Apple, Google, Amazon Enter Race to Buy Toshiba NAND Flash Unit

[deconstruct60]

What do you mean by change of strategy?

All three of them have solid reasons to cut the middleman and create their own NAND.

There aren't any non hand waving reason for those three to do this. The "solid reasons" here are a vast mirage.

1. there is no "middle man". Toshiba direct sales to Apple/Google/Amazon involves no middle man. Those three have contractors that actually make stuff for them but that isn't the "middle" of the transaction for Flash that is a different, assembly, function.

2. None of these three fab any of the other components of a cloud server so this relatively limited subsystem doesn't really do much of anything at all. [ Fabs are very high capital intensive items.... none of these 3 are committed to that level. The data centers aren't really at the same levels now or going forward. ]

Amazon and Google operate a lot of cloud infrastructure.

running cloud infrastructure ( a bunch systems that consist of parts assembled from semiconductor providers ) is a substantively different business than being a semiconductor fabricator.


Far more likely these bids are signals to others who want to be in semi-fab industry that these companies might "loan" some money (e.g., pre-pay or straight out loan) to have privileged access to production. It is a way of 'talking' to all of the bidders at once without really talking (potential anti-trust trouble. )


P.S. the other more probable factor here is that Apple/Google/Amazon are trying to push the price higher so Toshiba will actually sell. If some of these other fab offering companies low-ball too low then their might be no sale. Again this is far more "grease the wheels of the sale" than wanting to actually own it long term. The offer to buy gets increased access to Toshiba's books and other information around the deal. So bid to buy in so that can play a role in the decision.

 

[1applerules1]

Apple is going to get it because they're the richest

 

[Applebot1]

Well no because Apple isn't playing catch up, everyone else is


Apple will win the bid if they want to, they are the wealthiest company in the world. But they are also smart and sometimes very conservative when it comes to how much they spend.

They could enter the bidding just for the sake of driving the price up, with no intention to win. This gets one company stuck with an overpriced fab. This route is only assuming that Apple may have found better value elsewhere.

Good point.

 

[steve123]

Apple will not do this deal. NAND is nearing the end of its useful scaling life and that spells a reverse in price trend in the future. Toshiba knows this and that is why they are exiting the business while they still can.

 

[manu chao]

I love how I can buy toilet paper from one of these "tech firms". Go figure.

Buying toilet paper by giving a shout out to Alexa or pressing a Dash button in your bathroom owes more to technology and marketing than to shipping logistics.

 

[bladerunner2000]

Yeah if they ever upgrade them

Apple loyalists have been jumping off the Mac bandwagon in droves for the the last few years. What Apple's done to the Mac desktops (especially the Mac Pro) is criminal.

 

[konqerror]

I hate to break it to you, but in this case, vertical integration does nothing for Apple. It would simply mean they are tied to their own NAND chips for the foreseeable future. Unless their plans include entering the NAND market as a vendor, then this deal would make even less sense. Fabs are cash intensive, low margin properties. They typically subsist on volume. Apple's volume might be great, but if they are solely supplying themselves then the fab is nothing but expensive overhead with no appreciable benefit. A stake in a bidder makes more sense.

Your analysis misses some important facts:
1. Volume: At last count I could find, Apple consumed 1/4 of the world's flash. When you are consuming a whole plant's worth, then it makes sense to buy.

2. They are not buying a fab, they are buying a whole company with development operations and IP. There's more value than a simple fab, which may end up being a necessary expense.

3. Flash is a commodity, there's nothing to prevent Apple from selling excess units off.

4. Along with flash being a commodity, like DRAM, prices are based on yield, that is, scarcity. By having first crack at their own capacity, the winner now pays based on actual cost, not what others are willing to pay.

5. Samsung: Like it or not, Samsung has all of these advantages, and gets to take Apple's money.

 

[4jasontv]

Apple loyalists have been jumping off the Mac bandwagon in droves for the the last few years. What Apple's done to the Mac desktops (especially the Mac Pro) is criminal.

When Apple came for the HDD iPods,
I remained silent;
I had but few songs.

When they locked up Target Display Mode,
I remained silent;
I had one computer.

When they came for the optical drive,
I did not speak out;
I had a T1 connection.

When they took the headset jack,
I remained silent;
I couldn't afford to upgrade.

When they came for my Mac Mini,
there was no one left to speak out.

 

[Appleaker]

Ftfy. There's no excuse for a base 16 GB model.

I love how I can buy toilet paper from one of these "tech firms". Go figure.

Then it's a good job that the only product Apple offers with that is the iPod touch.
[doublepost=1491163244][/doublepost]

Don't fool yourself. Apple wants it to increase profits, not to increase base storage in their devices.

They can do both and have done.

 

[PaulRustad007]

Ftfy. There's no excuse for a base 16 GB model.

I love how I can buy toilet paper from one of these "tech firms". Go figure.

The sheer amount of infrastructure utilized to get you TP in 2 days or less is pretty remarkable....

 

[robinp]

The general assumption seems to be otherwise, but maybe Apple wants to get into fabrication

 

[diegov12]

Apple loyalists have been jumping off the Mac bandwagon in droves for the the last few years. What Apple's done to the Mac desktops (especially the Mac Pro) is criminal.

macrumors readers are not "loyalists" :d.

Also, last I checked, they're doing better then microsoft's surface line, which is their direct competition at the moment.

 

[nfl46]

Meaning they decided to bid in order to then deliberately fail? Sorry, but I understand neither your point nor why Aston441 upvoted it.

Read comment #12.

Basically: if it goes above $300, then we're out. Apple would only want it if they could get it for a steal. Otherwise, it's a no go. Or, Apple is doing it to force its competitors to pay even more for it.

 

[Kabeyun]

They're not bidding anonymously on EBay. Bidding directly against competitors changes not only the dollar amount but the rational behind the bidding.

As you say, this isn't eBay. Apple's not going to risk spending billions of dollars they don't want to just so they can snicker about making other insanely rich companies pay a couple of billion more. At this level, anyone in the fray wants Toshiba's NAND fab, can afford it, and is prepared to win it.
[doublepost=1491168069][/doublepost]

Read comment #12.

Basically: if it goes above $300, then we're out. Apple would only want it if they could get it for a steal. Otherwise, it's a no go. Or, Apple is doing it to force its competitors to pay even more for it.

If Apple has set the ceiling on their price, that's fine. It doesn't mean they're bidding frivolously. And, as I said above, I disagree that that would be any kind of corporate strategy at this level. This isn't eBay. My 2¢.

 

[69Mustang]

Your analysis misses some important facts:
1. Volume: At last count I could find, Apple consumed 1/4 of the world's flash. When you are consuming a whole plant's worth, then it makes sense to buy.

Consuming and supplying are totally different things. They affect the company differently. Consumers absorb the cost of the end product. Suppliers absorb the cost of manufacture and get small profits in return. Apple would be absorbing both cost while lowering their overall margins. Not the best idea.

2. They are not buying a fab, they are buying a whole company with development operations and IP. There's more value than a simple fab, which may end up being a necessary expense.

We're both speculating here. Heck, we're all speculating, but without knowing what the sale would entail, I'd be hard pressed to come up with an argument for or against what you wrote.

3. Flash is a commodity, there's nothing to prevent Apple from selling excess units off.

True. The challenge will be finding enough customers to buy it's product. Bigger question is how much would it cost to get those customers? Companies aren't Apple fans. I don't think many would be willing to pay the Apple Tax. If anything, they'd be looking for discounts.

4. Along with flash being a commodity, like DRAM, prices are based on yield, that is, scarcity. By having first crack at their own capacity, the winner now pays based on actual cost, not what others are willing to pay.

Again, cost would be passed to Apple on both sides of that equation and they would have to actively find customers willing to buy that excess. Those customers would, like Apple, most likely be requesting volume guarantees.

5. Samsung: Like it or not, Samsung has all of these advantages, and gets to take Apple's money.

And they have all of the disadvantages as well. When Samsung loses customers of it's products, it affects their business. Like losing Apple as a customer would affect them if Apple acquired this flash unit. If Apple became a vendor they would have the same issues.

Apple backing one of the bids makes sense to me. Apple bidding alone doesn't.

 

[Robert.Walter]

There aren't any non hand waving reason for those three to do this. The "solid reasons" here are a vast mirage.

1. there is no "middle man". Toshiba direct sales to Apple/Google/Amazon involves no middle man. Those three have contractors that actually make stuff for them but that isn't the "middle" of the transaction for Flash that is a different, assembly, function.

2. None of these three fab any of the other components of a cloud server so this relatively limited subsystem doesn't really do much of anything at all. [ Fabs are very high capital intensive items.... none of these 3 are committed to that level. The data centers aren't really at the same levels now or going forward. ]




running cloud infrastructure ( a bunch systems that consist of parts assembled from semiconductor providers ) is a substantively different business than being a semiconductor fabricator.


Far more likely these bids are signals to others who want to be in semi-fab industry that these companies might "loan" some money (e.g., pre-pay or straight out loan) to have privileged access to production. It is a way of 'talking' to all of the bidders at once without really talking (potential anti-trust trouble. )


P.S. the other more probable factor here is that Apple/Google/Amazon are trying to push the price higher so Toshiba will actually sell. If some of these other fab offering companies low-ball too low then their might be no sale. Again this is far more "grease the wheels of the sale" than wanting to actually own it long term. The offer to buy gets increased access to Toshiba's books and other information around the deal. So bid to buy in so that can play a role in the decision.

I would be more inclined the talk comes from Toshiba's divestment advisors. If the talk comes from Apple, it also has an interest in a competitor buying it at high price because that weakens the competitor without increasing the commodity cost.
[doublepost=1491171440][/doublepost]

Consuming and supplying are totally different things. They affect the company differently. Consumers absorb the cost of the end product. Suppliers absorb the cost of manufacture and get small profits in return. Apple would be absorbing both cost while lowering their overall margins. Not the best idea.


We're both speculating here. Heck, we're all speculating, but without knowing what the sale would entail, I'd be hard pressed to come up with an argument for or against what you wrote.



True. The challenge will be finding enough customers to buy it's product. Bigger question is how much would it cost to get those customers? Companies aren't Apple fans. I don't think many would be willing to pay the Apple Tax. If anything, they'd be looking for discounts.


Again, cost would be passed to Apple on both sides of that equation and they would have to actively find customers willing to buy that excess. Those customers would, like Apple, most likely be requesting volume guarantees.


And they have all of the disadvantages as well. When Samsung loses customers of it's products, it affects their business. Like losing Apple as a customer would affect them if Apple acquired this flash unit. If Apple became a vendor they would have the same issues.

Apple backing one of the bids makes sense to me. Apple bidding alone doesn't.

And all Apple has to do to back a bid is indicate that it would continue to purchase via the new owner.

 

[tennisproha]

The sheer amount of infrastructure utilized to get you TP in 2 days or less is pretty remarkable....

But with that logic Walmart should also be a tech company, b/c buying everything at one store took wonders in logistics and infrastructure. Plus those everyday low prices.

 

[mvallance]

The three biggest tech firms, in their respective category, Apple, Google, Amazon, changing their strategy at the same moment and moving into owning semiconductor fabs? Colour me skeptical.

Toshiba needs to sell. They lost a phenomenal $100 billion with their nuclear power division recently.

 

[satchmo]

If Apple loses the bid by $3.2 beats, I mean billion....

 

[usarioclave]

The IP is worth more than the actual unit.

You can manufacture with whomever you want, but you'll get sued like crazy if you do. Buying Toshiba means that Apple suddenly has all kinds of patents and agreements.

 

[PaulRustad007]

But with that logic Walmart should also be a tech company, b/c buying everything at one store took wonders in logistics and infrastructure. Plus those everyday low prices.

open your eyes......look at the really big picture.......

 

[zorinlynx]

I have to ask, if this division is so lucrative, why is Toshiba selling it instead of keeping the profits for themselves?

Something must be underfoot if they don't want to hold onto it.

 

[Quu]

I don't think this is so much Apple wanting to own a NAND flash producer as it is them not wanting the competition to own one. There isn't many companies out there that can make NAND to the volume Apple consume, we already know they use NAND from multiple suppliers at once and pay billions up front to secure the NAND they need.

And I think it's likely if Amazon or Google bought Toshiba's flash division it would be unfavourable for Apple. So I think if they're bidding it's just to secure their interest and not because they necessary want to buy it.

I'm sure the cheaper NAND prices they could secure for themselves is a bonus. Be interesting to see who does buy it as Google hasn't had a great track record with hardware accusations (Motorola and Nest come to mind).

 

[Col4bin]

Did I read that correctly that Toshiba was already offered about $18 Billion for this NAND memory unit...as in $18 Billion with a "B"??? (Damn.)
[doublepost=1491195176][/doublepost]

It helps the cost to storage continually drops year after year... which will continue (at least for Apple products) if Apple acquires NAND.

Yet product retail prices would continue to climb.

 

[konqerror]

The IP is worth more than the actual unit.

You can manufacture with whomever you want, but you'll get sued like crazy if you do. Buying Toshiba means that Apple suddenly has all kinds of patents and agreements.

Logic and memory are very different. Memory (Flash and DRAM) is intimately tied to the manufacturing process. In logic, the work is how to connect transistors (logic gates) to do what you want. That's centered on design. In memory, the work is how to make a mediocre transistor dirt cheap. That requires development and execution of manufacturing processes.