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Despite the pair's eroding relationship, the brains of every Apple product are still made by Samsung

Like Felix Unger and Oscar Madison, Apple, Inc. (AAPL) and Samsung Electronics Comp., Ltd. (KS:005930) are the real world's corporate "odd couple".  Samsung is the world's top smartphone maker, outselling Apple over 3-to-2 at last count.  Apple is the world's largest tablet maker, outselling Samsung by an even larger margin.  And both companies are locked in an international legal war -- initiated by Apple in 2010 -- which has swept the globe to encompass over 80 separate lawsuits or trade court complaints [1][2][3][4] [5][6][7][8] [9][10][11][12].

And yet despite the company's apparent disdain for each other, Samsung continues to dutifully make the "brains" of Apple's tablets and smartphones, while Apple begrudgingly depends on the South Korean electronics giant's aid.  

I. The Apple A5: Now Made in America (by Samsung)

The pair's odd relationship was in the spotlight, following a Reuters report that reveals that the production of the A5 CPU found in the iPhone 4S and iPad 2 has shifted production to Samsung's new Austin, Texas facility.  The 1.6 million square foot (about the size of nine football fields), $3.6B USD new factory is only Samsung's second non-memory chip fab, with the other being in South Korea.

Apple A5
The Brains of the iPhone are currently made at Samsung's new Austin, Texas factory.
[Image Source: iFixIt]

The new chip fab reached full production in early December, with a reported yield of 40,000 wafers a month.  It employs 1,100 workers, many of them engineering graduates from the local University of Texas' engineering school.  

The facility is a sister site to Samsung's neighboring NAND flash memory chip fab, which opened in 1996 and employs 2,400.  Apple and Samsung could almost be holding each others hands under the table, as Apple is right next door with a thousands of employees customer call center that deals with customer complaints in North America, Apple's biggest market.

It's not all flowers and roses for the pair, though.  While Apple still relies on Samsung for its CPU chip-making expertise, according to recent tear-down reports Japan's Elpida Memory, Inc. (TYO:6665) is now making the chips in some of Apple's iPhone 4S models.  And those reports also indicate that Apple, as previously reported, has made a full transition from Samsung NAND storage to Toshiba Corp. (TYO:6502) NAND chips.

But for now Apple and Samsung are still forced to endure their standoffish coexistence as coinhabitants of the same residences -- the iPhone 4S and iPad 2.

One final aspect to note is that some will be refreshed with the change of scenery of a top smartphone maker buying chips from an American fab.  This is particular true given Apple's long history of relying on cheap Asian manufacturing capacity to build its products, having mostly turned its back on American manufacturing long ago.

II. Report: Apple is Opening New R&D Facility in Israel

In related news Apple is also reportedly preparing to building a semiconductor-focused research and development center in Israel.  Reportedly Apple scored a coup in hiring hot  Israeli high-tech veteran Aharon Aharon, who began his career at International Business Machines, Inc. (IBM) before going on to top leadership roles with several large and successful Israeli tech firms [source].

Apple is also thought to be closing in on acquisition of Israel's Anobit for around $400M-$500M USD.  Anobit makes the flash memory controllers found in Apple's mobile devices and holds valuable patents on extending the life of failure-prone MLC flash memory.

While Apple is called a "global innovator" by many analysts, it's among one of the most stingy of the large technology firms when it comes research and development.  In 2010 it reinvested a mere 2 percent of revenue -- or about $2.4B USD -- in R&D, according to company financial documents.

Apple admittedly relies heavily on its competitors for product inspiration.  Late company co-founder and CEO Steven P. Jobs infamously bragged, "Picasso had a saying - 'Good artists copy, great artists steal.' And we have always been shameless about stealing great ideas."

The top American tech firm is aided by its powerful legal staff, who have a penchant for cajoling global patent offices into granting them patents on seemingly obvious software features that are almost trivially different from designs that have been on the market for years.

The company is rather brilliant, though, in its ability to thus far use its supplier relationships, rather than actual research and development, to "out innovate" its competitors.  

For example, Apple was the first company to mass-deploy minimalist multi-touch smartphones and tablets, later admonishing its competitors in court for "copying" its design post-mortem.  Our sources and past reports suggest that companies like Samsung were exploring similar multi-touch products to the iPhone back in 2007, but that Apple simply beat them to the punch, convincing the sole supplier (at the time) of thin multi-touch displays to sell all of its stock to Apple.  

The move ensured that competitors could not put a similar product out on the market for over a year.  At the same time, Apple was granted a patent on multi-touch gestures which had been published in peer-reviewed literature almost 20 years before, but which Apple had ported to the smart phone.

Apple's approach of innovation through supplier relationships, patenting other peoples' technology, and then using those factors to outsue and outsell its competitors has been an approach that has infuriated its rivals.  But it's hard to argue with the results -- Apple is now vying with Exxon Mobile Corp. (XOM) for the distinction of being the world's most profitable company.  Apple's critics may call its strategy diabolical, but if it's indeed diabolical it's certainly very good at being diabolical.

Sources: Reuters [1], [2]

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American Business
By Raiders12 on 12/16/2011 1:09:10 PM , Rating: 5
I'm no fan of Apple, but the fact that a large chip manufacturing facility is built in the USA, well thats a win-win no matter who is the company.

RE: American Business
By tng on 12/16/2011 1:18:08 PM , Rating: 2
Well yes and no. I have done allot of contract work in the Samsung memory facility in Austin and it seems a miserable place to work, primarily because of Samsung's rules.

Nice to see them put the plant there, but also feel sorry for the people who have to work there in what amounts to a fancy sweatshop.

RE: American Business
By sigmatau on 12/16/2011 7:28:47 PM , Rating: 2
LOL! A few years ago I was a little desperate and almost took a job for Apple to support the iphone and imac. This was an outsourced company and they started you at a whopping $9.00 an hour.

I mean, you can always make more money starting at Wal-mart, but you couldn't brag to everyone that you are working for Apple.

RE: American Business
By quasi_accurate on 12/17/2011 3:47:36 AM , Rating: 2
From what I understand, the smaller Samsung design center pays much better than the Samsung memory facility, which is in a separate location.

RE: American Business
By semiconshawn on 12/17/2011 12:17:56 PM , Rating: 3
Well 2yr degreed equipment techs get paid $25-35 and even higher depending on experience. They work for it but these guys arent digging ditches here. If you add in a 10-15% night shift for some and overtime $100k is easy with full benefits. Those are the sweat shops we need in this country. As for rules go contract at an intel site. It takes you a week to get in the front door. No I dont work for Samsung, yes I have spent time in the Austin Fab. I also have a few friends who work/worked there. It is what you make it. That being said I didnt leave my job to go apply when they were recruiting heavily and paying VERY well so take that with a grain of hypocracy.

RE: American Business
By bah12 on 12/16/2011 1:32:14 PM , Rating: 3
This really has nothing to do with Apple. Samsung can make them wherever they want, as long as the supply and price meet the contract.

The real Kudos here is to TX for giving Samsung the incentives it needed to build there. Still one of the most logically ran states in the union. No state income tax, relatively low sales tax, and a growing economy because they aren't afraid to tap their natural resources when needed. A good case study for staying the hell out of businesses way. Keep your regulations minimal, taxes reasonable and businesses will grow.

Now if the morons would reverse the sales tax issue with Amazon, it would be a slam dunk.

RE: American Business
By yomamafor1 on 12/16/2011 1:43:03 PM , Rating: 3
Still one of the most logically ran states in the union. No state income tax, relatively low sales tax, and a growing economy because they aren't afraid to tap their natural resources when needed. A good case study for staying the hell out of businesses way. Keep your regulations minimal, taxes reasonable and businesses will grow.

...and your budget deficit high.

RE: American Business
By Solandri on 12/16/2011 3:39:59 PM , Rating: 4
Per capita (which is really the only way deficits should be compared), it's actually among the better states.

In 2010 (FY2009) Texas actually had the second lowest deficit per capita.

RE: American Business
By tng on 12/16/2011 2:15:45 PM , Rating: 3
A business in Sacramento CA is moving it's headquarters to TX next year. This was in the news here this week, and when the interviewed the CEO of the company he said they were moving primarily because CA had the "highest taxes and most regulation of any state in the Union".

When a member of the CA legislator was interviewed he said that was "just not true", which do you believe?

Anyhow Sacramento will loose about $50 million a year because of this, but still the morons there don't get it.

Oh come on...
By messele on 12/16/2011 1:19:41 PM , Rating: 1
Don't tell me you STILL don't get the meaning of the "great artists copy" quote?

Picasso coined it, Jobs got it, why is it that few others even get close to comprehending it?

Before you say you do Jason, go back and read your snide words in the same sentence because you clearly do not.

RE: Oh come on...
By sprockkets on 12/16/2011 1:48:26 PM , Rating: 2
Only appletards would think otherwise.

But we know. It isn't exactly your fault. The RDF has an effect on the weak minded, which is 100% of apple users.

RE: Oh come on...
By Camikazi on 12/17/2011 12:24:52 AM , Rating: 2
So explain it o wise one, you seem to think you understand it better then everyone so explain it to everyone allow us to marvel at your knowledge. If you don't wish to explain then STFU and GTFO.

RE: Oh come on...
By xype on 12/17/11, Rating: -1
RE: Oh come on...
By TSS on 12/17/2011 7:32:38 AM , Rating: 2
Way to miss the point. If it had to do with recognition would apple admit or even boast stealing ideas?

It has to do with originality and creativity. Creativity is hard but being original is nigh impossible.

Picasso wasn't original either. His kubism looks alot like fauvism, which was the dominant form of art and the beginning of "modern art" at the time picasso learned about art. You don't have to be a genius to see the resemblances.

The difference between copying and stealing is creativity. A copy is a 1 to 1 representation of the original work. It might be a very good copy, but none the less it is something that has been done before. A Copy of the mona lisa will never be the mona lisa, or a take on, or improved of version of the mona lisa. It'll always be a Wona lisa (wanna-be mona lisa :p).

Picasso would never have been famous if he copied fauvism. So he stole it. He thought "let's take fauvism, but add something. I think it would look nicer in kube like shapes". Thereby making it "better" then the original (better is highly subjective in art, just depends on what the current fad is and the inevibility of it passing. Kubism beat out Fauvism as the dominant form, so it was better).

It's basically what apple has always done (but they copy as well! they're just very ashamed about the stuff they copy). They took a generic MP3 player, added a HDD for storage capacity, a larger screen so you could actually see the songs on your MP3 and increased battery life. Then they named it an Ipod. Nothing original, but creative compared to the MP3's already out there.

Even the apple II computer was stolen. They took off the shelf components somebody else made (so much for original) but they tied it together in a low cost, easy to use package in a way nobody else had before. They stole the components, but they created the package. And as a result, got famous.

When you see something new that's really good, you don't go out of your way to invent something original that's even better. That's impossible. You take what you find and improve upon it. copying stuff is just taking what you find. Which is good if you copy something great your found. But it'll never be great in itself.

RE: Oh come on...
By Tony Swash on 12/17/11, Rating: -1
RE: Oh come on...
By themaster08 on 12/18/2011 5:43:47 AM , Rating: 2
Ask yourself these questions...

If Apple were to go out of business today, how would that have an effect on business and the economy?

If Microsoft were to go out of business today, how would that have an effect on business and the economy?

Perhaps the answers should put the true importance Apple in the technology world into perspective for you.

RE: Oh come on...
By Tony Swash on 12/18/11, Rating: 0
RE: Oh come on...
By themaster08 on 12/18/2011 8:23:24 AM , Rating: 3
As opposed to living in denial?

Clearly you have no understanding of how insignificant Apple are within business.

Early this year they discontinued their XScale line of rack-mounted servers, solidifying their commitment to business application.

Whilst the iPhone may be growing in business adoption, there are viable alternatives that could easily be used instead that would have no impact upon the business. Can you name me a true alternative to Microsoft Small Business Server for small/medium size businesses?

Can you name me a true, affordable alternative business operating system that is fully integrated for self as well as centralised management?

Your silly dream of self management is absurd. You've clearly never worked in IT. Collaboration of information, files, ideas, security, productivity, communication always have, and always will rely on centralised management of IT systems. Do you really think that each node becoming its own email, file, print, management, name server is viable? You're an absolute fool. The best product and the only viable option for many businesses, that caters to all if the aforementioned needs, and much more, is the Microsoft Windows and server products. Nothing else comes close.

Your view is far too engaged in the general consumer outlook. You're unable to open your mind any further because you're unable to fathom the true complexities of I.T infrastructure. You've used Windows at work and hated it. For all you know the infrastructure could have been built on Linux. I've seen many a company run their back end through a half baked Linux mess, having a profound negative effect in the performance and reliability of their Windows nodes. Just because the IT department at your place of work were crap, that doesn't make all I.T administrators, all configurations and infrastructures based on Microsoft's products bad. That's your own personal experience based upon your own place of work. That doesn't account for the millions of other infrastructures and administrators, does it? Your view is like that of a child. Grow up.

I'm all for making the experience more pleasant for the end user. Self management is the exact opposite of that.

RE: Oh come on...
By themaster08 on 12/18/2011 8:25:26 AM , Rating: 2
Sorry, that should be XServe, not XScale.

RE: Oh come on...
By DeluxeTea on 12/18/2011 9:56:10 AM , Rating: 2
Way to dodge the question and inject another "Apple is earning mounds of cash so it is more important than anything" argument there, Swashie.

RE: Oh come on...
By powerwerds on 12/18/2011 9:54:24 AM , Rating: 4

Apple excels at selling consumer electronics. They have established a reputation for their focus on ergonomics which allows them to package the same electronic components as other companies but sell them at a premium price. This is their business success in a nutshell. Same components, yet because of the well thought out packaging and ergonomics, people pay premium, Apple profits.

I guess I'm disagreeing with you here, because what you call technology, I call consumer electronics. Your post and sentiment and history commonly hail Apple as a "dominant and defining force in technology," and I think "you may want to revise that view a bit." Did you read the article Mr. Sir? Apple does very little research. They are very far off from defining any new technology. For me, Apple is a pretty far ways off from technologically dominant. Do they dominate some sectors of consumer electronics? Yes. Not only are they not responsible for the technology in their consumer electronics, they are very very seldom offering the best technology available in said consumer electronics.

For me, Apple is a top tier consumer electronics company, sure. For me, Apple is just really not what I consider to be technologically dominant or defining. For me, if I am going to give some technology some credit, its just a tad asinine to apply it to some packaging (Apple cred due) and not to the actual technology within (Apple cred not due).

I actually can't stand Apple or your views, and I wish you would get a clue "and not fall back on simplistic half truths even if they are very reassuring to one's world view." Strictly speaking, Apple doesn't make the technology mmmk? They repackage it nice and tidy for you to buy at premiums mmmk?

RE: Oh come on...
By Tony Swash on 12/18/11, Rating: 0
RE: Oh come on...
By Camikazi on 12/18/2011 12:01:06 PM , Rating: 1
I use STFU and GTFO cause I don't know how swearing is looked upon on the forum :P and I did it in the first place cause I am tired of people who make posts like yours "O I guess you don't understand what this means and I do so it's your loss". If you think you know what something means then don't post a post that alludes to you knowing what it means without explaining, it just makes people assume you don't know a thing and are just trying to look important. If you know explain if you do not then just shut up.

What a crappy "editorial"
By kmmatney on 12/18/2011 9:40:35 PM , Rating: 2
Jason Mick turns what should be good news for the U.S. - fabricating the A5 CPU in a U.S. - into an editorial filled with Anti-Apple slants. I really wish Anandtech would lose their affiliation with DailyTech - I have pretty much lost all respe3ct for DT long ago.

RE: What a crappy "editorial"
By TakinYourPoints on 12/20/2011 4:18:53 PM , Rating: 2
DT being on the Anandtech sidebar is like the Economist running side columns by the National Enquirer

RE: What a crappy "editorial"
By testerguy on 12/20/2011 4:33:42 PM , Rating: 2
I couldn't agree more.

What kind of pathetic, washed up, bitter, angry, insecure writer brings up a video of a picasso quote in a story about a Samsung factory in USA.

How pathetic Jason is to think that the fact that Samsung is just one of Apples hundreds of manufacturers somehow means that Samsung owns or is behind their product range. Ridiculous. Apple has already started to diversify its supplier range after what happened and could eventually quite happily go on without Samsung, but the key with Apple is not the individual components anyway, it's the way that they are all put together and combined with software.

Pathetic comments like 'Samsung outsells Apple' based on statistics BEFORE the iPhone 4S came out, couldn't be more ridiculous.

Jason, nobody who is actually calm and measured enough (you know, intelligent people) has any respect for such blatantly biased and idiotic reporting.

I will voice my opinion strongly on Anandtech that any afiliation with yourselves is ended.

RE: What a crappy "editorial"
By testerguy on 12/20/2011 4:35:43 PM , Rating: 2
And also, to say 'Apple started it' about all the litigation? Please.

SAMSUNG 'started it' when they blatantly ripped off the entire line of Apple products from iPod to iPhone to iPad.

And then you dare to question Apples innovation?

By TakinYourPoints on 12/20/2011 6:04:18 PM , Rating: 2
I will voice my opinion strongly on Anandtech that any afiliation with yourselves is ended.

They've been getting a lot of complaints over the last year. I believe it's one of the reasons why DT was pushed down the sidebar and Anandtech started running their own "Pipeline" news blurbs.

We'll see if DT is eventually spun off completely, that or if the "editorial" staff (the same ones that lets misspellings and blatant inaccuracies fly in every other news article) is fired. I don't think I've ever seen a page where readership corrects the staff so regularly, even trash pages like Gizmodo or other Gawker sites. I recall Tiffany getting pretty mad about it a few weeks ago.

It would be bad for DT in any case; Anandtech generates significantly more traffic and is presumably where many of the DT viewers come from. I know it's the only reason I click over.

RE: What a crappy "editorial"
By Subzero0000 on 12/21/2011 1:19:26 AM , Rating: 2
It's really painful to read this article, there is so much hate in Jason.

He never appreciate the ability to of taking(stealing) idea and put together into great consumer products.
He always try to prove some other companies has already made something beforehand, which really means nothing because those were really sh-t and nobody wanted them.

Anyway, I don't understand why he had to take it so seriously. They are just fancy gadgets.
I own both Android and iOS devices, and happy to just enjoy the technology. It is that simple !

By TakinYourPoints on 12/22/2011 7:34:01 PM , Rating: 2
He always try to prove some other companies has already made something beforehand, which really means nothing because those were really sh-t and nobody wanted them.

This point keeps getting glossed over. Execution actually matters, and that's something Apple does better than most tech companies.

Do people really think Motorola or Samsung has what it takes to innovate in complete packages? Give me a break.

By muhahaaha on 12/16/2011 1:48:19 PM , Rating: 2
How ironic that Samsung, who makes many parts for Apple's devices, is being sued by them for making their own phones/tablets.

If I was the top dog at Samsung, I'd cut them off and not supply them with any more parts. Sure it might hurt the bottom line a little, but seriously, screw Apple. Do the world a favor and stick it to that out of control company.

RE: ironic
By Commodus on 12/16/2011 2:06:46 PM , Rating: 2
Actually, it would hurt Samsung a *lot*, because Apple is its biggest customer much of the time.

Also, it's rather ironic that you're trying to claim Apple is "out of control," since Samsung is part of a Korean duopoly (LG is the other one) known for corruption and for bullying carriers that dare to support a foreign-made smartphone, whether it's the iPhone or someone else's (just ask KT, the first iPhone carrier). I'd take Apple's attitude over one that actually hurts politics.

RE: ironic
By muhahaaha on 12/16/2011 2:15:36 PM , Rating: 1
i doubt it but nice try

RE: ironic
By Doh! on 12/16/2011 11:46:45 PM , Rating: 2
Actually, he's spot on. It's you who has no idea about Samsung's ugly business practices in Korea. Ask any Koreans about Samsung's business ethics and I'm sure you'll hear a handful.

RE: ironic
By TakinYourPoints on 12/17/2011 8:40:17 PM , Rating: 2
Nope, Apple is actually Samsung's largest client by a longshot. Losing their business would hurt their bottom line in a big way.

Keep in mind that Samsung is a huge company with many discreet parts to their business. Component manufacturing and consumer products are two discreet portions. It makes sense that Apple would one the one hand use them for component manufacturing because they can produce in such high volume, while at the same time be in court with their product division for copying their cosmetic designs.

RE: ironic
By Tony Swash on 12/17/2011 12:52:45 PM , Rating: 2
If I was the top dog at Samsung, I'd cut them off and not supply them with any more parts. Sure it might hurt the bottom line a little, but seriously, screw Apple.

I guess that's why you don't run a large company :)

Do the world a favor and stick it to that out of control company.

I would love for you to offer an example of a 'controlled' large tech company.

Diabolical Apple
By randygrenier on 12/16/2011 1:48:57 PM , Rating: 3
Apple's business practices truly are diabolical. It's good to see at least one tech writer has figured this out. Maybe the courts will also soon figure it out.

RE: Diabolical Apple
By Cheesew1z69 on 12/16/2011 4:31:31 PM , Rating: 2
They are, slowly but surely.

Another take on this subject...
By croc on 12/16/2011 3:55:09 PM , Rating: 2
...might be that Samsung, one of the best of the 'greedy capitalist pigs', has finally seen the wage situation in the USA as low enough that it can now hire the brains it needs at China-like wages. As an American, how do you feel about this? Happy to be able to have employment at any cost?

RE: Another take on this subject...
By rich876 on 12/18/2011 10:47:40 AM , Rating: 2
Nobody else has low wages like China, but I do agree Samsung should pay their workers a lot more. If only they could unionize, that would change. but in the South, people don't believe in unions.

Symbiotic Relationship
By ltcommanderdata on 12/16/2011 1:18:50 PM , Rating: 2
Symbiotic relationships where companies have a love/hate relationship aren't uncommon.

For example, despite Android's marketshare lead, Google has testified to Congress that 2/3rds of their mobile search traffic actually comes from iOS. So in Google's core competency, search, Google's mobile breadwinner is iOS not Android despite all the animosity and rhetoric.

By rich876 on 12/18/2011 10:43:11 AM , Rating: 2
Apple got where there at from being greedy. They think no other company has the right to compete with them and wants to get rid those who try. This is not a company that looks for the consumers interest. It's a company who will try to get rid of the competition. In the long run, this will backfire on them.

I never bought anything from Apple and I doubt if I ever will.

"Like Roy and Oscar Madison" ?
By hoosiertech on 12/16/2011 1:19:38 PM , Rating: 1
"Like Roy and Oscar Madison" ? I thought the Odd Couple was Felix Unger and Oscar Madison. Not sure who Roy is.

I may be dating myself but it was one of the 1st sitcoms I remember watching as a kid.

By Tony Swash on 12/16/11, Rating: -1
RE: Stingy?
By muhahaaha on 12/16/2011 2:06:00 PM , Rating: 4
shut up

RE: Stingy?
By themaster08 on 12/17/2011 4:26:38 AM , Rating: 2
He's just pissed because he knows that his iPhone is a Samsung with an Apple logo.

Apple's R&D was essentially the design, marketing and OS usability. Some may call that innovative, but the reality is that it's based on existing markets, technology and methodology.

Tony still doesn't understand that many of us don't have a problem with Apple's products. He thinks that we find Apple's success a mystery. That we're in some way afraid this new paradigm of technology, although the irony of that is many of us here embrace it with our own smartphones and tablets. How he comes up with the crap is beyond me. He still doesn't realise that none of that is in any way true. It's simply their business practices which we frown upon.

RE: Stingy?
By Tony Swash on 12/17/11, Rating: 0
RE: Stingy?
By tng on 12/16/2011 2:22:10 PM , Rating: 1
I would call it being smart about looking at previous ideas, finding the best that works for what you want to do and then adopting them as your own.

R&D is much cheaper when you only have to link together existing technologies and put them in the package you want.

RE: Stingy?
By Tony Swash on 12/16/11, Rating: 0
RE: Stingy?
By tng on 12/17/2011 12:14:55 AM , Rating: 2
Do you honestly think that Apple became the biggest technology company on the planet by doing essentially nothing new, nothing innovative, nothing different?
Yes, however, they did transition the smartphone out of the hands of nerds and business and into the general populace. They gave it a better form factor and appeal, that is Apples contribution.

Apple took assorted ideas used in other places and brought them together. I can't say that Steve wasn't great at this, but after seeing what the lawsuits were all about, I lost all respect for him.

RE: Stingy?
By its tom hanks on 12/16/2011 3:06:16 PM , Rating: 1
perhaps 'brilliantly effective and efficient' might be more accurate.

I believe you're referring to their "Jim Jones" marketing, rather than their R&D

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