The Mountain Comes to Mohammed?

As of 8 June, Apple’s new MacBook Pro 13″ and 15″ models now come equipped with an SD card slot.

I find this very curious and seemingly very out of character and I’m not alone.

How far this goes and what implications there might be for SanDisk and Sandisk’s relationship with Apple remains to be seen. This could be a simple blip on the screen or it could be far more significant.

In any case its all good news for SanDisk.

Not only does SanDisk have the opportunity to sell more cards, but the more SD cards that are sold by virtually all of the competition (except Toshiba and Panasonic), the more money SanDisk collects in licenses and royalties.

The Apple/ SanDisk relationship bears watching. Recently SanDisk’s tone when talking about Apple has softened remarkably. Gone are the days of SanDisk’s “iDon’t” ads.

The new refrain is, “You can’t out-iPod the iPod.”

SanDisk could be making nice, because it could soon have a new customer. In all likelihood, Apple has some new products in its pipeline tailor made for SanDisk’s products, both removable and embedded.

Last, but hardly least, Apple is both a trendsetter and a trend indicator. In those MacBook Pro models where Apple has added an SD card slot, it has dropped ExpressCard.

For the longest time ExpressCard has looked like the future of removable solid-state storage for the consumer notebook/netbook market. The ExpressCard SSD looked positioned to be a game changer in SSD evolution.

With a high speed interface, compact form factor, and a large installed base, ExpressCard SSD seemed a natural.

This was going to be a thorny problem for SanDisk, looking to monetize its IP in the SSD marketplace. ExpressCard is an open standard and hence there would be no royalties flowing to SanDisk from that format.

ExpressCard

PCCard-ExpressCard resized

ExpressCard’s roots go way back to 1989 and the Personal Computer Memory Card International Association, or PCMCIA. The PCMCIA was, and is, a non-profit trade association dedicated to standardizing modular peripherals and promoting their adoption.

The PCMCIA was founded to standardize and promote PC Card technology.

By 2003, the PC Card was getting long in the tooth and ExpressCard was introduced as its 21st century replacement. This hot-swappable expansion module for PCs and laptops is supported by a coalition of system OEMs, card manufacturers and connector and component manufacturers including Dell, HP, IBM, Intel, Micron (Lexar Media), Microsoft, SCM Microsystems and Texas Instruments.

According to market reports, in 2008, more than 50% of the consumer notebook PCs that shipped had ExpressCard slots. Included in those numbers are all the MacBook Pros.

Now Apple is dropping ExpressCard in its MacBook Pro 13″ and 15″ models in favor of SD cards. Sure SD cards are far smaller and used in tons of consumer gizmos, but is that enough to overcome ExpressCard’s sophistication, installed base and support of industry heavyweights?

Apparently it is.

ExpressCard-SD-microSD

Apple

When asked directly about the decision making process, Apple’s director of portables, Todd Benjamin, said Apple opted for a SD Card slot because that format has become “really ubiquitous.”

A safe and many layered answer. True too. SD is indeed ubiquitous. Just not in laptops.

SD technology is the de-facto industry standard for solid state removable storage- in consumer electronics. The center of gravity in the computing space has moved to devices smaller than laptops. For these products, the SD Card and its cousin microSD are indeed ubiquitous.

It seems highly likely Apple is working on both a netbook and media tablet for release sometime in the next 12 months.

Not only will these new products probably not have ExpressCard slots, they may not have optical drives either- DVD or otherwise. It seems entirely possible that both will depend on SD cards for removable storage.

In addition Apple has some issues with Blu-ray. I wouldn’t be at all surprised if Apple is looking at SD Cards as both a workaround and a jump ahead.

This post is about SD becoming the potential defacto standard for removable storage in notebooks and netbooks, but I should probably mention the embedded-storage angle and Apple.

To date, at least prior to the iPhone 3GS, there have been no signs of Apple and SanDisk working together, or put another way- to date, there have been no signs of SanDisk winning any embedded design-ins with Apple.

To my mind, this is not a question of if, but rather a question of when. SanDisk’s strengths are in solid-state devices for consumer electronics. Apple is becoming ever more the consumer electronics’ company- where embedded solid-state storage is the name of the game.

Toshiba and SanDisk are NAND fab partners. Toshiba has NAND wins with Apple. SanDisk doesn’t sell chips per se to others, but as chips are stacked and packaged as devices in their own right, the line blurs.

As this recent teardown from techonline reveals, Toshiba’s latest win with Apple is for a 16 GB device in the iPhone 3GS.

Picture 1

In the video, the folks at techonline note that this Toshiba device, with four 32 Gbit dies tied together, is the “largest single IC memory device that we have ever seen.”

Then as they get into the chip package itself, the image below flashes onscreen.

Picture 2

Does the fact that the SanDisk name appears in an Apple product mean that SanDisk is selling product to Apple? Not necessarily.

But in this case, it does mean that SanDisk’s chips have been qualified at Apple.  And it would follow that SanDisk could be selling embedded storage to Apple if it wanted to.

So far Apple has resisted adding removable storage to the iPhone. To my mind, its only a matter of time, and economics, until Apple gives in. If and when Apple does- the winner looks to be a member of the SD family.

In any case, as far as removable storage goes, it appears that the pendulum’s swinging SD card’s way in the notebook (netbook) arena.  SanDisk looks to be sitting pretty- as market leader and locked in to collect royalties on every SD card sold (except from Toshiba and Panasonic).

As Eli and Sanjay said in SanDisk’s 21st birthday email, “The SD and microSD that we invented have now become the primary global card formats. Tenacity, patience and the right strategy triumphed.”

So what’s a global standard worth in licenses and royalties? As I posted recently SanDisk is likely collecting something on the order of $60M a year, at least as of 2008. How high this could go, is anyone’s guess- but the direction is up and this up could go far.

Curiously sometimes you don’t always have to chase the market. ExpressCard (potentially) losing out to SD is a case in point.

The mountain can come to Mohammed.

Of course, such a pleasant scenario is far from a foregone conclusion, but the SD trend, seems to be SanDisk’s friend.

About these ads

One Response to The Mountain Comes to Mohammed?

  1. medda says:

    Savo,

    Im telling you demand for sndk cards, mobile, is going to prove to be off the charts this qtr, after they report post mkt july 22nd.

    Simo’s miss is sndk’s gain.

    SNDK could post a nice gain.

    i also believe you are spot on with apple and sndk. i believe the relationships between apple and sndk has made massive gains in the past 9 months and sndk will provide apple with supply for strategic reasons.

    i also hear that samsungs new management team is much more condusive to new business ventures with sndk. i wouldnt be surprised to see the two of them collaborate on new products or technologies in the near future.

    i want you to do more homework on the subsidiary sndk set up 1.5 yrs ago called storage solutions or something like that. i think that sub has all the m-sys patents housed there and could relate to SSD drives. If my guesses are right it could be the FFD IP from m-sys along with other ip. could sndk be going after SSD players or companies that use SSD??

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 29 other followers

%d bloggers like this: