Apple, the Tablet, and SanDisk

This upcoming week will be big for both Apple and SanDisk. On Wednesday Apple will host a media event where the headline act is expected to be Apple’s much-anticipated tablet.

On Thursday SanDisk will announce Q4 earnings.

Whether there is any connection is anyone’s guess.

Last Thursday, Morgan Stanley (MS) released their thoughts on SanDisk. The report is titled:

“Preview: Raising Estimates on Stable Pricing.”

While the title may sound bullish, MS isn’t. They maintain their equal-weight stock rating.

One sentence caught my eye though:

“While the stock [SNDK] could rally some more on Apple’s tablet announcement next week as recent checks suggest SNDK is now selling to Apple, we wait for visibility into demand post Chinese New Year in order to turn more constructive on the stock.”

This is the first I’ve read of Apple named as a SNDK customer, and between the lines the implication seems to be that SNDK has a piece of Apple’s tablet.

Personally, I’m not particularly surprised, if this is how things play out. Hints have been around for a while. Starting in 2009, SanDisk’s tone when talking about Apple has softened remarkably. Gone are SanDisk’s “iDon’t” ads of 2006.

Eli’s much more sympathetic refrain has been, “You can’t out-iPod the iPod.”

2006 CES was where SanDisk announced, with great fanfare, its intention of becoming a consumer electronics powerhouse.

How quickly times change.

At CES 2010, SanDisk had a booth but passed on official presentations. It appears that SanDisk has decided it wiser to supply the consumer powerhouses than compete head-to-head.

Probably a wise decision.

That said, there was one interesting SanDisk PR which came out of this year’s CES: SanDisk’s pSSD was selected by LG for its flagship ultra-thin Mobile PC.

This PR is interesting because it is the third such PR announcing a pSSD win. The other two are Sony’s ultra-thin Vaio X laptop and Asus’ rotating-touchscreen computer.

This could be the tip of the iceberg.

While SanDisk has had its problems with its mainstream laptop/ PC SSDs, curiously, it appears to be very strong in the rapidly evolving new product segment between smartphones and laptops.

All three SanDisk pSSD wins are for offerings in this segment. All are extremely thin and light, with 9”- 11”± screens. All boast low power consumption. All are pricey.

Let’s see- new product category between smartphones and laptops, extremely thin and light, with 9”- 11”± screen, low power consumption, and last but not least- pricey.

Sounds kind-of like a rumor wrap-up for Apple’s tablet.

Apple’s Tablet

With only days to go before the official unveiling, its pretty clear that Apple’s tablet will fall somewhere between the iPhone and a laptop. Likely it will be extremely thin and light with the required strength coming from Apple’s expertise in unibody construction.

The screen will likely be a 10- to 11-inch touchscreen. The processor could very well come from Apple’s PA Semi team. It is expected to have roughly the processing power of Intel’s Atom processors optimized for the netbook market, but be far more efficient when it comes to power requirements.

The tablet is expected to cost roughly $1000. The concept rendering below is said to closely resemble the actual Apple tablet.

For all the tablet rumors, precious little has been written about storage- either onboard or removable. The first question: SSD or HDD? Probably a flip of the coin.

That said, I think there is a reasonable chance that the new Apple Tablet will include a low capacity SSD, for all the same reasons that Sony, Asus and LG did in their premium subnotebook offerings.

An SSD is lighter and smaller, more rugged and reliable, has better performance and is more power efficient than a HDD.

If this is how things go, I suspect SanDisk will get a big piece of the action with their pSSD. Eli has been repeating for a while now how well SanDisk has been doing with pSSD. It seems to be a good, proven product at the right price.

It’s unlikely that SanDisk would get an exclusive, though. Apple will want multiple suppliers. Also an official announcement is unlikely, as that doesn’t seem to be the Apple way.  We might get hints though, in the SNDK cc.

If SanDisk is inside the new Apple tablet it would be a huge deal. Not only for the specific business, but also for the relationship with Apple.

Apple is a leader and a trend setter. Other company’s premium offerings, in this emerging segment, will need to keep pace.

Another angle to watch is whether the Apple’s tablet includes an SD card slot. Probably better than even odds it will. Since June of 2009, Apple’s new MacBook Pro 13″ and 15″ models have included SD card slots.

Apple went with SD cards, because SD technology is the de-facto industry standard for solid state removable storage- in consumer electronics. An SD card makes perfect sense for a tablet, certainly far more sense than a DVD drive.

The combination of a low capacity SSD coupled with a card slot seems particularly compelling- enabling a relatively affordable, high-performance solution. Just what is needed until NAND pricing comes down.

The card would allow significant increased storage capacity thereby allowing a lower capacity, and more affordable, SSD. Given NANDs current strong pricing such a strategy makes a lot of sense.

I suppose it is possible that Apple might just go with NAND chips (memory modules) in its tablet instead of an SSD- as they have with the iPhone and iPod. A modular SSD, though, would seem to make a lot more sense for various reasons- most notably performance.

In any case, I suspect SanDisk is already providing Apple with chips (memory modules) along with Toshiba, for an upcoming iPhone and iPod refresh. Toshiba supposedly has the highest density embedded flash memory module in the industry. With 32nm SNDK/Toshiba NAND, 64GB modules can be produced thanks to advanced chip thinning, layering and wire bonding technologies.

Currently both the iPhone maxes out at 32GB. Next stop will be 64GB.

And yes, SanDisk’s Q4 will likely be another blow-out and SanDisk’s Q1 guidance won’t disappoint. Whether anyone will care is another matter.

Advertisements

14 Responses to Apple, the Tablet, and SanDisk

  1. Chingadera says:

    Savo, Great information and exactly what I am hearing. One way or another Sandisk wins. Thank you. Chinga

    • savolainen says:

      Hey Chinga,

      Its looking more and more like Apple’s tablet will be NAND-based.

      Today from Dan Amir, LCM- 25 January, 2010

      “Apple tablet to keep NAND tight. Today we have published, along with Colin Sebastian, LCM Internet Analyst, a report on the e-Reader/tablet market. Our analysis in the report suggests that the launch of Apple’s ~64GB NAND tablet this week could lead to further stability in the NAND market in 1H10. We estimate that the tablet could be the equivalent of at least 10M iPhones and as many as 50M in the first year of its launch.”

      If so the tablet will soak up a lot of NAND and will be good for SanDisk, just by doing that, whether SNDK is inside or not.

      The more the tablet is like the iPhone, the greater the likelihood we will see just a NAND package with controller. The more the tablet is like a laptop or high end netbook, the greater likelihood it might have a modular SSD like pSSD.

      64GB is the right number for the pSSD. It is also the right number for the latest 16 NAND chip package using 32nm SNDK/Toshiba NAND.

      As you said one way or another SanDisk wins.

      And that’s not even factoring in a potential SD card.

  2. sndk_long says:

    Had a dream a couple of nights ago that Eli semi-accomplished his original dream of a consumer product powerhouse by allowing Apple to buy them out for $13b and change (75% stock, the rest cash), with Sandisk operating as an independent subsidiary, and Eli getting a seat on the board. As part of the deal, Apple agreed with Toshiba to up their part of the next fab back to 40%, and of course to use Toshiba as a second source. Samsung was livid, and Hynix creditors still can’t find a bidder to take the company off their hands.

    Seemed to me to make sense even after I woke up. Sandisk shareholders get off the roller coaster, Eli’s vision comes mostly true, Apple gets a reliable low cost source of SSDs and chips, complete with plenty of L&R money and a possible huge kicker from Matrix in the future.

    What do you think? Does it make sense for Apple or Sandisk to do this?

    • Joncon63 says:

      I like your dream.

      Makes sense for both companies, I think.

      As a SNDK shareholder, I’d feel like I’m cashing in too early, but the combination of SNDK and AAPL would be awesome

  3. Poofypuppy says:

    Thanks, Savo. One thing that I’ve been meaning to ask you about, what are the differences between SanDisk’s pSSD and “mainstream” SSD other than the external form factor? As you noted, the pSSD is doing well while the SSD doesn’t seem to have any design wins, so I’m curious why that is.

    Regards,
    Poofy

    • savolainen says:

      Hi Poofy,

      Its probably all about dealing with the achilles heel of SSDs- random writes. SanDisk apparently has a workaround to the problem called nCache which right now seems to work just fine at the level of pSSDs, but not (yet) at the level of “mainstream” SSDs.

      Interestingly, the cache is not DRAM or SLC, but is a software only solution which uses small sections of the NAND itself as a cache to cope with random writes and is able to do it in such a way as to avoid performance degradation and limit the scope of fragmentation.

      Here is a link to a very good arstechnica article on SanDisk nCache SSDs:

      http://arstechnica.com/gadgets/news/2009/06/sandisk-ncache-ssds-subsector-remap-remapped.ars

      Regards,
      Savo

  4. Hapa says:

    @Savo:
    I suppose it is possible that Apple might just go with NAND chips (memory modules) in its tablet instead of an SSD- as they have with the iPhone and iPod. A modular SSD, though, would seem to make a lot more sense for various reasons- most notably performance.

    Savo, I agree with you. First, I doubt that Jobs would accept HDD inside the Tablet. If Sanshiba convinced Apple to take up 3bit/cell, pSSD would be a better choice because of the enormous task of designing new controller for it.

    However, if Apple chooses pSSD, isn’t compatibility an issue for drop-in second source?

    • savolainen says:

      Greetings Hapa,

      At a minimum, it looks like Apple’s tablet will use up a lot of NAND helping SanDisk. From today’s BoA/ML report “Apple presents upside to NAND”:

      “Tablet PC will likely spur new NAND demand worth $1bn

      Apple’s new tablet PC (thought to be named iPad) is now expected to create fresh NAND demand worth at least US$1bn a year (10mn units of tablet PC x about $100 NAND cost per unit to have about 64GB SSD). This represents about 6% of our current global forecast for the NAND industry for 2010 (ex-tablet PC impact). Netbook PC (mainly for low-end PC applications) that uses only 10-20GB SSD has not been a big catalyst behind NAND demand in the past two years. Ironically, most netbook and small notebook PCs, even those from Asus, Samsung and Toshiba, have been based on HDD rather than NAND so far.

      Key suppliers of NAND to Apple – all top four players

      Apple purchases NAND chips from all top four memory players — Samsung, Toshiba, Micron and Hynix. Thus these companies will collectively benefit from Apple’s upbeat momentum, in our view. While Samsung SDI and LG Chem also supply batteries to Apple, Samsung Electronics provides logic chips.”

      Reading between the lines, the ML analyst in Seoul seems to feel Apple will be going with NAND chips like the iPhone and not with a modular SSD for the tablet. Such a strategy makes sense as long as the tablet is closer to the iPhone than a laptop or a high-end netbook. By going with chip packages Apple would pay the least and have the most suppliers. 

      For best performance along the lines of a high-end netbook, Apple would have to step up to something along the lines of SanDisk’s pSSD. If not now, I suspect it is only a matter of time.

      I am really curious whether the tablet will have an SD slot. This would be a big change of direction for Apple, but makes a lot of sense. If so, there are many interesting angles for SanDisk. We should know tomorrow.

      Best,
      Savo

  5. Hapa says:

    Savo,
    Thanks for the insightful response. So, now we know; no pSSD, and no external SD slot. Customers pay extra $100 for the 32GB NAND version, and $200 for the 64GB.

    No SD slot is a disappointment for many people. However, as you said, still a good news for NAND demand driver.

    • savolainen says:

      Hey Hapa,

      Agreed. There is a long shot that pSSD is inside, but that’s really unlikely.

      It looks like business as usual at Apple. The iPad is a closed system and Apple (thereby) profits big time playing their proven memory game. As you point out another $100 for 32GB more of memory- that’s $$$$ going to Apple.

      Why include a slot when such $$$$ are there for the taking?

      The iPad looks really close to the iPhone- same apps etc. No need, apparently, for more sophisticated storage along the lines of pSSD. The iPad isn’t even a high end netbook, but that isn’t bad news.

      The iPad will suck up a lot of NAND, which is a good thing.

      Also I still suspect that Apple and SanDisk are working together. Eli’s “managed NAND” comments come to mind.

      Down the road, I expect Apple will expand the iPad product category- introducing tablets closer in processing power to low-end laptops. That should be another game entirely.

      I’m sure this is not lost on SanDisk.

      Tomorrows SNDK cc should be fun. I’m expecting L&Rs to be strong- over $100M easy. When Samsung and Hynix are making money, all the more trickles down to SNDK.

      OEM comments should be interesting.

      Best,
      Savo

      • savolainen says:

        A few more thoughts and Apple/SanDisk.

        Eli was at the iPad event, and “all smiles.”

        “One area that could benefit all flash memory makers is the nascent market for tablet computing devices, such as the Kindle and iPad. The Consumer Electronics Show earlier this month was abuzz with digital readers and tablets but the iPad trumped them all at its unveiling on Wednesday.

        Harari said he was all smiles when he attended Apple’s iPad event, saying these devices with multimedia features will call for “a huge consumption of flash.”

        It’s just wonderful,” he said. “I think that as demand is created, (the industry is) going to benefit from that, whether it’s in the card form or embedded, it still uses up NAND flash.”

        Harari declined to specify whether the iPad used SanDisk’s memory products, saying only that SanDisk sells its flash to the top 10 handset makers.”

        http://www.reuters.com/article/idUSTRE60S6D120100129?type=globalMarketsNews

        The late March/ April tear-downs of the iPad should be interesting- especially the 64GB models.

        Personally, after reflecting a bit, Apple’s iPad strategy seems particularly clever- the iPad is, in essence a large screen iPod touch. As such it is in a position to leverage the runaway success of the iPhone’s app store.

        The big surprise was Apple’s pricing- starting at $499- far below the rumored $1000.

        Granted the iPad isn’t all that powerful (1 GHz custom processor), but there is plenty of time for Apple to expand the category including far more powerful processors. Near term, competitors have their work cut out.

        iPad storage is solid-state (NAND) and will be from here on out. Competitors will have little choice but to follow Apple’s lead. I expect the iPad to quickly move up the storage capacity ladder. 128 GB will be next.

        The iPad tech specs aren’t maxed out. Apple has left itself room to upgrade. I’m still hoping for an SD card slot. Time will tell.

        For SanDisk, the iPad is all good news, whether SNDK is inside or not.

        A lot of NAND is going to be consumed. No wonder Eli was all smiles.

        Next week I hope to get to the cc.

      • savolainen says:

        Lazard Semiconductor update
        02.16.10 Dan Amir:

        SanDisk shipping to Apple.

        Our contacts have confirmed that SanDisk is currently supplying its iNAND to Apple for both the iPhone and the iPad. SanDisk could be the sole NAND flash suppler for Apple with its 32GB iNAND, which is believed to be used in both iPhones and the iPad. The average sales price for this component is $54-$60 per unit, and it brought approximately $81M revenue to SNDK in 4Q09. Meanwhile Samsung and Toshiba continue to supply Apple with lower density BGA NAND chips in 16GB and 8GB density. Therefore, a strong showing by Apple with its iPad could be marginally positive for SanDisk. We continue to like SanDisk and recommend investors accumulate shares ahead of its analyst day on Feb. 26.

        New iPhone(s) on track for production in May.

        While specs of the new iPhone(s) are still hard to come by, the production target is currently set for May. According to our latest channel checks, there are currently two new models which will be introduced over the summer (June). One of these models could be an upgrade of the $99 iPhone to a 3GS based design. The production roadmap calls for modest unit production for the new $99 model. The other new model could be a new design, with a fast production ramp in 2Q10. Our checks suggest that this will come with two cameras with image sensors made by Omnivision (OVTI). The expectation is for the current iPhone 3G and 3GS versions to be phased out during the 2Q-3Q period.

        iPhone shipment update.

        Our latest round of channel checks indicates that Apple will likely ship ~7.2M iPhones in 1Q10, a ~30% QoQ decrease. In 4Q, over 10.5M iPhones were produced, while only 8.7M were sold. This decline is slightly more than seasonal trends.

        iPad components shortages, though 1Q production seems promising.

        Based on our supply chain checks, component shortages are driving Apple to pay premiums to ensure production of its iPad in 1Q. The company is aiming to produce 2.5M iPADs in 1Q that will be available in stores in 2Q. This is a fairly aggressive number in our opinion and suggests that Apple is really trying to push this as a mass market product. Overall, the high production number is positive for both SanDisk and Broadcom which supplies the touch, Wi-Fi and Bluetooth components.

  6. MorganBucks says:

    Sorry for getting of Topic… anything that helps speed along new wireless devices is good for Sandisk

    Patent US6127799 provides a Method and apparatus for wireless powering and recharging which is based on a way to harness RF or microwave radiation in order to produce a DC output.

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

%d bloggers like this: