Missing The Point on Apple's Anobit Acquisition

by Michael in ,

Before I start on my exposition, here's some brief background from Bloomberg:

Apple Acquires Anobit

Apple Inc. (AAPL) said it acquired Anobit Technologies Ltd., an Israeli company that makes a flash-memory drive part for the iPhone and iPad, confirming a press report from last month.

The deal helps Apple secure supplies of a key component for its top-selling devices. Anobit makes high-performance controllers used to optimize the memory capabilities inside products such as the iPhone and iPad. Apple is the world’s largest buyer of NAND flash memory, accounting for about 23 percent of consumption last quarter, according to a Jan. 6 report from Sanford C. Bernstein & Co.

What people seem to be missing here is the same thing people are still missing about Apple's P.A. Semi acquisition: This isn't about securing supplies. If Apple hadn't acquired P.A. Semi it wouldn't be any more difficult for the company to get enough CPUs built for iPhones and iPads. Apple's purchase of Anobit might reduce its prices on flash memory a bit, but Apple is already the plurality of NAND flash consumption and with its bulk guaranteed purchases would have no problem assuring it gets first priority on flash shipments in the industry (as it does now).

No, this isn't about securing supplies. First, this is about design. Specifically, this acquisition is about acquiring expertise so that Apple can integrate things into its design. Second, this is about independence of design. Apple doesn't want to have to bend to the design whims of others in the industry.

Think about the P.A. Semi acquisition and what it has produced. The only thing in the iPhone and iPad we can be sure Semi's engineers have influenced is probably the A5 processor. Critics can scream and shout all they want that the A5 is nothing special, that it's simply a combination of parts available elsewhere that Apple has put together. These critics would be right to a large degree, but they'd be wrong to a larger one. P.A. Semi's expertise was in designing specific processors. Its engineers can, while working in conjunction with other experts at Apple, tailor the design of the processor to exactly the performance demands of Apple's specific software and hardware profiles. Tailoring the hardware and software together allows for getting more efficiency out of lesser-on-paper hardware. It's what will allow the iPhone 4S to stay competitive with just a dual-core 800MHz A5 processor whlie its compeitors start approaching dual-core 2GHz processors. A more integratedly designed whole allows for getting the same performance out of a less power hungry device (thereby requiring less battery life) or more performance out of the same power consumption profile.

A bigger point: If Apple had simply chosen to get an outside vendor to come up with their design for iOS device processors with some involved design, but the iOS devices' specific design decisions were contrary to what the designers' other clients wanted in high enough volume, Apple would be at the mercy of the design firm's changing expertise. With its own in-house processor design engineers Apple can focus on learning and excelling at core design ideas or principles important to Apple's roadmap which others might overlook. While they're unlikely to shatter the core of processor design, they can at least give Apple an extra edge in specific areas that add up.

Coming back to the Anobit deal: This isn't about securing flash supplies, though that is certainly a side benefit. This is about acquiring experts in flash management circutry. Processors have over time integrated more and more on to a single die with recent years accelerating the trend (memory controllers, graphics processors, larger amounts of cache memory). Instead of looking to what Apple can do with what Anobit provides right now, people should be looking at what Apple will be able to do with Anobit's expertise as technology advances. Incorporating flash memory and flash memory controllers more tightly with the cpu can lead to power savings and performance improvements even with the same exact flash technology. Integration at the design level means Apple can create a product designed from the top down to perform exactly as they need with traditional specs much lower than the same performance would require from other vendors with less integrated design.

This isn't about products and supplies. It's about expertise, design, and integration.