There's lots of talk this week of a buyout by Apple of flash storage vendor Anobit. The focus of most analyses is about performance and cost reduction of the flash memory. However, a significant driver for this technology acquisition must be to contain the potential rising costs for support of Apple's growing list of flash-centric products.
ZDNet's own storage guru Robin Harris points out that the Anobit gives Apple a "competitive weapon." By integrating its own proprietary flash controllers, Apple products can be more-easily differentiated from the competition that now purchase Anobit's technology.
And Anobit’s expertise is readily transferable to whatever next-gen technology overtakes flash. This acquisition is a long-term bet on the importance of cheap, fast and reliable solid-state storage for keeping Apple on the leading edge.
Analyst Jim Handy of Objective Analysis Semiconductor Market Research said that Anobit's technology will be of growing importance to Apple as each generation of flash becomes more dense, more prone to errors and harder to correct. Anobit won the award for "Best of Show" at the 2010 Flash Memory Summit for its SSD controllers.
At a demonstration at the Flash Memory Summit Anobit showed the difference between its controller and a controller with 24-bit error correction, which is understood to be pretty advanced. The demonstration used a NAND flash chip with pretty horrid behavior – a 3-bit per cell chip that started to lose data at fewer than 300 erase-write cycles. Anobit wrote and erased each block in the flash a different number of times – the first block got one erase-write, the second two, and so on.
The demonstration stepped one-by-one through these blocks, all of which contained the same photograph. At around 500 erase-writes the standard 24-bit error correction stopped being able to recover the picture, but the Anobit-corrected picture stayed intact for more than an order of magnitude more cycles, indicating that this algorithm could get far more life out of a flash chip than could standard algorithms.
Why is this important to Apple? Well, as time marches on and NAND flash chips migrate to increasingly aggressive processes to reduce costs ever further, the chips become increasingly more error prone and harder to control. Flash users will be forced to use continually improving error correction schemes to be able to get their products to work at all.
According to Handy, Anobit technology will let Apple buy "raw NAND (the cheapest kind of NAND) at the lowest possible prices, preventing other companies from competing."
The use of NAND keeps growing in Apple's products, from the iPhone/iOS lines to the MacBook Air. While users of MacBook Pro models have the option for an Apple SSD, these are twice the price of third-party drives. There have been rumors for most of a year that Apple wants to move the MBP line to a SSD standard config.
Of course, keeping up profit margins is important to Apple investors and in the October Q4 2011 financial conference call with analysts, Apple CFO Peter Oppenheimer said that the high gross margins were due to "lower component and products costs."
Total company gross margin was 40.3 percent, which was 230 basis points higher than our guidance. This difference was almost entirely due to lower component and other product costs. Operating expenses were $2.67 billion and included $253 million of stock-based compensation expense. OI&E was $81 million.
Later he said the trend would continue for the December quarter, although this was before the terrible flooding in Thailand, which has caused a human tragedy and rocked the supply-chain of hard drive components. Intel this week announced that the shortage of drives hit its PC business by some 20 percent.
However, finding a way to contain the support costs for flash-based products must be near the the top of Apple's to-do list. Moving away from rotating memory is supposed to improve reliability and reduce support calls. But if the technology actually degrades significantly during the warranty period, both calls and costs will go up. Preventing even one service call for a machine will be important savings for both for Apple's fiscal results and its brand as a maker of quality products.
Apple products continue to be known for excellent reliability and support. In the PC World reliability and satisfaction survey released this week, Apple was tops in every measure for service and support. It was also tops in overall reliability, taking above average scores for 4 out of 5 measures. This is based on a poll of 63K readers.
Still, there are difficulties in understanding the results of these surveys: what machines are being reviewed and how old are they? Who are the users and what are their expectations? All mysteries. Really, all we know is that these readers have Apple Macs or Dell or Lenovo or Asus machines.
The same must said of an October report by Rescuecom, a PC support and repair company based in Syracuse, New York, that showed Apple in third place in Q2 2011 behind Lenovo and Toshiba. I don't doubt the result, but again, there's no context to understand what's being judged other than a support call. (I point out that Rescuecom advertises MAC support, which is a dead giveaway of a PC-centric organization. "Mac" is short for Macintosh, not an acronym such as Media Access Control address.)
So, if Apple's buyout of Anobit can keep component costs low but especially keep support costs down, then it will be shown to be a real bargain.