SanDisk 2004 Annual Report Download - page 33

Table of Contents
them, if this happens at all. Moreover, broad acceptance of new standards or products by consumers may reduce demand for our older
products. If this decreased demand is not offset by increased demand for our new products, our results of operations could be harmed.
We cannot assure you that any new products or standards we develop will be commercially successful.
We face competition from numerous manufacturers and marketers of products using flash memory, as well as from manufacturers
of new and alternative technologies, and if we cannot compete effectively, our results of operations and financial condition will suffer.
Our competitors include many large domestic and international companies that have greater access to advanced wafer manufacturing
capacity and substantially greater financial, technical, marketing and other resources than we do, which allows them to produce flash
memory chips in high volumes at low costs and to sell these flash memory chips to our flash card competitors at a low cost. Some of
our competitors may sell their flash memory chips at below their true manufacturing costs to gain market share and to cover their fixed
costs. Such practices have been common in the DRAM industry during periods of excess supply, and have resulted in substantial
losses in the DRAM industry. In addition, many semiconductor companies have announced plans to bring up substantial new capacity
of flash memory. If the combined total new flash memory capacity exceeds the corresponding growth in demand, prices may decline
dramatically, adversely impacting our results of operations and financial condition. In addition, current and future competitors produce
or could produce alternative flash memory technologies that compete against our NAND MLC flash memory technology.
Our primary semiconductor competitors currently include our historical competitors Renesas, Samsung and Toshiba. New
competitors include Hynix, Infineon, Micron and ST Micro, 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, are attempting to use
their flash memory for traditional NAND applications, both embedded and in data storage cards.
We compete with flash memory card manufacturers and resellers. These companies purchase (or have captive supply of) flash
memory components and assemble memory cards. These companies include, among others, Dane−Elec Manufacturing, Delkin
Devices, Fuji, Hagiwara, Hama, I/ O Data, Infineon, Jessops, Kingston, Lexar, M−Systems, Matsushita Battery, Micron, Memorex,
Panasonic, PNY, PQI, Pretec, Renesas, Samsung, Sharp, Sony, Toshiba and Viking Components.
Some of our competitors have substantially greater resources than we do, have well recognized brand names or have the ability to
operate their business on lower margins than we do. The success of our competitors may adversely affect our future sales revenues and
may result in the loss of our key customers. Lexar introduced a line of flash cards bearing the Kodak brand name, which creates
significant competition for our flash memory cards. In addition, other companies, such as Matrix Semiconductor, have announced
products or technologies that may compete with our Shoot and Store products. Our TransFlash product faces competition from
M−Systems and Samsung who have announced similar form factors and from Advanced Micro Devices, Inc., Intel, Samsung and
Sharp who have competing embedded solutions. Our new music players face competition from similar products offered by other
companies, including Apple, Creative, iriver, Rio and Samsung. If our products cannot compete effectively, our market share and
profitability will be adversely impacted.
Futhermore, many companies are pursuing new or alternative technologies, such as nanotechnologies or microdrives, which may
compete with flash memory. These new or alternative technologies may provide smaller size, higher capacity, reduced costs, lower
power consumption or other advantages. If we cannot compete effectively, our results of operations and financial condition will suffer.
We have patent cross−license agreements with several of our leading competitors. Under these agreements, we have enabled
competitors to manufacture and sell products that incorporate technology covered by our patents. If we continue to license our patents
to our competitors, competition may increase and may harm our business, financial condition and results of operations.
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