There's a high density of good hardware engineering talent here in Israel, and specifically flash memory expertise (see: http://en.wikipedia.org/wiki/SanDisk and http://en.wikipedia.org/wiki/M-Systems).

Given Apple's voracious appetite for solid-state storage, I am surprised this didn't happen sooner.

Only thing I'm not sure of is why this is interesting news, particularly to the wider, non-Israeli HN community. Feels like a case of "OMG LOOK ISRAEL IN THE TITLE".

edit: Oh, just now noticing the inevitable politics in the comment thread. Le Sigh.