We are the worldwide leader in flash storage card products. We design, develop
and market flash storage devices used for a wide variety of consumer electronics
products such as digital cameras, mobile phones, Universal Serial Bus, or USB,
drives, gaming devices, MP3 players and other digital consumer devices. Flash
storage allows data to be stored in a compact format that retains the data for
an extended period of time after the power has been turned off.
Our strategy is to identify and develop current and emerging mass consumer markets
for flash storage products and through our vertical integration supply strategy
sell in high volumes all major flash storage card formats for our target markets,
enabling us to be a one-stop-shop for our retail and original equipment manufacturer,
or OEM, customers.
Our revenues are driven by the sale of products and licensing of our intellectual
property. We believe the market for flash storage is price elastic. Our management
team believes that more applications for flash storage will be created through
the continued increase in the number of megabytes a consumer can purchase at
a given price point.
We create new markets for flash memory. Together with Matsushita Electric Industries,
Ltd., or Matsushita, which owns the Panasonic brand, and a subsidiary of Toshiba
Corporation, or Toshiba, we launched the Secure Digital card, or SDtm card,
which is currently the most popular form factor of flash storage cards. We followed
that effort by working with mobile network operators and handset manufacturers
to develop the miniSDtm card and microSDtm card, an even smaller form factor
memory card. Our market-driving efforts now include investment in the U3tm platform,
with which software developers can transform USB drives from a simple mass storage
device to a platform for on-the-go computing. We are also in the early stages
of developing the market for pre-loaded content, such as music, and other digital
content for end-users in specific fields such as education. We are working with
device manufacturers, infrastructure and copyright owners and software developers
in developing these emerging markets, which we believe will contribute to the
future of flash storage products.
We are founders or co-founders of most major form factors of flash storage cards
in the market today. We co-own the Memory Stick PROtm format with Sony Corporation,
or Sony, we have worked with Canon, Inc., or Canon, to co-found CompactFlash®,
and worked with Matsushita and a subsidiary of Toshiba to co-found the SD card.
We co-developed miniSD with NTT DoCoMo, Inc., Toshiba and Matsushita, and we
pioneered TransFlashtm in collaboration with Motorola, Inc., or Motorola. We
plan to continue to work with leading companies in mobile communications and
digital consumer devices to find additional ways for flash storage card products
to enable proliferation of those technologies and markets.
We develop and own leading-edge technology and patents for flash memory and
data storage cards. Our team has a deep understanding of flash memory. We own
or control many patents, know-how and other intellectual property covering the
design, manufacture and operation of flash memory and flash memory cards. One
of the key technologies that we have patented and successfully commercialized
to date is multi-level cell technology, or MLC, which allows a flash memory
cell to be programmed to store two or more bits of data in approximately the
same area of silicon that is typically required to store one bit of data. This
technology is an important factor in our ability to reduce the cost of our flash
memory. We have an extensive patent portfolio that has been licensed by three
of the four largest semiconductor companies based on revenues.
We are investing with Toshiba in joint ventures, that are high volume, state-of-the-art
flash manufacturing facilities in Japan. Our commitment takes the form of capital
investments and loans to the ventures, credit enhancements of the ventures’
leases of semiconductor manufacturing equipment, commitments, on a take-or-pay
basis, to purchase 50% of the output of the ventures at manufacturing cost plus
a mark-up and sharing in the cost of SanDisk-Toshiba joint research and development
activities related to flash memory. We supplement our sourcing of flash memory
from the Toshiba ventures with purchases of memory on favorable terms from Renesas
Technology Corporation, or Renesas, Samsung Electronics Corporation, or Samsung,
and Toshiba. Additionally, we design in-house and fabricate at third-party foundries
the controllers which interface between the flash memory and digital consumer
devices. Our team manages a network of contract manufacturers that assemble
and test our flash memory and cards according to our specifications.
We sell our product globally to retail and OEM customers. We intend to continue
to expand our retail customer base to additional new geographic regions as well
as to new outlets such as supermarkets and drug stores. We also seek to strengthen
our current retailer relationships and establish exclusive arrangements where
practical. In North America, we sell our products principally through retailers,
such as Best Buy Company, Inc., or Best Buy, Circuit City Stores, Inc., Wal-Mart
Stores, Inc. and Costco Wholesale Corporation. In North America and the rest
of the world, we manage a network of distributors who sell to other retailers
and dealers. We also are expanding a separate network of distributors and retail
locations specifically focused on the mobile phone market. There are now more
than 150,000 worldwide retail storefronts where consumers may purchase SanDisk
products. We also sell directly and through distributors, to key OEM accounts,
including mobile phone manufacturers and digital camera manufacturers who include
our products with their products when sold to end users.
Competition
Our industry is very competitive. We face competition from numerous flash memory
card manufacturers, as well as from semiconductor manufacturers of NAND flash
memory. We also face competition from hard disk drives and from new technologies.
See Item 1A, “Risk Factors.”
Our Key Competitive Advantages. We believe our key competitive advantages in
NAND flash products include:
• our intellectual property ownership, in particular our patent claims and manufacturing
know-how over MLC, provides a cost advantage to us and Toshiba;
• through the ventures with Toshiba, we benefit from Toshiba’s manufacturing
and research and development experience and expertise;
• we manufacture and sell a broader range of card formats than any of our competitors,
which gives us an advantage in obtaining retail and OEM distribution; and
• our captive NAND flash wafer supply enables us to control our supply chain
and provides cost advantages over our competitors, who only have contractual
relationships with their suppliers.
Semiconductor Competitors. Our primary semiconductor competitors currently include
our historical competitors Renesas, Samsung and Toshiba. New competitors include
Hynix Semiconductor, Inc., or Hynix, IM Flash Technologies, LLC, or IM Flash
(a new company formed by Micron Technology, Inc., or Micron, and Intel), Infineon
Technologies, A.G., or Infineon, Micron, and STMicroelectronics N.V., or STMicro,
who began shipping NAND or NAND-competitive memory in 2004. If any of these
competitors increase their memory output, it will likely result in a decline
in the prevailing prices for packaged NAND semiconductor components. Additionally,
manufacturers of NOR flash memory, such as Intel and Spansion LLC, or Spansion,
are attempting to use their flash memory for traditional NAND applications,
both embedded and in data storage cards.
Card and USB Flash Drive Competitors. We compete with manufacturers and resellers
of flash memory cards and USB flash drives. These companies purchase (or have
captive supply of) flash memory components and assemble memory cards. These
companies include, among others, Buffalo Technology, Dane-Elec Manufacturing,
or Dane-Elec, Delkin Devices, Inc., or Delkin, Fuji, Hagiwara Sys-Com Co., Ltd.,
or Hagiwara, Hama Corporation, Inc., or Hama, I/O Data Device, Inc., or I/O
Data, Infineon, Kingmax, Inc., or KingMax, Kingston Technology Company, Inc.,
or Kingston, Eastman Kodak Company, or Kodak, Lexar, M-Systems, Matsushita,
Memorex Products, Inc., or Memorex, Micron, PNY Technologies, Inc., or PNY,
PQI Corporation, or PQI Corp., Pretec Electronics Corporation (USA), or Pretec
Electronics, Renesas, Samsung, Sharp, SimpleTech, Inc., Sony, Toshiba and Viking
Components, Inc., or Viking Components.
Digital Audio Players. Our digital audio players face competition from products
offered by other companies, including Apple Computer, Inc., or Apple, Creative
Technologies, Ltd., or Creative, iriver America, Inc., or iriver, and Samsung.
Other. There are other technologies that compete with our product offerings.
There are many companies that are attempting to develop memory cells that use
different designs and materials than the semiconductors in the marketplace today.
When these technologies can be manufactured in high volume, they could have
a significant cost advantage over NAND memory technologies. One example is NROM
technology which was invented and patented by Saifun Semiconductors Ltd. We
also face competition from hard disk drives. Small hard disk drives have a lower
cost per megabyte today than does NAND flash; however the minimum density is
higher making the hard disk drive expensive in applications that may not require
as much memory as the hard disk provides. The hard disk drives in the market
today also have significant power requirements and are not as rugged as flash
memory. The competitive disadvantages of these other technologies may be reduced
or eliminated over time.
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