What if I told you there was a non-volatile memory technology available that could fit one Terabyte "TB" of storage on a single chip smaller than a postage stamp, was 3D stackable for multiple Terabytes of storage, had 20x faster write speeds than NAND flash with 20x lower power consumption and 10x the durability. What if this memory technology was CMOS compatible making it relatively easy to manufacture at current foundries, had been successfully fabbed at a large commercial foundry, and was nearly ready for commercialization?
You would probably ask me for the ticker symbol and buy shares!
Well that technology is actually here, it is called Resistive Random Access Memory "RRAM," and it is being developed by a private company called Crossbar, Inc. (sorry no ticker). The thesis for this article is Apple (NASDAQ:AAPL) should buy Crossbar Inc. and secure the technology to drive increased demand and improved margins around Apple's iPads, iPhones, and iPods and to keep it out of its competitors' hands.
So What Is Crossbar RRAM?
Crossbar RRAM uses a three-layer structure and can be stacked in three dimensions which allows for greater amounts of storage in about half the footprint of NAND flash. The technology was invented by Wei Lu, a University of Michigan professor, and was eventually licensed to the founders of Crossbar, Inc. in 2010 when the company was started.
Crossbar RRAM is also a non-volatile memory which means it can store data permanently even when it has no power - just like flash. Crossbar's RRAM can be used everywhere flash is used today such as:
*Consumer Electronics, Mobile Phones and Tablets
*Enterprise Storage, SSDs and Cloud Computing
*The Internet of Things; The Industrial Internet
Crossbar has successfully fabbed a working Crossbar memory array at Taiwan Semiconductor (NYSE:TSM) and said the product is nearly ready to commercialize. Crossbar has over 100 patents applications with 30 already issued for the technology.
Below is a nice graphic for the advantages of Crossbar RRAM compared to NAND flash:
Source: Crossbar, Inc.
By now it should be clear how Apple could incorporate this technology into its consumer products. Can you imagine an iPod, iPad, or iPhone at current sizing storing 250,000 songs or 250 hours of HD video - WITH increased speed and battery life? That would be a game changer and would drive significantly increased demand for Apple products. Consider that Apple marks up each additional 16GB of memory in their products by $100 and it only costs Apple about $20 for that memory. Considering the cost of manufacturing Crossbar's RRAM is less than current flash technologies, one can see how Apple could leverage this technology to improve margins. Consumers will pay for storage especially if one small device like an iPhone could hold massive amounts of pictures, songs, and HD video.
Apple accounts for nearly 30% of the global demand for NAND flash memory and drives the market - if Apple were to buy Crossbar and incorporate Crossbar's RRAM into its products, it would drive the entire market towards the Crossbar RRAM technology - Apple could have the technology locked up and secure additional revenues through licensing, further juicing its margins. Apple has a growing relationship with Taiwan Semiconductor as they will be producing the bulk of Apple's next generation A8 processors. Since Crossbar also used Taiwan Semiconductor to fab its RRAM chip, it would certainly not be stretch to think Apple could capitalize on this synergy at some level.
NAND flash memory is already approaching its scaling limits and alternatives are already under development. Micron (NASDAQ:MU) is working on its Hybrid Memory Cube "HMC," Samsung (OTC:SSNLF) is already producing its vertical 3D NAND flash, and several other companies are developing future competing technologies. Apple could get a jump on a viable and improved technology to NAND flash and drive the adoption of the technology.
In an August 5th, 2013 press release Crossbar articulated where it is and what its plans are:
From George Minassian, Crossbar CEO -
With our working Crossbar array, we have achieved all the major technical milestones that prove our RRAM technology is easy to manufacture and ready for commercialization. It's a watershed moment for the non-volatile memory industry.
Crossbar plans to bring to market standalone chip solutions, optimized for both code and data storage, used in place of traditional NOR and NAND Flash memory. Crossbar also plans to license its technology to system on a chip (SOC) developers for integration into next-generation SOCs.
Apple is not shy about securing technology or components that fit its needs - consider its purchase of Israeli based flash memory part maker Anobit in 2012. Apple must consider the following competitive implications of letting this technology slip away. On the consumer side there is Microsoft's (NASDAQ:MSFT) - Surface Tablet and Windows Phones, Google's (NASDAQ:GOOG) - Android/Motorola phones and Nexus tablets/phones, and Amazon's (NASDAQ:AMZN) Kindle tablets and soon to be released smartphone. Also chip makers such as Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD), or Nvidia (NASDAQ:NVDA) could secure the technology to enhance their products and license the technology.
Apple should secure Crossbar's RRAM technology to drive demand for its products and increase margins but also to keep competitors from using the technology and further erode Apple's market share for smartphones and tablets.
Disclosure: I am long MU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is informational and intended to spur thought and discussion. This article is NOT a substitute for your own extensive due diligence and does NOT qualify as investment advice. DO NOT BUY OR SELL STOCKS BASED ON THIS ARTICLE.