More Apple & SanDisk

Since January we’ve gotten a few more pieces to the Apple SanDisk puzzle.

Nothing definitive, but enough to warrant another post before moving on.

SanDisk Analyst Day added some info. The Kinnucan capers even more so.

2012 Analyst Day 

At this year’s Analyst Day in February, SanDisk’s OEM VP Dan Inbar used the slide below, “How is SanDisk Winning?”

“Memory” flanked by an iPad on the left and an iPhone on the right with “Winning” above.

I suppose these Apple products could simply be generic graphic representations of product categories, but a far more likely explanation is that this slide is a broad hint that SanDisk is, or soon will be, selling memory into both devices.

As mentioned previously, the only teardown of an Apple product that has revealed a SanDisk chip, that I am aware of, was an iPod Nano.

My guess is that the SanDisk chips have been missed along the way by the teardown shops. SanDisk NAND and Toshiba NAND are interchangeable and Toshiba NAND has been uncovered in many Apple teardowns including last week’s iPad 3 4G teardown by ifixit.

Ipad 3 logic board partial image below: the yellow rectangle: 16 GB 24 nm MLC Flash from Toshiba.

Dan’s presentation from Analyst Day, where he used the iPad-Memory-iPhone slide above:

“And this [winning] is being done with a lot of work and a lot of effort, which again, I’d try and share with you a bit, how this is happening. So obviously, the basic ingredient for all of SanDisk product is our memory. We need good memory, strong memory, advanced technology, scaled, et cetera. 

 

And to date, our raw memory is being used in many components today, as a raw component. This, from our point of view, is a certificate of the strength of our raw technology, our basic NAND memory.”

So, Sandisk could be selling some of it’s basic NAND memory into some iPhones and iPads. Not a particularly big deal, nor should it be.

Judging by SanDisk’s weak Q1’s results, any sales in this period to Apple were not substantial.

This was directly addressed in the Analyst Day Q&A:

“Doug Freedman, RBC Capital Markets: All right. Let me try one more then on the OEM front. One of the complaints, I think, investors have had is that there’s a question whether you’re exposed to the right end customers.

We’re looking at Apple and Samsung doing extremely well in the smartphone market. Your exposure there is clearly limited. The question really is what are you doing to broaden your customer base, broaden the platforms? You mentioned that you felt like you got caught in the Q1 being limitedly exposed even at the customers that you have, you’re working on expanding that. How do I think about going forward what that has done to your strategy?

Dan Inbar: Yeah?

 

Sanjay Mehrotra: Yes, absolutely.  

 

Dan Inbar: I wasn’t sure. Right at the bell. 

 

So yes, as we said, we have had some designs that didn’t go as strongly as we would like and others, that not necessarily we were a part of, were doing very well in the first half of this year. That said and I think if you go outside here, you can see that you can, you will see design wins at basically all these OEMs. And developing the right product, the right configuration for each of them is something that we continuously do. And we believe that we are very well-positioned for the second half, for a strong second half, including the names you mentioned and many others, of course.”

So SanDisk feels it is well positioned for a strong second half including Apple.

More raw NAND Apple sales aren’t particularly exciting in themselves. But throw in some Apple SSD sales, and it could get interesting. L&R would be welcome too.

We’ve got more evidence that the SanDisk 27 September 2011 Confidential Treatment Order was Apple, which could point to both Apple opportunities and L&R.

Kinnucan Caper

We can thank the FBI for this info. Apparently the FBI trumps CT Orders.

They say, the FBI always gets its man. In this case they did and  it was John Kinnucan, a Portland research analyst.

They really really wanted to get him. And get him, they did.

Mr. Kinnucan publicly taunted the FBI on television and in print for two years with follow-up phone calls .

Not a good idea.

Mr. Kinnucan is now awaiting trial, in jail.

Mr. Kinnucan curried favor with Donald Barnetson, a senior director at SanDisk. In return, Mr. Barnetson fed Mr. Kinnucan SanDisk juicy confidential info.

Central to the FBI insider-trading case are leaks of a legal dispute between Apple and SanDisk. Interesting in itself, but even more so in that a resolution was soon expected that would be positive for SanDisk’s business.

From page 15 of Court Documents, 16 February 2012:

“d. Later in the same conversation on September 10, 2010, the SanDisk Insider[Barnetson] told Kinnucan about certain confidential negotiations over a legal dispute between SanDisk and Apple that were expected to be finalized within 6 weeks, and expected to be positive for SanDisk’s business. The SanDisk Insider explained that once finalized, SanDisk would have to file a Form 8-K with the U.S. Securities and Exchange Commission to disclose material corporate events to shareholders and the public.  

 

e. Shortly after his conversation with the SanDisk Insider, Kinnucan contacted several BBR Clients and advised them against short selling SanDisk stock for the next six weeks.” 

A form 8-K is a very broad form used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission.

No form 8-K has been filed by SanDisk for any deal with Apple. Not even a whisper of any negotiations has reached the media.

So what happened?

My guess is that negotiations dragged out far longer than 6 weeks, and the final resolution resulted in the CT Order filed in the fall of 2011. My guess is that the dispute revolved around flash management software. SanDisk’s strength and key to Apple’s ability to use raw NAND solutions.

As to what SanDisk would have received from Apple, my guess is license and royalty payments, and business opportunities.

In Q4 SanDisk did receive a “one-time favorable royalty adjustment of $7 million.”  So that could fit.

Also James Brelsford, SanDisk’s Chief Legal Officer and VP of IP Licensing just received a $360,000 bonus for fiscal year 2011.

Make of it what you will.

Rumors

The following believable rumors are worth watching.

Micron royalty talks apparently are still going on. Micron has likely avoided paying royalties because of their Intel partnership. Intel and SanDisk had/have a cross licensing agreement.

Intel just sold Micron its stake in two NAND wafer factories for approximately $600 million.

With the Intel shield now gone, the pressure might be ratcheting up on Micron.

SanDisk has guided for 2012 revenue of $6.2 billion to $6.6 billion, up from $5.66 billion in 2011. SanDisk expects that the majority of this revenue growth will take place in the second half of the year.

Rumor has it that this upside is solid because it is based on OEM design wins.

SanDisk continues to have its eye out for viable acquisition targets.

Apparently some Anobit enterprise SSD employees are interested in moving to SanDisk, including some that worked in the past at FLSH and SanDisk.

Yoram Cedar, SanDisk’s CTO recently left the company. Some have speculated that his departure might be problematic.

Apparently there were no issues. Yoram simply wanted to be involved in his son’s Internet start-up. His SanDisk option profits gave him the opportunity and he took it.

For the time being Yoram’s SanDisk responsibilities have been split between Atsuyoshi Koike and Ritu Shrivastava, two very capable individuals.

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10 Responses to More Apple & SanDisk

  1. ACR says:

    Interesting post. Any additional insights on what’s going with Micron and Intel? Is this that ‘canary in the mine’ sign from Intel that you wrote about earlier? Reduce exposure to flash market and still keep the supply going.

    • savolainen says:

      Hey ACR,

      My take is that Intel is executing their exit strategy from NAND. Pretty much as expected. Curious that no journalists seem to be providing much analysis.

      Yes, Intel has reduced its exposure to the NAND market while still maintaining captive supply for its needs. Pretty clever- from Intel’s perspective. They have passed the buck to Micron.

      I think we are going to have a wait a ways yet to tell for sure whether Micron/Intel has a viable 3D NAND or a a viable post-NAND technology ready to go.

      It sure seems though, that Intel has voted Nay.

      Regards,
      Savo

      • ACR says:

        Micron’s future rests, IMHO to a large degree, upon having a competitive post planar NAND strategy. It is indeed curious that this matter hasn’t been discussed more in the press. There is an extension of the RnD program according to the thin news brief put out, and Handy of Objective Analysis compared Intel’s position to that of SanDisk when it had oversupply a few years ago. Anyway, I for one am curious to see what products the current NAND companies will choose to commercialize first. Elpida’s businesses purportedly attracting bids from Toshiba, Micron and others is also another wildcard that’s floating around now.

      • savolainen says:

        Hey ACR,

        Micron/Intel and SanDisk/Toshiba seem to have very different strategies for post NAND technologies.

        Micron seems to have a shotgun approach, pursuing: SST-MRAM, CMOX, PCM, & ReRAM.

        SanDisk/Toshiba appears to be betting it all on ReRAM, with 3D NAND (BiCS) as a bridge technology/insurance policy.

        Time will tell who’s got it right and who’s got it wrong.

        I still feel that if Intel had felt really good about it’s chances, together with Micron, for post-NAND, it would not have bailed on the fabs.

        Another interesting angle to watch for the next couple of years will be how current players can deal with NAND scaling down through 1Z.

        I heard that Apple stole Anobit from Micron, who was very interested in acquiring Anobit for itself.

        At the last Analyst Day SanDisk sounded more confident than ever on its prospects for scaling through 1Z.

        It will be interesting to see whether the other players, including Micron, have what it takes to manage NAND all the way down.

        My guess is that Micron is feeling the heat and wanted all the help it could get and hence its interest in Anobit.

        Regards,
        Savo

  2. gal2k says:

    Savo,
    As an Apple end user, it is hard for me to understand why anyone would purchase anything but Apple for laptop, tablet, or phone. With that said, hard for me to be bullish on Sandisk without significant Apple participation. Here is a report of a teardown of the nascent Apple TV…which indicates Toshiba 8gb which you advise = Sandisk.

    Following the release of the third-generation Apple TV late last week, one forum member at XBMC.org has performed a teardown of the device, revealing a number of details about its internals.

    As Apple notes on the tech specs page for the new Apple TV, the device utilizes a unique single-core A5 system-on-a-chip, an upgrade from the A4 package found in the previous generation but lacking the dual-core processor found in the A5 chip used in the iPad 2 and iPhone 4S. The Apple TV teardown reveals a typical-looking A5 chip at first glance, carrying date codes suggesting it was manufactured during the seventh week of 2012, or mid-February.

    The processor inside the new Apple TV’s A5 package is identified as APL2498, indicating a variation on the APL0498 processor found in the standard dual-core A5. The part number for the RAM included in the chip suggests that it is a 512 MB chip from Hynix, a boost from the 256 MB of RAM found in the A4 package on the previous-generation Apple TV.

    As for flash storage, the format of the part number stamped on the chip implies that it is an 8 GB part from Toshiba, meaning that the device carries the same storage capacity as found in the previous-generation model. Given that the Apple TV is a streaming-only device, on-board storage is only required to support the operating system and buffering of streaming content.

    There had been some speculation that Apple could boost the on-board storage in order to handle larger 1080p content supported on the updated model, but it appears that Apple still views 8 GB as sufficient given limited increases in file size for 1080p content. Maintaining 8 GB of on-board storage undoubtedly also helps Apple maintain the $99 pricing on the Apple TV given other improvements such as the A5 chip.

    Finally, the new Apple TV appears to contain a second antenna that was not present in the previous-generation model, although it is unclear exactly how the new antenna is being used to improve performance.

    Thanks as always for your posts,
    gal2k

    • savolainen says:

      Hi gal2k,

      Hope the new year is treating you well.

      Thanks for the report on the Apple TV teardown. Not surprising that it’s Toshiba inside.

      I wouldn’t go so far as to say that Toshiba= SanDisk, but rather that the potential is there.

      Apple suppliers play a high volume/ low margin game with not much margin for error.

      I still think it telling that Intel chose to give Apple’s NAND money back in Q4 2008. SanDisk has to be very careful not to let Apple gain the upper hand.

      I have heard that SanDisk has been working closely with Intel on cache SSDs, a technology that enables “SSD-like” performance with HDDs.

      This technology is targeting ultrabooks, but could also lead back to Apple with forthcoming redesigned MacBook Pros. Another angle to watch.

      Regards,
      Savo

  3. gal2k says:

    Hi Savo,
    No pressure but just wondering if there will ever be another post again?
    thanks
    gal2k

  4. gal2k says:

    in the Samsung v Apple lawsuit…..seems to me that a Samsung victory would naturally push Apple to look to punish Samsung in return and move NAND sourcing to another supplier…..SNDK?
    thoughts?
    gal2k

  5. gal2k says:

    Toshiba=SNDK???
    The Korea Economic Daily, citing an unnamed industry source, reported on Friday that Apple had dropped Samsung from the list of memory chip suppliers for the first batch of the new iPhone, the iPhone 5, which is widely expected to be unveiled next Wednesday. The report said Apple instead picked Japan’s Toshiba Corp, Elpida Memory and Korea’s SK Hynix to supply DRAM and NAND chips.

  6. Morgan Bucks says:

    Sav!!Hope all is OK.Miss you, looking foward to hearing all’s looking Sweet!

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