I was just reading this:
and began to think about Apple and their thirst for flash memory. Every iPhone and iPod with the exception of the iPod Classic uses flash (“NAND”) memory for storage. The MacBook Air has it as an option. Even the XServe has an optional flash drive for booting. Apple has given every indication flash memory is their way forward.
Flash memory isn’t just important to Apple – it’s critical. If Apple couldn’t get their market-leading supply of the stuff, they’d be dead. Apple integrates the memory into the iPhone and other units; no external memory slot. So Apple needs their memory early in the manufacturing chain, and can’t make changes as quickly or easily. Many other smartphones take a different route. The NexusOne, for example, has next to no built-in memory but includes a 4GB microSD card.
I think Apple’s approach is much better – the full memory is available to applications, nothing to drop out or lose, and even the low-end 8GB iPhone is plenty large for most users. But if HTC has a hard time getting 4GB microSD cards they can easily find other sizes from many manufacturers at any point in the manufacturing process. Apple’s integration costs them that flexibility.
Apple prevents supply constraints by working out long-term deals with flash memory manufacturers. Apparently they mostly use Samsung, Toshiba, and Hynix (but I’m no expert). I haven’t seen them working with Sandisk, a major player in the game. This could be because Sandisk makes the Sansa MP3 player, a direct competitor to the iPod, but it’s apparently only a small part of their overall business. Again, I’m no expert.
But I was thinking – if Apple wanted to shore up a guaranteed supplier of flash memory, why not just buy Sandisk? They have a market cap of $7.7B, so Apple could buy a majority stake for $4B. Apple has the cash. The other companies mentioned above are all larger and in other businesses. Sandisk does nothing but Flash, and holds some key patents on the stuff too. Apple would likely need to sell the Sansa business to someone else to please the FTC, but it’s of no use to them anyway.
To be honest I think it’s a pretty dumb idea. Apple has stayed out of the manufacturing business for good reason. They can play companies against each other, and who wouldn’t want Apple’s business these days? It would be a massive defensive play. If someone with deep pockets wanted to hurt Apple they could offer a premium to the manufacturers and buy more than they need. Apple’s market share would drop considerably if they can’t get the parts.
SanDisk is perhaps a bad acquisition for other reasons. Much of SanDisk’s business is in retail memory cards – not something Apple would care about. So really this was just me thinking about a potentially critical problem and finding a really bad solution to that problem.
If it did happen, Apple could also control the design of another critical component. That’s right up Apple’s alley. Is there a PA Semi of the flash memory world? I don’t know, but if so that’s more Apple’s style.
I hope (and expect) Apple’s top brass is smart enough to avoid the need to dive back into manufacturing, but if it happens you heard it here first…