SanDisk 2005 Annual Report Download - page 91

operations and financial condition. In addition, current and future competitors produce or could produce alternative
flash memory technologies that compete against our NAND flash memory technology.
Our primary semiconductor competitors continue to include our historical competitors Renesas, Samsung and
Toshiba. New competitors include Hynix, Infineon, Micron and STMicro, which began shipping NAND or
NAND-competitive memory in 2004. If any of these competitors increase their memory output, as Hynix recently
has, it will likely result in a decline in the prevailing prices for packaged NAND semiconductor components.
We compete with flash memory card manufacturers and resellers. These companies purchase, or have a captive
supply of, flash memory components and assemble memory cards. These companies include, among others,
Dane-Elec, Delkin, Fuji, Hagiwara, Hama, I/O Data, Infineon, Jessops PLC, KingMax, Kingston, Lexar, M-Sys-
tems, Matsushita Battery Industrial Co., Ltd., Matsushita, Micron, Memorex, Panasonic, PNY, PQI Corp., Pretec
Electronics, 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. For example, Samsung,
with significant manufacturing capacity, brand recognition and access to broad distribution channels, provides
competing flash cards, such as the MMC micro
TM
that competes directly with our microSD mobile card. Lexar
markets a line of flash cards bearing the Kodak brand name, which competes with our flash memory cards. Our
handset card products also face competition from embedded solutions from competitors including Intel, M-Systems
and Samsung. Our digital audio players face competition from similar products offered by other companies,
including Apple, Creative, iriver and Samsung. Our USB flash drives face competition from Lexar, Memorex, M-
Systems and PNY, among others. If our products cannot compete effectively, our market share and profitability will
be adversely impacted.
Furthermore, 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.
We believe that our ability to compete successfully depends on a number of factors, including:
• price, quality and on-time delivery to our customers;
• product performance, availability and differentiation;
• success in developing new applications and new market segments;
• sufficient availability of supply;
• efficiency of production;
• timing of new product announcements or introductions by us, our customers and our competitors;
• the ability of our competitors to incorporate standards or develop formats which we do not offer;
• the number and nature of our competitors in a given market;
• successful protection of intellectual property rights; and
• general market and economic conditions.
We may not be able to successfully compete in the marketplace.
The semiconductor industry is subject to significant downturns that have harmed our business, financial
condition and results of operations in the past and may do so in the future. The semiconductor industry is highly
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