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SanDisk gets Samsung in X4 armlock

Give us more money you cheapskate

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A US court ruling makes SanDisk free to charge Samsung more licence fee cash for its industry-leading four-bits-per-cell Flash technology.

Flash memory chips are composed of cells, and the more bits a cell can support the higher the capacity of the Flash chip, and the lower its price per bit. The fastest Flash has one bit per cell (single-level cell or SLC). Slower but higher-capacity - and hence cheaper - multi-level cell (MLC) Flash uses two bits a cell, with three bits per cell (X3) coming and four bits per cell (X4) in development.

SanDisk made a nifty move in acquiring Msystems, an Israeli Flash company with X4 technology, in July 2006. At that time Samsung and Msystems had an agreement, dating from 2003, whereby Samsung could use the X4 technology in exchange for royalties and a supply of cheaper chips to Msystems. But the cheaper chips didn't come in sufficient numbers, and Msystems cancelled the agreement in April 2006, a couple of months before it was acquired by SanDisk.

Samsung appealed against this and a lengthy arbitration process started. During its latter stages Samsung mounted a bid for SanDisk which was rejected because, SanDisk said, it undervalued the company. A New York court has just decided that Msystems, aka SanDisk, was within its rights to cancel the December 2003 agreement because Samsung had indeed not met its supply commitments.

To complicate matters, SanDisk and Hynix signed a patent cross-licensing and joint venture agreement in March 2007, in which Hynix can use the X4 technology in exchange for licence fees and a supply of cheap X4 chips to SanDisk.

Why does it matter? The Flash market is in an over-supplied glut state, yet prices are still high enough to discourage purchases of the stuff for notebook, desktop and server use, and for bulk use in storage arrays, assuming that write endurance problems can be sorted.

Manufacturers reckon the key to price cuts is to increase cell capacity so you get two, three or four bits per cell for almost the same manufacturing cost. If any one manufacturer can increase capacity faster than others and so cut its prices, that means it can sell its chips cheap and make a profit.

SanDisk has the X4 technology needed for this and now Samsung hasn't got its mitts on it any more - but rival Hynix has. That puts up SanDisk's value. We can expect an increased Samsung bid to come for SanDisk in the next few days - or maybe the collapse of the bid. ®

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