Where Will Apple Get Flash Memory Now?

An anonymous reader writes "EE Times examines whether Samsung could be about to control the equipment output of Apple by putting the Cupertino company on a rationed supply of NAND flash as the non-volatile memory goes into short supply in 2013. The analysis argues that Apple may need to put down billions of dollars of cash to fund a guaranteed NAND flash supply plan, something that Samsung did in the middle of the last decade."

Comments

At the prices Apple charges for extra memory

[Anonymous Coward]

they could probably pay someone to assemble the bits by hand under an electron microscope.

Re:At the prices Apple charges for extra memory

[MarkGriz]

"they could probably pay someone to assemble the bits by hand under an electron microscope"

You mean they don't?!! I didn't mind paying the extra because I though I was getting hand crafted bits.

Non story

[Anonymous Coward]

Apple may need to put down billions of dollars of cash to fund a guaranteed NAND flash supply plan

..which wouldn't be a problem for them.. and given the way they've worked with processors and displays, is to be expected.

Re: Non story

[jittles]

Well the story assumes that Apple hasn't already secured their supply. This story from 2005 reports how Apple made 5-year deals with 5 different manufacturers to secure their supply. The deals have since run out but it doesn't take a grand strategist to guess that Apple may have negotiated new deals. Remember Apple is very secretive so that may not announced to the world all their plans. Also, Apple has been known to front money to their suppliers in exchange for guaranteed supplies. Today they are sitting on billions in cash.

I doubt such a deal could remain secret due to SEC filings from Apple. Not to mention the fact that the suppliers will want to say "Look at us! We just got a billion dollars!" so that they may boost their stock prices. If we haven't heard about Apple making such a deal, then it probably hasn't happened. And it may not happen easily. Everyone is using flash storage now, and there is likely to be a lot of concern over supply. The big players may not want to make a deal with Apple to guarantee a supply so that they do not artificially limit the supply for their own products. Of course with a few extra billion, you could possibly increase your production significantly.

Re: Non story

[Anonymous Coward]

Well the story assumes that Apple hasn't already secured their supply. This story from 2005 reports how Apple made 5-year deals with 5 different manufacturers to secure their supply. The deals have since run out but it doesn't take a grand strategist to guess that Apple may have negotiated new deals. Remember Apple is very secretive so that may not announced to the world all their plans. Also, Apple has been known to front money to their suppliers in exchange for guaranteed supplies. Today they are sitting on billions in cash.

Please rtf the original article. The deal with 5 different manufacturers is why Apple will find it difficult to source the supply in 2013. They schemed the manufacturers and always projected they needed way more than they purchased. This lead to oversupply in the market and lower prices. So the 5 year, 5 manufacturer deal fell off the cliff. Therefore Apple in 2013 will have to put up billions as opposed to 1.25 billion and they probably have to buy all of the nand they think they need. Not just project and then play one manufacturer against another. Therefore Apple will possibly pre-pay and possibly pre-pay much higher prices and will also need to buy it. They will probably not make as much money on the NAND but still a significant margin.

And the parent post is modded informative! The best of slashdot. This post needs to be modded down into negative territory.

Re: Non story

[Sez Zero]

That's probably the most interesting part of the story. Because of what they did in 2005, they might not be able to do it again. By over-estimating the amount they would need, they kept the price of NAN down. Because they had deals with almost everyone, all those NAN suppliers made too much. From TFA:

Back in 2005 Apple pre-paid $1.25 billion to five NAND flash memory suppliers to ensure they would be able to supply Apple with memory through 2010. That was a five-year supply agreement (see Apple to pre-pay $1.25 billion for flash memory) that made sure Apple could continue its apparently inexorable rise as a mobile consumer electronics supplier. The five NAND flash memory suppliers were the same as those listed above although how the pre-payment broke down was not revealed at the time.

Apple also then proceeded to give its suppliers an indication of its estimated future needs year-by-year so that the vendors could tailor their manufacturing to meet its needs. The only problem was that towards the end of the five-year agreement Apple was reportedly accused of always over-estimating the need causing the flash memory vendors to be always in an oversupply situation and unable to raise prices. These accusations circulated in South Korea during 2009 (see Apple accused of NAND price manipulation).

Re: Non story

[hairyfeet]

I don't know if I'd bet the farm on that Hoss, in 2011 Flash prices were pretty volatile and there was fabs being built and shrinks happening so I wouldn't be surprised if Apple chose to wait until things were more stable before signing a long term contract of such high value.

At the end of the day Apple can get bit in the ass by a sudden change in the market, no different than anybody else. I mean I'm sure Dell and the rest of the OEMs wished they had bought a year's supply of hard drives before the flood but it just didn't make sense at the time because sizes were going up and prices down, sometimes shit does just happen ya know. Hell considering how fricking loyal Apple fans are they could probably raise prices 30%+ to cover the cost of getting the flash and still make crazy profit so I'm really not seeing this actually hurting the company, if flash gets tight the ones I see it hurting are those Droid tablets that are in a race to the bottom right now.

Gotta give Jobs credit, nice thing about marketing your company as a high end brand is people expect it to be expensive so passing on the costs to the consumer really isn't as hard for them as it is a Dell or HP that have razor thin margins.

Re: Non story

[UnknowingFool]

Apple pre-paid which means they would have to account for it to their stockholders and the SEC. If they made an agreement on price and supply amount without negotiating upfront money, I don't think that they have to report it.

Re: Non story

[NatasRevol]

They do. They're spending a LOT more capital in the last couple of years.

http://www.asymco.com/2012/12/11/the-new-age-of-capital-intensity/

Re: Non story

[c]

if flash gets tight the ones I see it hurting are those Droid tablets that are in a race to the bottom right now.

If flash gets tight, Adnroid tablet makers don't have many qualms about reducing internal flash and externalizing storage costs via (micro-)SD cards. As it is, a lot of those tablets might already be using lower capacity/spec flash that Apple wouldn't touch if it was free...

Re: Non story

[Xest]

The reason Apple's iPhone/iPad sales were up last quarter but their profit remained flat is because they were losing more money on the supply chain.

So I wouldn't assume it wont hurt them, it already did on other components (screens), it likely will on flash too. It may well mean that not only will profits be flat again with an increase in sales, but might actually decline despite shifting more units.

Effectively much of Apple's profits have been gained because they had great deals on components, they don't have those deals any more, and their suppliers like Samsung are sick of their lawsuit antics and in close competition now so are unlikely to sign such sweet deals again either. You're right that they could raise prices but that will have an impact on sales - maybe not to fans, but certainly to the average Joe who also buys the iPhone normally.

Effectively they're in a quandary, because costs of production has gone up as fast as rate of sales causing flat profits, if they raise prices then they'll lose even the continued increase in rate of sales, if they don't, then profit might actually go down. The only way they can deal with it is to make more profit elsewhere (i.e. a new product line), or somehow more drastically increase rate of iThing sales to outpace the growth in component cost.

In reality they'll probably attempt both, the success of which will no doubt play out in front of our eyes in the next year dependent on whether the iWatch and iTV turn up, or the iPhone 6 and iPad 5 can steal a serious share of the market back off of Android. They certainly can't rely on cheap component deals though - I suspect even Foxconn will be reaching a point where it realises it's got Apple by the balls in terms of manufacture given that perhaps no one else can churn out the levels Apple needs to meet demand and may start upping it's prices somewhat too.

Re: Non story

[Anonymous Coward]

So you are saying its a great thing that most android systems were willing to add a microSD slot?

Re: Non story

[Dixie_Flatline]

Well, being bitten is something else that they planned for--by having an enormous mountain of cash. Part of the brilliance of how Apple operates is not just that they plan for the stuff that they can control, they've also been planning for wild contingencies like this. Being able to buy your way out of any situation (at least once or twice) is terribly valuable.

Re: Non story

[fermion]

There has to be historical context here. Prior ro 2005 there not much demand for NAND flash memory. USB drives were around, but cost $50, though prices were dropping rapidly. All computer still came with CDRW and discs were cheaper. Apple decided to move from the microdrive to flash and introduce the iPod Nano, I am sure for suppliers this was a boon as Apple it significantly increased the market size for the product. Apple also is continuously upgrading product, so it would guarantee a market for larger sizes as they became available. I am sure that any of us would agree that if the there was a decision between almost no market and a huge market, the huge market would be preferable.

This only become a better situation for memory manufacturers with iPhone and iPod with demand for 16 and 32 GB memory sizes. Who else was buying at that size? Even the Zune never got more solid state storage than 16GB. And look a the iPad, now pushing 128 GB, while the WIndows Surface RT was released with 16GB and 32GB. The point is that if the manufacturers wanted to sell memory, Apple was the firm that was mass marketing large quantities to consumers.

What really changed in 2010 was Android, and the smartphone market share approaching 10%. It is interesting to note at that time RIM still had the largest market share, and would grow in revenue for another year. It is also interesting that most phones only has 1GB or none at all. Android phones, OTOH, like iPhone, built a demand of lots of memory. The smartphone was going to grow, and it was going to require lots of nand flash. Apple, for the first time had real competition for memory.

Here is where the manufacturers have to be careful. While tablets are going to drive memory demand, phones may not. I bought the 64(57available)GB iPhone and now realize that there is no way I am going to use all of it. With permanent cloud storage for purchased content and streaming I do not need it. An android phone I bought last year had almost no storage. It does not need it. All content is streamed. So right now we are in a bubble. People still want memory, but how long are they going to pay for memory they do not need? And if other do what MS is doing, which is selling tablet with insufficient memory, how is that going to effect the market?

Re: Non story

[jonbryce]

Their latest 10-Q filing shows $6.6bn in "other current assets", and $5.1bn in "other assets". Prepayments to suppliers will be included in there - "other current assets" if it is in respect of components to be supplied within the next year, or "other assets" if the components are to be supplied after more than one year.

Re: Non story

[DarkOx]

Well, being bitten is something else that they planned for--by having an enormous mountain of cash.

Yes and no. On the surface you are correct Apple has so much money not matter what problem they face they can probably write a check to make the immediate issue go away. They have such great contribution margin on many of their products they many even still be profitable writing that big check.

Trouble is as always Wall Street. The institutional share holders don't like that Apple has left them out of the profits; no dividend payments. Right now a goodly chunk of Apple's market cap is directly supported by the cash pile, 30-40%. There is a growing consensus that their cash cow iDevice market is being commoditized so expectations of profit growth there are shirking just on the loss of pricing power. Now you add increasing production costs and it starts to look like lots of head wind.

Wall Street does not like that cash pile for another reason too; control. APPL does not need outside investor interest or credit to fund its operation and won't need it even if it were shoveling dollars through a turbofan all day long for years. The stock is widely held so doing anything about the board would also be impossibly expensive. So there is and will be more fear about what happens: If APPL goes off the rails will I be able to get out? How can they possibly continue to meet expectations without opening new markets; and can they do that without Steve?

In the short term the company is very much isolated from the performance of their shares on the market. If that cash pile runs out though they won't want the reputation of their stock being a dog. It took them years to shake that the last.

Re: Non story

[Anonymous Coward]

Gotta give Jobs credit, nice thing about marketing your company as a high end brand is people expect it to be expensive so passing on the costs to the consumer really isn't as hard for them as it is a Dell or HP that have razor thin margins.

This pretty well covers my thoughts on this. Apple is in the position of having the highest profit margins in the industry. Which has the practical advantage of meaning that if prices go up substantially they can, if they so choose, absorb a fair amount of price inflation and still turn a profit. The people who are going to lose on this deal are the people making the lower end products who don't have the margins to cover these costs. They'll either have to raise prices, cut costs somewhere else or suffer even slimmer margins. The other thing about having the kind of cash Apple has on hand is it gives them options. Worst case they can just bid the prices up. Other major players can play ball under those circumstances but your 2nd tier people will suffer. So arguably Apple could come out of a serious supply shortage in a stronger position rather than a weaker one. Just depends upon how good their planning is and how ruthless they are. I haven't seen anything to make me think they lack for either of those things.

Re: Non story

[c]

I bet my Samsung tablet has ram that is as good as or better then whats in the iPad.

I don't consider Samsung as being a major part of the "race to the bottom" that I was responding to. Of the "major" Android tablet vendors, I'd have to point at Acer, ASUS and Lenovo being most likely to cut some corners... the ASUS Transformer Infinity, for example, is considered by hobbled by a second-rate I/O controller on its SSD, and that was until recently their top-of-the-line tablet.

Re: Non story

[Wookact]

Ok, thanks for the well reasoned reply. I see what you were trying to say there.

Re: Non story

[cthulhu11]

Our iPad / iPhones are using about 30GB right now for content for our son. Streaming in no way is a substitute for having local copies: no reliance on an unmetered, always-available, always-fast cell-network connection - which are not to be found on airplanes and rural highways. No reliance on the external provider keeping the content available forever. I doubt many people would put up with waiting for every app they want to run to be downloaded over the air every time. My son sure wouldn't cope with it for his 250MB apps.

Re: Non story

[lsatenstein]

Well the story assumes that Apple hasn't already secured their supply. This story from 2005 reports how Apple made 5-year deals with 5 different manufacturers to secure their supply. The deals have since run out but it doesn't take a grand strategist to guess that Apple may have negotiated new deals. Remember Apple is very secretive so that may not announced to the world all their plans. Also, Apple has been known to front money to their suppliers in exchange for guaranteed supplies. Today they are sitting on billions in cash.

I doubt such a deal could remain secret due to SEC filings from Apple. Not to mention the fact that the suppliers will want to say "Look at us! We just got a billion dollars!" so that they may boost their stock prices. If we haven't heard about Apple making such a deal, then it probably hasn't happened. And it may not happen easily. Everyone is using flash storage now, and there is likely to be a lot of concern over supply. The big players may not want to make a deal with Apple to guarantee a supply so that they do not artificially limit the supply for their own products. Of course with a few extra billion, you could possibly increase your production significantly.

===
When your customer is rich, and the competition is limited. You can charge more. But you must be able to deliver volume and quality. Apple with deep pockets will pay more for product than another less financially endowed company.

Re: Non story

[fermion]

Here is the thing. I have been at about 30-40 GB of content on devices for over 10 years. First I have 30 GB of songs, all the CDs I owned. Then I paired it down and started adding video. For a while ia hard a half terabyte drive to steam movies locally, but i don't really use that anymore. On my iPad where I have many movies the 64GB limit is a strain, but I still have most of the content I need, while on my phone the 64GB is an overkill. While my next iPad will be 128GB, I don't see paying for phone more than 64GB. It really seems that most things, 30GB is enough for anyone.

Re: Non story

[cthulhu11]

Well, you're a grownup, probably neurotypical. I need all the content (and whatever the future brings) for my autistic son -- if one device's battery dies mid-flight eg., it will be a very bad trip for everyone on the plane. Most people of course don't have my constraints, and at home content that isn't for my son lives on a system that shares it out over the net, but for leaving the house with my son having the capacity on my phone is priceless.

they bought Anobit but....

[maroberts]

Anobit has no fab plant, so it doesn't solve the problem of not being able to get the actual components.

Re:they bought Anobit but....

[NatasRevol]

Apple could probably put a small percentage of their capital into TSMC and double or triple their capacity.

Re:they bought Anobit but....

[gl4ss]

sure, and they'd have the capacity well after this year.
believe me, if any of those companies could put down some money simply and meet the market they would. why wouldn't they?

Re:they bought Anobit but....

[Algae_94]

They can't do this overnight. Enough money can get things done, but there are physical limits to what can be done in a set amount of time. Apple would also need to analyze the risks and returns of doing this. How long do you think it would take management to even decide to spend the money?

Re:they bought Anobit but....

[NatasRevol]

They would have decided two years ago.

Maybe there's a reason Apple's capital spending has increased dramatically in the last 2-3 years.

http://www.asymco.com/2012/12/11/the-new-age-of-capital-intensity/

Re:Anobit?

[Anonymous Coward]

Because Wikipedia: "Anobit Technologies, Ltd. is an Israeli fabless designer of flash memory controllers." For the reading impaired, this means that they design memory controllers, not memory chips, and they only design them, they don't make them.

Re:Anobit?

[Chrisq]

Didn't Apple buy Anobit? So why would they buy NAND from Samsung?

Do Anobit make actual flash memory or just flash controllers? I can't seem to find the information on Google

So much FUD

[Anonymous Coward]

Every time a company is not 100% vertically integrated you get these kind of fearmongering articles. NAND flash is a commodity, they can find it somewhere else.

Re:So much FUD

[Joce640k]

Every time a company is not 100% vertically integrated you get these kind of fearmongering articles. NAND flash is a commodity, they can find it somewhere else.

But not necessarily at a price that makes people happy.

Re:So much FUD

[tlhIngan]

by Joce640k (829181) Alter Relationship on Thursday April 11, @07:42AM (#43422251) Homepage

Every time a company is not 100% vertically integrated you get these kind of fearmongering articles. NAND flash is a commodity, they can find it somewhere else.

But not necessarily at a price that makes people happy.

People would be a lot more unhappy than Apple though. Think of who uses flash memory. And then think of what happens if Apple were to pay a premium to lock in supply.

Basically if Samsung puts Apple on allocation, Apple will go to Toshiba, Micron, Intel, etc., for their memory and probably pay a premium to lock it in. Which means everyone ELSE who buys flash has to pay more as well, AND be put on allocation as supplies will go to Apple first.

Which means all your non-Samsung SSDs and non-Samsung, non-Apple phones will be a LOT more expensive. Perhaps driving them off the market.

Flash is a commodity. It's affected by everything else as well, and companies dependent on the commodity will all suffer equally. Those who can lock in supplies will at the expense of everyone else. Same thing happens to ever other commodity out there - oil, gas, oranges, bacon, etc.

Re:So much FUD

[AmiMoJo]

Shit NAND flash is a commodity, but when you build high end devices that demand both performance and low power consumption your choices are quite limited.

It will be interesting to see what Apple do. They usually try to second source everything, but often one of the options seems to suck (LG retina displays, for example).

Re:So much FUD

[snadrus]

The source of the valuable ingredients control the product. In cars, you've got the Ford Motor Co. & other similar companies that wrap a car around the most valuable part that they built. Similarly, the best deal has always been products from the same company (like Samsung for Android phones).

Re:So much FUD

[smash]

More likely, apple will just BUY toshiba, Micron, or whatever and make their own.

What Would Steve Do?

[Maximum Prophet]

If Steve Jobs were still alive, he'd just find the next big thing, and stop using NAND flash. Memristors anyone?

Of course, if anyone else tried this, the new tech would be non-viable, but Steve would use his force of will to make the new tech work at the price he wanted to pay.

Re:What Would Steve Do?

[rvw]

If Steve Jobs were still alive, he'd just find the next big thing, and stop using NAND flash. Memristors anyone?

In Soviet Union, comradstors would keep Steve fleshy and alive!

Re:What Would Steve Do?

[bhagwad]

Seriously?...

The fact that I can't tell if this is sarcasm or not...ouch.

Re:What Would Steve Do?

[interval1066]

Don't think so. NAND is going to prevail longer than that.

Re:What Would Steve Do?

[Em Adespoton]

If Steve Jobs were still alive, he'd just find the next big thing, and stop using NAND flash. Memristors anyone?

Of course, if anyone else tried this, the new tech would be non-viable, but Steve would use his force of will to make the new tech work at the price he wanted to pay.

I hope you're not serious. Apple has NEVER found the next big thing, ever. Everything apple has ever made has always been done by someone else previously. Apple is just really good at attracting people in their 40s and people in their 20s to buy their products at a premium and that's it.

And as soon as apple releases a product at least 2 other companies release their own version which is a superior product at a much lower cost.

Apple has little to do with jobs at all really, he was just the spokesman. His engineers, marketing department, designers and lawyers are what built apple. He didn't do anything but soak up credit for it all and grand standed in front of everyone. Kind of like how movie directors take credit for everything when they are just a small cog in a big machine, or everyone thinks the president runs the country when in reality he is just a mouth piece. Jobs was just a showman that's it. Apple lovers praised him for being a genius, everyone else though he was a dick, and only half of those people were right.

I'm pretty sure he wasn't serious... but I hope you aren't too.

Back in the day, Woz created a floppy drive that didn't require physical sectoring -- it was picked up by the entire industry, and was part of what ushered in the PC era. Sure, you could argue that floppy disks were around before, but they were clunky, prone to failure, and the controllers were really expensive. Apple got it right.

That's pretty much the trend you see at Apple (except for the blip under Scully and Amelio) -- they took ideas in the industry, and then re-thought them to make them both affordable and useful (not just one or the other). Apple also, of course, has had more than its share of "me too" technologies, such as the mouse (ball and laser versions), USB, LCD screens, EFI, etc. But in all these cases, I think you'll find that Apple's implementation often drove market acceptance.

Apple grabbed people in their 40's and 20's for one very big reason: they targeted the education market when both of those groups were in elementary/highschool. To those groups, Apple is a brand synonymous with technology done right. Then Apple went after the hipster movement, and fed new lines of product into the same demographics.

However, Apple has also targeted other markets -- it's why you'll still find graphic designers using Apple products, as well as die hard groups in the US Military, among other places. Apple has always sold vision and a story, not just technology.

And this is where Jobs came in -- he was an excellent salesman for vision and story. He knew how to deliver the entire package in a way that would capture people's imagination (hence the reality distortion field).

And here's the big part: he didn't just use these skills on the general public: he did the same thing within Apple. As a result, he wasn't just a spokesman; he was the man who drove his engineers, marketing department, designers and lawyers. He pushed all of them -- hard. This is why he gets so much credit; he was a genius at getting things done, and was a dick when he needed to be to accomplish this. Not the sort of person I'd like to have as a friend, but as a totalitarian leader for a large company, he had just the right talents.

Oh, I missed out your comment about "superior products at a much lower cost" -- examples please. Apple used to be this way back in the 90's, when they were hefting most of the R&D costs and clueless about where they were actually heading. These days, prices are all similar, components are identical, and Apple is really only fronting the marketing research, with R&D being done by all the leaders on the technology front.

Re:What Would Steve Do?

[ogdenk]

I hope you're not serious. Apple has NEVER found the next big thing, ever.

So....

The Pre-packaged ready-to-go personal computer.
USB (though inspired by Atari SIO)
FireWire
First successful integration of an online music store and a portable media player.

I'd say all 4 have been pretty successful.

While I'm no Jobs fan and I personally HATE iOS (and Android for that matter), NeXTstep was awesome. OSX is a modern version of NeXTstep. If you get used to its quirks and differences from Linux boxes and turn some of the retarded tablet-like features off I'd say it's the best damn desktop UNIX environment out there. Period. And I can run native MS Office and other packages that make PHB's happy. And still compile lots of open source goodies. And run them natively too.

Oh yeah, forgot to mention.... first *SUCCESSFUL* desktop UNIXish platform targeted at consumers. But that's ok because the year of the Linux desktop is just around the corner.

Re:What Would Steve Do?

[smash]

When jobs came back to apple the first thing he did was shit-can most of the product line, and narrow it down to laptop, regular desktop and pro desktop in 3 different specs (good, better, best), then set about producing the iMac and iPod.

The existing product lines, when Steve returned, were all pretty much scrapped ASAP.

Re:What Would Steve Do?

[smash]

If we also include NEXT (which was steve's spin off which was reintegrated into/became the new apple), you can include the first real Object Oriented rapid application development platform (interface builder), first desktop OS with a built in TCP/IP stack, first workstation with CD quality audio, etc.

Re:What Would Steve Do?

[ogdenk]

Yeah seriously..... how long was it before the Wintel world got a TCP/IP stack that wasn't a joke? I still have nightmares about Trumpet Winsock.

Re:Anobit?

[h4rr4r]

Niether. They design flash controllers, but don't have a fab.

so who is samsung going to sell to?

[alen]

this is not a school yard
samsung borrowed lots of money to build high tech flash memory factories. they can play hardball with apple, but they need to have a customer lined up to buy up whatever apple doesn't. unused capacity means lost revenue while salaries and interest on the debt still has to be paid

Re:so who is samsung going to sell to?

[h4rr4r]

This.
The article is completely crap. Samsung will sell flash to anyone who will buy it, until they are out of capacity. Sure they will likely give better deals, faster delivery, whatever to their own mobile and computer divisions, but they are in the business of selling these chips. They are not out of spite going to ignore a huge customer.

Re:so who is samsung going to sell to?

[radio4fan]

The summary is way over-dramatic.

The customer they have lined up to buy the NAND flash is Samsung itself, as they're now making a shit-load of smartphones, tablets, TVs and whatnot. There just may not be enough flash memory to go around.

The article is also littered with phrases like "what effect, if any..", "one can imagine that...", "there is the possibility that..."

Re:so who is samsung going to sell to?

[hairyfeet]

The problem with your theory is this: In 2011 there really wasn't as much stuff using those chips as there are now. In 2011 only the most high end TVs were "smart TVs", now even the low end sets have some smart features which means flash, hell pretty much every thing with a screen now uses flash memory and with so many appliance makers out there if Samsung wants to play hardball I seriously doubt it'll be hard to find takers for those chips.

But Apple is sitting on such a mound of capital I'm shocked they just haven't had their own fab built, not like their usage of flash chips is gonna go down at any point in the next several years barring some breakthrough in storage tech so if Apple has to scramble for chips i could easily see them either building their own or buying one of the smaller fabs for themselves. After all wouldn't be the first time, look at how they bought PA Semi so they could bring chip design in house.

Re:so who is samsung going to sell to?

[Sponge Bath]

This other confidence inspiring gem FTA stuck out:
"There are few reliable sources for this, a comment in the Korea Times here, an unnamed supply chain sources there, but the general opinion is that..."

Re:so who is samsung going to sell to?

[h4rr4r]

Short of buying someone with a fab, Apple cannot just buy a fab. They need the knowhow as much as the physical plant. What will happen is they will buy rights to the output of a fab for X years for Y dollars. They could also buy a small Fab firm, but there are not that many of those left. Who short of Intel and Samsung is down to 22nm? And we both know Apple is not buying Intel or Samsung.

Re:so who is samsung going to sell to?

[default luser]

Short of buying someone with a fab, Apple cannot just buy a fab. They need the knowhow as much as the physical plant. What will happen is they will buy rights to the output of a fab for X years for Y dollars. They could also buy a small Fab firm, but there are not that many of those left. Who short of Intel and Samsung is down to 22nm? And we both know Apple is not buying Intel or Samsung.

How about Sandisk?

They're a 6 Billion dollar a year company in terms of revenue (about a quarter of Samsung), and with a market cap of 14 Billion they're quite purchasable.

The company has a shiny outlook thanks to the increase in flash prices this year, so I would think that a takeover bid would be graciously accepted right now.

They have their own NAND fabs, have a growing SSD business (vertical integration with desktops?). The only stick point I can see is the Sansa music players, which might get buried during the buyout.

Re:so who is samsung going to sell to?

[tibit]

Apple can afford to pay people with the knowhow. If they wanted and needed a fab, they could get one.

Re:so who is samsung going to sell to?

[AmiMoJo]

Sandisk are not really a viable competitor to Samsung for very high end devices though. Samsung have a big advantage in terms of performance and low power consumption, and are very competitive on price. That's why Sandisk flash mostly ends up in SD memory cards, mid-range devices and devices where power consumption isn't an issue.

Hynix do some okay stuff. Building/buying a fab is an option but I doubt Apple would want to go down that road because the cost of R&D and investment just to keep up with the state of the art is immense, and Apple doesn't do any manufacturing anyway.

Re:so who is samsung going to sell to?

[DarkOx]

Apple is not buying Intel

That is an interesting proposition actually. Apple has a market cap almost four times Intel's, and close to it just in assets. Apple probably could pull off a hostile take over of Intel if they were really determined.

That would radically alter the market.

Re:so who is samsung going to sell to?

[h4rr4r]

I doubt it would be allowed by regulators.
It would be bad for the entire industry to have the nearly monopoly CPU vendor for the server/desktop space so closely linked with an OS vendor.

Re:so who is samsung going to sell to?

[jbolden]

I don't know that. They could very well buy Intel. They could also give Intel very favorable terms as a way of leapfrogging the capabilities of the Android phones for several years.

Re:so who is samsung going to sell to?

[jbolden]

I don't think it would have to be hostile. Why would Intel's board object assuming they got a nice 30% premium?

They might have regulatory issues, but a quasi buyout where Apple had strong contracts with all sorts of rights in exchange for lots of upfront money...

Re:so who is samsung going to sell to?

[Algae_94]

funny thing about a hostile takeover, buying all those shares of Intel would cause the price to rise to the point that the takeover is way too expensive to do, even for Apple. Intel is just not a likely acquisition for Apple.

Re:so who is samsung going to sell to?

[gl4ss]

they got buyers..

are you unfamiliar with the concept of a shortage? apple bullied on the school yard and now nobody will give them a tab and promise them chips apple might not even buy, so they have to pay market price.

Re:so who is samsung going to sell to?

[gl4ss]

Apple can afford to pay people with the knowhow. If they wanted and needed a fab, they could get one.

yes. in 5 years. at which time point their fab might be pointless.

it's debatable if apple wants the investment risk on that. they've never wanted the risk on a chip fab before..

Re:so who is samsung going to sell to?

[hairyfeet]

But you are missing the big picture friend, there are like 6 or 7 companies with fabs making chips, one mentioned Sandisk which are a possibility but the Sansa media players would likely make them not as attractive, I would put my money on Micron.Tech, they got the fabs, got the capacity and since they primarily make flash for other devices you don't have any product lines to kill.

So the point is with the huge pile o' cash Apple is sitting on this could actually turn into a positive because they could just buy one of the smaller companies, use their output exclusively for a couple years and then if the tech changes too much so it will cost a ton to get them up to current tech? just sell 'em, its not like the output of previous gen fabs aren't being used today so they could get most of their money back and fix the problem easily.

Re:so who is samsung going to sell to?

[mjwx]

but they need to have a customer lined up to buy up whatever apple doesn't

Look around.

Samsung, LG, HTC, ZTE, Sandisk, Crucial, Western Digital, Huawei, Motorola, Sony.

Everyone produces something that uses NAND flash. From MP3 players to phones, SSD's, even cars to fridges have internal storage these days.

Samsung has no shortage of customers for NAND flash, Samsung themselves use a significant percentage of what they produce (Samsung make phones, tablets and SSD's) they would stand to make more money by selling Apple's supply to 8 other players at slightly higher prices.

This is how Apple's business model of suing your competitors instead of competing bears fruit. Samsung happily sells to their own competitors, its bad for business not to. But when your competitor is trying to use the legal system to gain an artificial advantage, helping them becomes bad for business. This is pretty much what killed Commodore, abuse your suppliers and you find your suppliers dont want to do business with you any more.

Re:so who is samsung going to sell to?

[smash]

Yes and no. I don't think they'll find the volume they'd lose if apple stopped buying from them. Smart TVs typically aren't using 256GB + of flash, like MBAs, rMBPs, iMacs. Hell, i doubt they're using even 32GB which is a mid-range iPad.

I'd bet a large quantity of money that Apple have taken precautions for the day Samsung refuses to sell, etc and already has second sources, a backup plan, etc for when the day comes.

If Samsung is going to try and play hardball with flash, I don't think they're going to do themselves any favours either - they're only going to lose their biggest NAND customer.

Re:Yes please

[Anonymous Coward]

Nothing like the nerdrage geeks seem to have against companies they have nothing do with. Grind your teeth!

Disclaimer: I hate the fact that people get so riled up over cell phones

So what...

[multimediavt]

Pay particular attention to the 'Total cash' line item. Apple could build their own fab anywhere they wanted with the amount of cash they have. Why is this an issue? Oh yeah, it's not. More FUD on a slow news day.

Re:So what...

[Targon]

A fab isn't just some generic piece of equipment, and getting beyond 32nm has proven difficult for most companies. If it were so easy, then AMD would have 22nm processors currently and wouldn't be having nearly as many problems competing in the CPU space. There is also expertise that is required beyond the basic equipment.

Re:So what...

[interval1066]

Yes, they probably can do this. But building a fab for every supply problem isn't practical.

Re:So what...

[Dishevel]

Not only the expertise, but also the time required to get up and running, but also the time.
Once you decide to set up your own chip fabrication plant it will be a few years (maybe a few more) before you start producing the chips.
By that time the entire market can change. Setting up your own fab is not a solution to a problem you see coming in 2013 or even probably 2015.

Re:So what...

[gl4ss]

They could go to their other partner, Intel. Or they could go to TMSC or IBM. Those guys may know a thing or two about making chips.

Samsung is playing hardball, because it can (it should against Apple they are sharks). I would be more worried about NK getting crazy and it hurting Samsung if I were Apple...

intel has a better use for their fabs. this wouldn't actually change if apple owned intel, since that's just how the market works.

notice that this isn't particularly a crisis for apple except in the sense that they've used up their apple card already with the manufacturers so they need to pay cash today and not just promise to buy more later to get a discount.

Re:So what...

[magowski]

Hire some engineers. Apple can afford that. there's the expertise problem sorted. Buy an existing fab. Apple can afford that also. Do whatever it takes to stay on top ( within the law, of course) Hire away whomever, Build whatever, Contribute to whichever re-election fund. Whatever it takes.

Re:So what...

[dkf]

Apple could build their own fab anywhere they wanted with the amount of cash they have. Why is this an issue?

Because it takes 18-24 months between breaking ground on a modern fab to getting chips out the door.

And the margins on being in the physical manufacturing business are totally different to those that Apple is used to today. Investing in a fab would make Wall Street very unhappy with Apple's board...

Re:apple are retards

[DougOtto]

It'd be easier to accept your assessment of Apple's intellectual prowess if you used things like capital letters and punctuation.

/just sayin

The usual way...

[Anonymous Coward]

...they invent flash and sue everyone who uses their patent.

Re:apple are retards

[i_ate_god]

long term sustainability is not profitable.

Re:WTF?

[alen]

samsung is the largest manufacturer of flash

apple's problem now isn't design, its sourcing enough materials to be able to make enough products to fulfill demand. look at HTC. they designed a decent phone but can't seem to manufacture it to actually sell it in the store to people

Re:apple are retards

[bhagwad]

Which is entirely tangential to the point he was making. Since he made an argument and not merely an assertion, there's no reason to look at his grammar or anything else other than the actual logic used no?

Re: Stupid Move

[UnknowingFool]

Well the lawsuit aside, it would not be wise if Apple relied completely on one supplier for parts. This is part of the reason they went with TSMC for their A6 chip. Another reason is likely that TSMC already has a 28nm line while Samsung is still building theirs. I assume when Samsung's line is up, Apple will use both companies. One thing that article assumes is that Samsung is the only supplier of NAND chips in the world which is false. Now Samsung might be one of a handful that makes particular kinds of chips (speed, capacity) that Apple wants but they are not the only game in town. Toshiba, Hynix, Micron, and Intel will gladly sell billions of dollars to Apple.

FUD

[bWareiWare.co.uk]

We are all frustrated by Apple at one time or another, but that don't justify spreading ridiculous FUD.
Apple has more cash then ANYONE IN HISTORY; security their supply lines is hardly going to be difficult.

Re:FUD

[Anonymous Coward]

Apple has more cash then ANYONE IN HISTORY

Ah, more ridiculous lies.

They haven't even one-tenth of the funds that the East India Company held.

When Apple starts donating surplus warships to the navy, come back to me. Yes that's how big the EIC was.

Also, you meant to use 'than' rather than 'then'.

Re:FUD

[Algae_94]

If we are willing to adjust for inflation, John D. Rockefeller had the equivalent of more money than Apple has currently. He had between $300 and $400 billion in today's dollars. Apple has a lot of cash, but it's not unprecedented.

Re:Stupid Move

[Anonymous Coward]

Short-term versus long term.

In the short term Sammy could get some money on low-margin commodity NAND chips, until/unless Apple decided to switch suppliers in the future.

Long-term they could try and use the opportunity to hit their main competitor in the high-margin smartphone market.

Nobody makes big bucks selling commodity hardware.

Re:apple are retards

[interval1066]

I don't think Apple are retards. They didn't see Samsung coming, I think.

Re:apple are retards

[DougOtto]

I'm sure this has nothing to due with the announcement that Apple is shifting development to TSMC, instead of Samsung, for their upcoming A7.

I hate the term FUD

[Anonymous Coward]

FUD was really for describing large corporations' tactics of spreading disinformation against competitors products or services.

The most famous and probably the start of the term "FUD - Fear, Uncertainty and Doubt" was Microsoft's comparisons of their OS with Linux - especially for server and other back end applications.

In this case, it is inappropriate.

Remember the tsunamis and other natural disasters in SE Asia that cased supply chain nightmares for months afterwards in the computer industry? Apple was affected too.

But I mean, let's say this is true. I, as a consumer, don't give a shit. If I were a stockholder of Apple, then I may be concerned about a couple of quarters at best.

But as of now, Apple has bigger issues than Samsung as a supplier

tl;dr; "FUD" is an over used expression and is being used as a lazy means of disputing arguments one may disagree with.

But other than that, the parent is correct in that this is a non-issue for everyone but the purchasing dept at Apple.

Re:I hate the term FUD

[DragonWriter]

The most famous and probably the start of the term "FUD - Fear, Uncertainty and Doubt" was Microsoft's comparisons of their OS with Linux

No, its not probably the start of the term; it goes back, in that specific form, at least to IBM's tactics against competitors in the 1970s.

Re:Stupid Move

[TheSkepticalOptimist]

6 years ago Samsung was barely a competitor in the non-smartphone market, now Samsung is outselling Apple in smartphones.

Samsung is probably their own biggest customers for their NAND flash. Companies often "buy" within their own divisions, so Samsung's phone division is Samsung's component division's best customer.

Now also consider that Samsung has become the largest manufacture for smart TV's and AV components, all requiring NAND flash, even some of their refrigerators have web services built into them. Samsung is creating an empire significantly larger than Apple.

ANY Samsung shareholder should be thrilled with the direction Samsung has taken and turning it into a household name that exceeds Apple's mindshare around the world.

You could be a stupid investor and dump Samsung shares because you don't like how they are treating Apple, but realize Apple is becoming a small drop in Samsung's profits and business strategy. Considering how vocal Apple has been about moving away from Samsung, Samsung is taking the right steps to sever ties and move towards more lucrative and profitable industries, namely, themselves.

Samsung makes phones, tablets, computers, the parts that goes into those devices AND TV's, appliances, and so much more. Samsung is so friggen diversified that Apple probably NEVER made a significant impact on their profits, so if I ran Samsung, I would say good riddance and cripple one of their pissy competitors in only one of their many many divisions.

Re:apple are retards

[Anonymous Coward]

It would be easier to accept your authority on any subject that matters if you didn't have that big blue turd next to your username. /just sayin

american companies have quit looking long term

[WindBourne]

So many of american companies scream free enterprise, but rarely take notice of the fact that other companies are nationalistic or simply in control of their future. For american executives, it is all about short-term profits since they own stock.

Re:american companies have quit looking long term

[the eric conspiracy]

Well, it's more that the executives in publicly traded companies have to report quarterly results. If they aren't good the heat comes.

Look at Ron Johnson.

Re:american companies have quit looking long term

[Chance Phelps]

Quite true. Most American companies have to show more revenue and profits than what they got in the previous quarter, else the shareholders will scream bloody murder. However, the Asian companies have got it right: profits don't matter. Marketshare does. Once you have control over the market bordering on the monopolistic, you can charge what you feel like. They also make long term investments (like Samsung in TFA). On the other hand, you have companies like HP whose operations seem to be planned on a day-to-day basis. Even then, they have trouble sticking to their plans (or CEOs).

Re:american companies have quit looking long term

[WindBourne]

Before the GD, we allowed executives to own stock. As such, many of our companies were short-sighted and we had crashed every 20 years or so. Since 1933 when the no-executive-own-stock was put in place, the companies switched to long-term focus and we had massive economic expansion. It was after reagan rolled that EO out and allowed executives to own stock that we have seen nothing but short-term focus. It has nothing to do with profits. It all has to do with stock manipulations. Look at GE, IBM, and HP. They have done massive damage to themselves via CEOs that look short-term. Heck, an even better example is American Airliens. They did great under Bob Crandall. Under the next 2 CEOs, the companies was bankrupted. Why? Because the executives had loads of stock and pushed for short-term manipulation that ran up the stock price at which point the executive sold much of their stocks, while waiting for more.

What is needed is for an EMPLOYEE STOCK. One that is tied to profits, and is not allowed to be sold on the open markets. Yes, basically, an ESOP. However, they need to make it so that NO employee is allowed to own any public stock in the industry.

Re:american companies have quit looking long term

[Patch86]

What is needed is for an EMPLOYEE STOCK. One that is tied to profits, and is not allowed to be sold on the open markets. Yes, basically, an ESOP. However, they need to make it so that NO employee is allowed to own any public stock in the industry.

What you are describing is a mutual business or workers co-operative; where all employees own a portion of the business, are entitled to vote at AGMs and share in the profit, but the share of ownership is non-transferable- it lasts exactly as long as you are an employee. Additional capital can be raised on the open market as publicly tradeable bonds (such as PIBS), which more or less function as non-voting shares.

This is a sentiment I whole heartedly agree with. Mutual businesses have shown themselves to be (as a rule) more stable and more long-term viable than PLCs time and time again.

Re:american companies have quit looking long term

[WindBourne]

It did not used to be that way at HP. We were focused on long-term operations. From what I hear, what you describe is exactly where they are now.

Re:american companies have quit looking long term

[the eric conspiracy]

Bob Crandall was suis generis. You can't extrapolate from a singularity.

GE did massive damage to itself by becoming a financial institution. HP has had atrocious corporate governance (terrible board of directors) since the founders left and IBM is one of the most successful companies there is.

Employee stock that can't be sold is what I have right now. It has no influence on me in any way because it has no value to me.

Back in the 1980's I did belong to a sort of ESOP - everyone in the company got options. That was more interesting because the performance of the company over the option cycle (2 years) directly affected my compensation.

The problem was that my performance had no significant impact in the company. This was a Dow 30 company with 40,000 employees. The only people who had real impact were the senior execs and the CEO. And the CEO was a horse's ass.

So perhaps a stock option plan for a small company is a useful idea. But I think a really a good compensation plan is a better idea.

Re:Yes please

[Thud457]

OH YEAH?!! Well, your favorite brand of pencil sucks. They don't even use sustainably-grown cedar!

Wow... Talk about pulling a story out of thin air

[93 Escort Wagon]

The article starts by saying there's little to no reliable evidence for this... but Apple MAY be planning to jump ship on Samsung with regards to manufacturing of its A7 processor. Then, from there it goes on to "if this happens, how will it affect Samsung's willingness to sell memory to Apple", and speculates (with zero support, not even rumors) that maybe Samsung MIGHT need to keep more of its own memory for its own products, in which case it MIGHT have to allocate how much memory Apple can buy (again, this is not even supported by some whisper the author heard in a bar - he's flying solo).

That's bad rumor-mongering even by analyst standards.

Re:Anobit?

[Anonymous Coward]

Dont forget to stop driving vehicles or buying food delivered using saudi oil. Hipocrisy is a bitch.

Re:Wow... Talk about pulling a story out of thin a

[MightyYar]

...all in the midst of a glut in capacity in the semiconductor industry.

Re:apple are retards

[bhagwad]

It's for you to decide by examining the argument itself isn't it?

Because. Offshoring.

[sl4shd0rk]

This is the thing I hate -- and it's not just Apple. These US companies offshored Allllll their manufacturing and processes to take full advantage of cheap labor, third-world economies and loose environmental restrictions. People at home get laid off[0] jobs dried up, manufacturers closed their doors, and a good portion of blue collar labor went on unemployment. Now, these same assholes complain their is no "skilled labor" to fill their job openings, so they need to import H1B workers[1]. What's more, then become worried that they can't find a source for components for their gizmos that USED TO BE PRODUCED IN THEIR OWN BACKYARD? The irony is mind-numbing.

[0] - TI lays off 1700
[1] - H1B Visa lottery

Apple may need to put down billions of dollars

[Swampash]

Yeah, that'll be a real disaster, what with Apple being so short of cash and all.

iFab

[magowski]

Time for an iFab. Apple can easily foot the bill for a new fab anywhere they want. Hopefully in the USA.

Re:apple are retards

[backslashdot]

Yup, so retarded .. I mean any fool can be one of the top companies in terms of revenue, market capitalization, and profitability?
I'm sure you could make such a company too if you wanted.

Re:Anobit?

[Anonymous Coward]

Animal Mother - is that you?!

Re:WTF?

[NatasRevol]

Samsung has a monopoly on NAND flash chips?

Not a monopoly, but a clear majority of world wide manufacturing.

Re:apple are retards

[Goose In Orbit]

And ditto you with the AC...

Re:Yes please

[Anonymous Coward]

Yes, would've been much better to still be in these mythical days when everything about smartphones was cheap, open, easy to use, and not at all locked down and preconfigured with abortionware by the cell carriers.

You lot amuse me - the iPhone is orders of magnitude more "open" and functional than anything that existed in anything remotely resembling a "mainstream" smartphone market prior to the iPhone's debut. But because it's not completely open in every way you can imagine, you clickety-clack away on Slashdot, burning all that nerdrage - and probably some lean tissue - talking about how Apple's entrance into the smart phone market plunged us into some sort of Smartphone Dark Ages.

The good old days you all seem to remember aren't anywhere near as good as you'd like to believe they were. And the best thing is, we have legitimate competition in the smartphone market between Android & Apple - which means that we, as consumers, will continue to benefit as they duke it out.

Quit yer bitchin - these are great days we're living, bros.

(Incidentally - since Apple's 30% cut is so unreasonable and extortionary, where are the multitude of viable competitors charging something significantly less than that? Maybe that 30% really is a lot closer to 'break-even' or 'modestly profitable' than you'd like to admit, given that they're handling hosting, sales, distribution, and payment processing?)

Can't they sue someone?

[chemosh6969]

That seems to be their strategy to stay on top lately.

Lets put your convo in perspective

[tuppe666]

Apple much to its disgrace has large amounts of unused cash around, that perhaps it should have invested earlier, but buying out Samsung is simply not even close to being a reality, Samsungs market cap sits at $200Billion admittedly half that of Apples Plummeting Market cap of $400Billion, but it is far too large for Apple to buy.

Re:Lets put your convo in perspective

[TankSpanker04]

Antitrust concerns would prevent such a purchase from being approved by the U.S. govt anyway.

Re:Lets put your convo in perspective

[vux984]

I wouldn't be surprised if South Korea were to veto such a deal too.

Re:apple are retards

[ultrasawblade]

My theory is to avoid paying royalties to Microsoft for implementing the FAT32 format, which would be pretty much necessary as people would expect to be able to shove the SD card into their Windows system and access files.

Re:so im assuming the conversation would

[Anonymous Coward]

Don't assume. You make an ass out of u and me.

They should perhaps invest in manufacturing.

[tuppe666]

Time for an iFab. Apple can easily foot the bill for a new fab anywhere they want. Hopefully in the USA.

The fact its an entirely different business from manufacturing they rebadging foxconn phones, its what up until recently so profitable [not so much anymore...ask foxconn] where Apple make 40% and Faoxconn make about 3%, setting up facilities even if they manage to move that much money around, takes time and planning, and whatever they so they will shit on the USA.

Cash rich with shrinking margins

[tuppe666]

Yeah, that'll be a real disaster, what with Apple being so short of cash and all.

Except right now 35% of Apples value got chopped of Apples Value due to slightly less than expected sales and shrinking margins, Judging by Foxconn cutting iProduct manufacture, and this news I guess we get to see a repeat of Apples share drop...and with it an awful lot of brand support.

Re:Cash rich with shrinking margins

[Comrade Ogilvy]

There was a golden age of fat profits for Apple hardware, but it was inevitable the margins would shrink as reasonable competition appeared. As the Lord and Master of a highly profitable walled garden (Apple app store), they can still theoretically make good money while breaking even on hardware. Can Samsung afford to offer sweetheart deals to internal customers who have even lower profit margins than Apple, and no app store to supplement the income?

Apple can spend their "locked up" foreign money

[Tanman]

I don't understand why Apple doesn't just spend all their $billions locked up overseas to build an overseas manufacturing facility. They have plenty. Probably plenty to do it multiple times. Then, they get the best of multiple worlds: 1) they are not as reliant on Samsung, 2) they get to use that money tax-free, 3) they can have some meaningful diversification

And if the thing goes belly-up? Then they "buy" the whole thing from their foreign subsidiary with US cash and get a tax rebate on the business expense in addition to never having paid taxes on it in the first place.

this is why Apple has a huge cash stash

[swschrad]

need a fab? buy a fab. update it. make a screaming pile of flash memory. undercut the market price while supplying all their own.

oh, and One More Thing... we remember who our friends are, and they get a discount.

Re:this is why Apple has a huge cash stash

[Anonymous Coward]

Unfortunately a fab is not a household appliance that you can have installed by next Tuesday. These things take time to plan and build and need to operate for a while before they crank out working chips. If Apple needs flash memory next year, this year is a little late to start planning.

Re:this is why Apple has a huge cash stash

[tibit]

If you have Apple's pile of cash, getting a fab is pretty damn easy. You just hire people who know exactly what they are doing. If you scramble, you can have blueprints and permits done in a month, all the POs and contracts can be signed by next month, and you can break the ground and go ahead. All it takes is focused people who know exactly what it takes in their discipline -- architects, process engineers, building site managers, etc.

Re:this is why Apple has a huge cash stash

[jklovanc]

I guess you have never dealt with development permits, public consultation, building permits, environmental impact studies, inspections, utility hookups, etc. To break ground within a year of starting is considered very fast in development circles. Then there is build out, hiring, equipment installation and worker training together which will add about a year. So at lest two years from project start to opening.

Re:this is why Apple has a huge cash stash

[David_Hart]

If you have Apple's pile of cash, getting a fab is pretty damn easy. You just hire people who know exactly what they are doing. If you scramble, you can have blueprints and permits done in a month, all the POs and contracts can be signed by next month, and you can break the ground and go ahead. All it takes is focused people who know exactly what it takes in their discipline -- architects, process engineers, building site managers, etc.

Seriously?? LOL...

I used to work for a company that builds the robots/machines required for fabs. It would take 6 to 12 months just to spin up extra capacity in an existing fab. Most fabs took at least 2 years to build, from planning to production. In addition, it then takes another year or so to improve chip yields to get the plant at maximum efficiency. And this is working with major chip manufacturers with experienced personnel already on their payroll and with huge budgets. For Apple to build a fab, it would take them much longer as they would be literally starting from scratch with hiring fab managers, etc.

Re:this is why Apple has a huge cash stash

[vux984]

oh, and One More Thing... we remember who our friends are, and they get a discount.

2% discount, provided you buy it on valentines day, and you don't mind that it's already engraved with "Happy Birthday Julilly-Lynn"

Re:this is why Apple has a huge cash stash

[Jane Q. Public]

"Unfortunately a fab is not a household appliance that you can have installed by next Tuesday. These things take time to plan and build and need to operate for a while before they crank out working chips. If Apple needs flash memory next year, this year is a little late to start planning."

But Intel and Micron have them, as well as the capital to build more. And they could use this as an opportunity to grow themselves and gain market share.

It's called competition.

Re:this is why Apple has a huge cash stash

[gl4ss]

need a fab? buy a fab. update it. make a screaming pile of flash memory. undercut the market price while supplying all their own.

oh, and One More Thing... we remember who our friends are, and they get a discount.

eh.

that hasn't so far EVER been why Apple has a big pile of cash. the reason for their current big cash is that they let everyone else do their work for them. Commodore had their own fab back in the day and did well during one timeframe because of it. Apple never had one besides a place where they assembled their stuff and they haven't had even that in a long while. Apple never wanted to get into the fabbing business because it's risky and takes a lot of cash up front with payoff coming in years rather than months.

It's sort of funny that you're recommending this tactic because that's what Samsung did. All the way to the "we remember who our friends are". Some fabbing techniques just aren't for sale. Apple would need to pay a hefty premium for a good quality nand fab today(since there is a supply shortage) - if they were going to build one it would take years to get it online at which point nand pricing could have crashed so that their investment wasn't worth it.

it's not like a bicycle factory that you can buy from french in couple of months, it's more like a chip fab that you can buy from germans in 3 years - 4 if you include negotiations...

Re:this is why Apple has a huge cash stash

[tibit]

:) I'm in the middle of a fucking residential remodel that I'm doing myself (I'm my own contractor). One room. $600+ for three permits, and I've had enough schedule slips of my own doing that it's not even funny. I've allocated a week to do a complete gut, re-finish and re-wire. LOL. Oh, and I have figured for the $200 permit I might as well replumb the whole house's water supply in CPVC. I'm now two weeks behind schedule and if I really push it this weekend I'll be staring at finished walls and new hardwood floor, but that's not the end of it. I'm pretty damn sure getting anything done in two months, especially when you have local politics to deal with, is nigh impossible. You'd need to know a lot of people face-to-face just to get a productive team assembled in that timeframe. I was trying to be funny and I'm thankful to the insightful moderator who caught onto that.

A friend of mine had to wait a year for the city politics to play out just to get an office building approved in the historic part of the city. The permit was cheap, the wait wasn't.

Re:this is why Apple has a huge cash stash

[tibit]

Well, to say the truth, if you have a good team you should be able at least to do the first construction stage drafted out, contracted out and permitted quickly - a couple months if local political figures don't interfere. Stuff like grading, getting the utilities in, etc., can happen in parallel with detailed design of the actual fab that fills in the space you've allocated to it. Of course two months was a joke, I was hoping to catch some Apple fanboys to "agree" with me.

Re:this is why Apple has a huge cash stash

[bloodhawk]

Not really, even with perfect cooperation from local politics. if you are a company that already has extensive experience with Fab's then you are looking at a couple of years. this is not just some warehouse you are throwing together. On top of that you need the personnel and then time once complete to get the chip yields up. throwing more money at that problem might make it a little shorter but not much. There is simply too much specialised equipment required that all needs to be built as it isn't just lying around as excess shelf stock in someones warehouse. I would think best case would be late 2015

Re:this is why Apple has a huge cash stash

[gtirloni]

The amount of memory Apple needs is not trivial. It cannot source the chips from many different companies, that would be a nightmare. It needs a reliable manufacturer able to provide all the memory it needs with the quality it demands (hint: Samsung). I don't how Intel has any interest in enter the memory market and Micron has the muscle to be the Samsung replacement.

Re:this is why Apple has a huge cash stash

[gtirloni]

Your plan is sound, if you plan on producing sausages. Unfortunately memory chips aren't that tasty.

Re:this is why Apple has a huge cash stash

[mjwx]

If you have Apple's pile of cash, getting a fab is pretty damn easy. You just hire people who know exactly what they are doing. If you scramble, you can have blueprints and permits done in a month, all the POs and contracts can be signed by next month, and you can break the ground and go ahead. All it takes is focused people who know exactly what it takes in their discipline -- architects, process engineers, building site managers, etc.

Seriously?? LOL...

I used to work for a company that builds the robots/machines required for fabs. It would take 6 to 12 months just to spin up extra capacity in an existing fab. Most fabs took at least 2 years to build, from planning to production. In addition, it then takes another year or so to improve chip yields to get the plant at maximum efficiency. And this is working with major chip manufacturers with experienced personnel already on their payroll and with huge budgets. For Apple to build a fab, it would take them much longer as they would be literally starting from scratch with hiring fab managers, etc.

I hear you,

Even buying an existing fab that produces similar chips will take 12 months to re-tool assuming you already have the skills and technology.

Re:this is why Apple has a huge cash stash

[Jane Q. Public]

"I don't how Intel has any interest in enter the memory market and Micron has the muscle to be the Samsung replacement."

Intel has been in the memory market for a very long time now, via its partnerships with Micron and others.

Micron already has the memory business(es), Intel has the clount and capital to help Micron expand.

Re:this is why Apple has a huge cash stash

[Jane Q. Public]

I should add that just for example, Intel and Micron have a joint plant that was built in the Salt Lake City area around 5-6 years ago, give or take. They have been doing this for a while.

Apple has...lots of Cash?

[tuppe666]

Apple has more cash...

Let me stop you there. Having lots of cash on hand is a poor sign for a company. The fact that this article is about shrinking margins...on the heals of Apples shrinking sales, and Apple are looking little prepared for it. Technology companies burn through money on the way down. They could still invest the money...but that takes time to realise.

Re:Amusing

[Ixtl]

Yeah, I'm pretty sure Apple could scare up a few billion to fix this problem. Rifling through the couch cushions, perhaps.

The "skilled labor" problem

[swb]

Is less about outsourcing and more about pay rates and employer expectations.

http://www.startribune.com/business/164935926.html?refer=y

There was another story in this paper as well about this I couldn't find the link to -- a survey found that the "problem" wasn't a lack of workers, it was the low wages and working conditions that kept employers from recruiting workers.

Training is an issue as well -- employers have a desire to hire "ready for work" employers, even though the employees they often want need to have extensive education and experience with complex, high tech manufacturing systems that are difficult to get experience with...without working on one.

It's a self-perpetuating problem for employers. As long as they refuse to invest in training and paying salaries, they will have a shortage of workers.

I also think they have another problem -- the culture of manufacturing and blue collar employment generally. Manufacturing jobs have historically been "dumb" jobs -- the kind of work some high school dropout or grad got working on an assembly line turning a bolt, adding a part or whatever. Little to no skill, no education. Treat them awful and throw them away, we can always plug another body into this. It's why much of this COULD be outsourced -- there's little difference between an ex-jock who barely got a high school diploma and some third world country mouse who moved to the city.

Unions boosted the wages of these jobs until the early 70s, but there was always this cultural gulf between "labor" and "management"" and usually open hostility, as management sought to screw labor any way they could, and labor sought to take management for maximum compensation and minimum work. Labor were people to be piss-tested, searched and yelled at, and sic your security goons on if they step out of line.

Now we're at this point where the people manufacturers need aren't the dumb HS grads or third world peons, they are educated people with extensive skills, but business keep perpetuating this fucked up class warfare kind of culture, with the working conditions and pay to go with it. No wonder they can't find people -- anyone self-aware enough and smart enough to do this kind of work wants nothing to do with being treated as little more than a slave.

If we would have a manufacturing environment that treated the skilled workers more like white collar office workers and paid them that way, I can only imagine the talent pool would grow a lot deeper and the productivity would skyrocket.

Re:Apple knew this years ago.

[Anonymous Coward]

Really, how can a company turn down offers like "We want to purchase your entire 2012-2015 flash fab output in advance. Here's money up front to expand your capacity, and more money to help develop the next gen products you're going to make for us" - This is literally the sort of deals apple makes with their suppliers.

Very bad idea for the supplier in the long-term. You practically become a subsidary of your sole customer and will be exploited merciless with threats not to extend the contract. It is high risk to have only one customer or one supplier for your company.

To Apple billions of $$ is no big deal

[walterbyrd]

What does Apple care? Apple has that much spare change under the couch cushions.

Re:Anobit?

[gallondr00nk]

I'm sorry, could you repeat that? I suffer from reading impairment.

There are many alternatives.

[MaWeiTao]

Taiwan? Germany? Or, godforbid, the United States?

The added bonus is that they wont copy your designs while they're making this stuff for you.

Re:There are many alternatives.

[gl4ss]

Taiwan? Germany? Or, godforbid, the United States?

The added bonus is that they wont copy your designs while they're making this stuff for you.

yeah, but the crisis is that it cuts into their profit margin, thus affecting stock price.

Big capital costs = up front money

[sjbe]

Apple pre-paid which means they would have to account for it to their stockholders and the SEC. If they made an agreement on price and supply amount without negotiating upfront money, I don't think that they have to report it.

If they have a contractual obligation that would have to appear in the financial statements whether or not there is money exchanged up front. It is a liability of the company and they would be obligated to report it. It's kind of an irrelevant point however since no supplier is going to accept orders that size without a lot of upfront money. To produce the quantity of product Apple would buy requires major capital investment (equipment, facilities, etc) and no one is going to invest that sort of coin trusting to Apple's (or anyone else's) good faith. Basically an order that size requires a big upfront payment.

Re: Big capital costs = up front money

[UnknowingFool]

Only if money/supply is guaranteed. If it is not, they don't have to list it. If I'm a bread maker, I don't have to list the amount I'm paying for flour unless the contract says I'm contractually obligated to buy a certain amount at a certain price. If I have an agreement that I may buy up to X amount for Y price, it isn't an obligation. I could pay $0 amount if I chose to use another supplier. Or if I bought enough to cover me for the next quarter. It all matters in the agreement. Many are saying that the memory suppliers got burned by Apple time so they wouldn't enter into any fixed agreements would they?

Funniest post ever!

[Overzeetop]

That may be one of the funniest things I've read in a while.

Next time I need a baby in two weeks, I'm going to get together a team of 18 women and have them knock it out. I can pay extra, so it shouldn't be problem to get them focused and working together.

Re:Funniest post ever!

[MrEdofCourse]

I find your baby needs disturbing.

Re:Funniest post ever!

[Darinbob]

That project might not succeed, but if they're getting 18 women pregnant I suspect there are a lot of happy developers anyway.

Re:Funniest post ever!

[dkf]

That project might not succeed, but if they're getting 18 women pregnant I suspect there are a lot of happy developers anyway.

Well, as long as there's no support issues being raised, sure. I've never known a developer be keen on maintenance.

Re:Open is the new closed

[tibit]

Reading fail. Go to just before the first iPhone debuted and look at what you had with regards to app development and platform compatibility for phones. LOL. Everything was proprietary, we'll-let-you-sign-an-NDA-if-you-buy-our-reps-a-couple-nights-on-the-town, and so on. Even the fucking power connectors and power specs for the phones weren't standard. At least Apple was making stuff with the same connector for almost a decade.

Out of what crevice did they pull this from?

[aristotle-dude]

Apple has repeatedly spent millions of dollars in cash upfront to secure flash chip supplies since they started their switch to flash storage years ago so where is this anal-yst pulling their information from?

the old AMD plants are closed or underutilized

[swschrad]

and with enough crackling, fresh, green US of America freakin' M.O.N.E.Y, obstacles melt quickly.

Re:the old AMD plants are closed or underutilized

[Anonymous Coward]

It took SAMSUNG 2 years to build a fab in China recently. That was considered neck-breaking speed to have one built. China is the easiest place to build b/c of poor labor and environmental laws, but you can't simply clear land, pour concrete, complete a building, and get the equipment online much faster. Even if you purchased an old fab, it would take at least a year or two b/c the old equipment wouldn't be of the quality necessary -- nor would the air filtration, etc. It'd take you almost as long to re-furb an old fab as it would to build a new one to get it to where you'd want it to be.

All companies that build fabs have the kind of money to make these things happen. Pouring more into it won't make it happen any faster as speed is always a priority in the industry. You build a fab, expect to get so many years out of it of high profit, then switch gears to low profit as you build another fab for the higher profit things... and then re-tool the old fab or sell it when the cycle starts over.

Gah, Slashdot needs a better way to log in so I don't have to post as AC w/ out wiping what I just wrote and finding the post to reply to... oh well.

Re:the old AMD plants are closed or underutilized

[lsatenstein]

It took SAMSUNG 2 years to build a fab in China recently. That was considered neck-breaking speed to have one built. China is the easiest place to build b/c of poor labor and environmental laws, but you can't simply clear land, pour concrete, complete a building, and get the equipment online much faster. Even if you purchased an old fab, it would take at least a year or two b/c the old equipment wouldn't be of the quality necessary -- nor would the air filtration, etc. It'd take you almost as long to re-furb an old fab as it would to build a new one to get it to where you'd want it to be.

All companies that build fabs have the kind of money to make these things happen. Pouring more into it won't make it happen any faster as speed is always a priority in the industry. You build a fab, expect to get so many years out of it of high profit, then switch gears to low profit as you build another fab for the higher profit things... and then re-tool the old fab or sell it when the cycle starts over.

Gah, Slashdot needs a better way to log in so I don't have to post as AC w/ out wiping what I just wrote and finding the post to reply to... oh well.

===
You forgot to mention electricity, water, sewers, roads, and rubber stamping of building permits. Oh yes, building materials and warehousing shelving, etc. etc. etc.
Two years is reasonable for a priority project where nothing can go wrong that can't be quickly fixed.

"the typical man-hour myth"

[swschrad]

it's not how many resources you can put into a task, it's getting the RIGHT resources...

Re:"the typical man-hour myth"

[Anonymous Coward]

He did specify women.

Re:"the typical man-hour myth"

[Overzeetop]

I wager that no matter what resources I muster, getting a functioning baby, from scratch (so to speak), is going to take me no less than 36 weeks, and that's shorting the process by a couple figuring you can induce early (i.e.: the base moulding won't be applied and some of the paint won't be finished).

I've watched some "fast track" architectural projects (I'm a structural engineer in real life), and one of two things happen: The project ends up taking just as long as it would have, or it becomes an absolute clusterfuck where nothing works properly. Occasionally, you get both the regular schedule AND the clusterfuck. On very rare occasions, and on very small projects, good planning actually saves time - but it's still never as much as the owner would like.

Re:"the typical man-hour myth"

[mjwx]

I wager that no matter what resources I muster, getting a functioning baby, from scratch (so to speak), is going to take me no less than 36 weeks, and that's shorting the process by a couple figuring you can induce early (i.e.: the base moulding won't be applied and some of the paint won't be finished).

That's nothing. Any competent project manager will tell you it takes at least 19 years to return a fully functioning human child.

BTW, you can birth a child 8 weeks early using a c-sec and have a good chance of survival. You just really dont want to (it's like starting to build on a slab (concrete foundation) that hasn't finished setting).

Re:"the typical man-hour myth"

[EETech1]

One of my life long friends just made a baby in only 24 weeks! She was only 12 inches long and weighed just 22 ounces!

AND...

Just like any other project that was "pushed out" to production too soon, It took another 100 days of rework at the Neonatal Intensive Care Unit before she could go home, and at $13,000 a day (not including any diagnostic testing) it is far more cost effective, and much lower risk, to give the project the time it requires "up front".

BUT!!!

Thanks to the dedication of all the nurses and doctors, and the wonders of modern technology, they are now both home and perfectly healthy :)

Cheers

Re:"the typical man-hour myth"

[tibit]

See -- it can be done. With some rework :)

Oh noes!!!

[nedlohs]

Because everyone knows Apple isn't sitting on mountains of cash or anything like that.

Cash on Hand

[tuppe666]

What does Apple care? Apple has that much spare change under the couch cushions.

...because if this article is right the company Apple has lawsuits with in >50 countries worldwide, in an attempt to get them banned, suddenly finds itself dependant on a critical component. Paying more cash is only part of the problem, but your right in the fact that is the least of its worries, not being able to fulfil demand is a greater problem.

Re:apple are retards

[MouseTheLuckyDog]

Nah. These days they could write a device driver for that.
In fact they could do something like take the present port of ext2 and improve it.
From what I remember studies indicate that ext4 is actually the best file system for flash.

It's Jobs vision of computing. You couldn't add a hard drive to the original Mac because
"Who wants a hard drive?". It just makes things more complicated. Remember the big fight between Jobs and Scully
was because Scully wanted to open up the MAc and do things like add SCSI ports and Jobs opposed it.

This is sill

[jbolden]

This is silly. Intel's entire sales: CPUs, motherboards, memory... were $53b last year. Apple has $140b sitting in the bank. They could buy 100% of Intel's capacity with cash on hand for almost 3 years. Apple's problems with Samsung I'm sure are an annoyance, they aren't a critical threat to the company.

And before someone mentions some sort of secret Intel conspiracy they could buy all of Intel for less than their cash on hand

Re:This is sill

[Algae_94]

And before someone mentions some sort of secret Intel conspiracy they could buy all of Intel for less than their cash on hand

Maybe I don't want to sell my part? They can't buy it if it's not for sale.

Re:This is sill

[jbolden]

Yes they can. The board agrees on your behalf. You get the cash assigned to you or if you really want to be a pain about it you get to keep the now worthless stock certificates for a company that no longer exists.

Re:so im assuming the conversation would

[Wookact]

Lmao thats funny. You must do standup.

Re:apple are retards

[oh_my_080980980]

Right, because the opening line, "apple are such retards" was full of great logic.....

Real options

[sjbe]

Only if money/supply is guaranteed.

That's what a contractual obligation is - a guarantee. I didn't use those words carelessly. There would be little point to a supply agreement without any actual obligation to buy.

If I have an agreement that I may buy up to X amount for Y price, it isn't an obligation.

Correct though depending on the nature of the agreement it might be considered an asset. What your are describing is an option (properly speaking a real option) and depending on the particular way it is done the company may or may not have to report it. Typically not on the balance sheet but somewhere in the filings could be required.

Many are saying that the memory suppliers got burned by Apple time so they wouldn't enter into any fixed agreements would they?

If they got burned then they only have themselves to blame. If Apple wants to pay my company to tool up to do a big order I'm going to make sure the agreement cover most/all of my capital costs and probably the relevant fixed costs as well. Perhaps these companies took a gamble for competitive reasons but if they took that risk knowingly the first time and got burned then I don't have a lot of sympathy.

Re:apple are retards

[bhagwad]

Not by itself no. But he did say something after that. You can't use the hypothesis of an argument and then ignore the attempt to prove it can you?

Re:Open is the new closed

[narcc]

Revisionist history.

Toshiba? Hynix? Micron?

[unixisc]

Not all the NAND flash in the world is made by Samsung. Sandisk, for instance, gets (or at least got) the bulk of their NAND from Toshiba. Hynix is also a major player, as is Micron (which acquired Intel/ST's flash company Numonyx). There are quite a few suppliers.

Not to mention, Apple could easily buy a fab in either the US or elsewhere to just make NAND. And DRAM (since memory fabs to tend to be somewhat different from fabs that manufacture CPUs and controllers)

New Argument.

[tuppe666]

Can Samsung afford to offer sweetheart deals to internal customers who have even lower profit margins than Apple, and no app store to supplement the income?

Its kind of off-topic, although I do find it hilarious that the pro-Apple arguments have moved from "Race to the Bottom" to "We can survive better at the bottom". The major problem with Apple surviving on a diet of store only money...and Google bunging them a few dollars is that Apples has thrown away all their market share chasing those early profits, so I hope its not going to have to rely on that money. Android already had whole countries producing Android applications exclusively...and least they will have America, at least in the short term...till the carriers turn on them.

Re:New Argument.

[Comrade Ogilvy]

That is a non-argument, just an assertion that Apple "should have" gone for market share. How exactly making less money an improvement over making more money? It is not surprising that the hardware margins are shrinking for Apple -- what is surprising is just how long Apple has maintained huge margins.

Re:My readings fine

[uglyduckling]

PRIOR TO THE iPHONE'S RELEASE!! Man, there's some major reading fails here. Apple was first to market with a wildly popular truly smart smartphone, way before there was any sort of industry standard for anything.

Samsung isn't the only NAND maker.

[Guspaz]

Samsung has 36% marketshare, roughly the same as Toshiba. They're not the only fish in the pond, and with Apple sitting on something like $140 billion to throw around, they're not going to be hurting for NAND.

Toshiba, with more than a third of the global NAND market, has a market cap of $23 billion... Apple's cash hoard is six or seven times that size...

Re:Anobit?

[Xeranar]

Very little of our oil is saudi, as in next to none in the US. We import mainly from Mexico & Venezuela. Oil is a global commodity that few governments have sought to nationalize to bring an end to middle east domination.

But I digress..

Re:apple are retards

[smash]

Why the fuck would they use ext2 when they have code for both UFS and ZFS?

Re:Really!?

[smash]

And find all the phones from 1996 - 2008 that used standard USB for charging. Go on...

Here is Apple's solution

[TheSkepticalOptimist]

Apple should have a trade in program. People hand in their iPhone 5, an Apple Store genius scratches an S after the 5 on the back of the case and then hands it back, but with a $800 service charge for the upgrade.

I mean come on, it's pretty much what Apple iPhone users do anyways; stand in line to rebuy last years product with an S lasered after the name. At least Apple doesn't have to go through the pretense of buying NAND chips to pretend to make a new product.

Scrooge McDuck would agree

[tuppe666]

That is a non-argument, just an assertion that Apple "should have" gone for market share.

No, it's neither, it's a business strategy. Apple chose to make money by *maximising profits on hardware* which has left it with a tiny market share [in some markets none existent], Which makes for a weak app-store content and less customers buying you content...which sadly leads to a shrinking market share [hell even Microsoft is bragging larger market share]. They could have taken an Amazon approach [sell content, make no money on hardware], Google approach give away OS [for Advertising] or License it like Microsoft [If their product is really worth it!?], but they didn't...am I asserting it was a massive failure by Apple *absolutely*, but I argued that a maximising *market share* strategy [any of them] was the strategy they should have taken a *long* time ago if they planned to live off their store content, and unfortunately *market-share* is the only answer to that one, but then they have $140Billion in cash...they could like swim in it like Scrooge McDuck

Re:Scrooge McDuck would agree

[Comrade Ogilvy]

Okay, that is a coherent argument. I am not sure I am of the same mind, but it is hard to disagree a facile Scrooge McDuck-laden argument. The question still remains whether Apple possesses the Lucky Dime.

Re:apple are retards

[Anonymous Coward]

Nah. These days they could write a device driver for that.

And you'd be among the first to complain if Apple did that.

It's Jobs vision of computing. You couldn't add a hard drive to the original Mac because
"Who wants a hard drive?".

That was actually part of Jef Raskin's original concept for the Mac.

Oh, NK...

[bbsalem]

I get it, did you notice the Mac on Kin Jung Un's desk? Maybe his rhetoric is an Apple plot. He is an Apple agent, by putting the hurt on Samsung he could change the supply problem in an, er... flash!