller technology -- a type of error correction code (ECC) -- would allow Apple to choose the cheapest NAND flash chip inventory available for its products. "It could ultimately impact the cost of the NAND flash they buy if they're able to continue to develop [technology] that allows them to use the cheapest flash possible," said Michael Yang, a memory and storage analyst at market research firm IHS iSuppli.
Industry analysts said they weren't surprised by Apple's move, noting that it follows an industry trend. In March, SSD-maker OCZ Technology Group signed an agreement to acquire privately held Indilinx, a maker of popular NAND flash controllers, for $32 million. In October, fabless semiconductor maker LSI Corp. announced it was acquiring flash controller maker SandForce. Neither Apple nor Anobit have confirmed the sale, and neither company responded phone calls or emails seeking comment.
Objective Analysis analyst Jim Handy said Apple won't be saving much money by owning its own controller technology. "These controllers cost from $5 to $20. The NAND flash in most SSDs is significantly more expensive than that," he said. Joseph Unsworth, a Gartner analyst specializing in NAND flash and SSD, said that "if this acquisition was to take place" it would support Apple's strategy of using technology that allows it to innovate and differentiate itself from competitors with flash management and system software. He added that it would also enable Apple to use the cheapest flash available, and that should help boost the company's profit margins.
"That's why Anobit is interesting," Unsworth said. "This is about flash management and the integration of this technology into their greater ecosystem" of both hardware and software. Noting that intellectual property "is always important," he added, "having it is always better than not." Unlike LSI, which said it would continue to sell SandForce's technology to other equipment makers, Unsworth said it's highly unlikely Apple will allow Anobit to court competitors. "I see no value for Apple in doing this. Why share their secrets?"
"This is NAND management technology, not actual flash chips. So to me this makes little sense when considering other [system manufacturers]," Unsworth added. Handy agreed, adding, "I think the door will be shut. Apple very infrequently shares technology." Anobit has produced two generations of its Genesis SSD technology . The intellectual property that sets it apart from other SSD manufacturers is its controller, which uses firmware it calls Memory Signal Processing (MSP), a type of ECC.
Anobit's MSP technology increases the signal-to-noise ratio, making it possible to continue reading data even as electrical interference rises. The MSP controller technology also extends the endurance of standard consumer-grade multilevel cell (MLC) flash from about 3,000 write/erase cycles to more than 50,000 cycles -- making MLC technology suitable for heavy-duty cycle applications, such as relational databases.
According IHS iSuppli, in 2010, Apple spent $17.5 billion to purchase semiconductors -- that was an increase of 79.6% from the $9.7 billion it spent in 2009. Earlier this year, iSuppli figures showed Apple's iPad was leading an almost fivefold surge in NAND flash memory use as consumers gobbled up tablets in increasing numbers.
"Flash memory is not getting better. It's getting worse. So having a controller technology that you work in-house allows you to dictate ... technical specifications as the geometry moves down," Yang said.
Yang said while Anobit's intellectual property is key to Apple, it isn't unique. Flash controller makers Indilinx, Marvell and SandForce all have slightly different ECC technology that accomplishes the same thing: improving the resiliency and performance of NAND flash memory.
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