Bitcoin sets a new all-time high above $6,000 >>> READ MORE

Apple’s Purchase of Anobit: A Step Toward the Post-PC Future

Bringing the engineering expertise of flash-chip specialist Anobit in-house will help shapren Apple’s competitive edge


When Apple (NASDAQ:AAPL) confirmed the purchase of Israel-based flash memory firm Anobit earlier this month, it not only completed one of the largest purchases in its history (the Anobit deal was reportedly worth between $400 million and $500 million), it helped to solidify Apple’s position as a consumer electronics market leader.

In recent years, Apple has inked high volume deals with companies that supply key components for its most popular products, ensuring constant supply while lowering costs. Competitors to the popular MacBook Air have found aluminum supplies constrained because Apple has locked up a large percentage of the time-intensive aluminum chassis supply. Research In Motion (NSADAQ:RIMM), for one, was reportedly forced to delay the launch of its PlayBook tablet because Apple controlled the majority of touch-panel manufacturing capacity.

While prepaying for huge quantities of key components can be a viable strategy, Apple has also been buying up companies and hiring to boost its own expertise. Its purchases of companies such as fast-chip maker Intrinsity and semiconductor specialist P.A. Semi have boosted Apple’s engineering staff to more than 1,000 while giving the company the expertise needed to design its own highly efficient, customized processors, reducing dependence on Intel (NASDAQ:INTC), AMD (NYSE:AMD) and other companies supplying chips to the industry. The powerful A5 processor that powers the iPhone 4s is an Apple in-house design, although manufacturing of the chip is contracted to Samsung (PINK:SSNLF).

The Shift to Flash

Anobit made sense as a target because it satisfies both Apple strategies: In addition to its more than 100 highly trained engineers, who will become part of Apple’s design team, Anobit has expertise as a leading supplier of high-performance controllers for NAND flash memory. Apple relies on flash memory for storage on all of its mobile devices (iPod, iPhone and iPad), and it has been increasingly replacing the physical hard drives in its portable computers with flash drives: the company now buys nearly a quarter of the world supply of flash memory.

The advantages of flash drives over standard hard drives include speed, size, ruggedness, lower power consumption and lower operating temperature. But there also are drawbacks. Flash drives are expensive compared to standard spinning disk hard drives, and flash memory drives have a tendency to suffer read/write errors over time that can slow them down or cause premature failure.

Anobit’s controllers are in high demand because they extend the life of flash memory. By buying the company, Apple controls its supply of these critical components and brings the engineering know how in-house, while potentially denying the components to other consumer electronics manufacturers, such as smartphone, tablet and portable computer rival Samsung.

In the so-called post-PC era, where mobile devices require technology that’s faster, smarter, smaller and more energy-efficient, Apple has positioned itself to continue its success. Buying Anobit was just the latest move in a strategy to control the supply of key components while accumulating some of the industry’s best design and engineering talent.

As of this writing, Brad Moon did not own a position in any of the stocks named here.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC