SanDisk 2007 Annual Report Download - page 51

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Description of Our Business
Industry Background. We operate in the digital electronics industry, which encompasses traditional personal
computers, or PCs, consumer electronics, communications and industrial products. Our products use flash memory
to store digital information for devices such as mobile phones, digital cameras, digital video camcorders, gaming
devices, portable digital audio/video players, PCs, blade servers and global positioning system, or GPS, devices.
These applications require storage that is small in form factor, portable and removable, highly reliable, high
capacity, low in power consumption, and capable of withstanding high levels of shock vibration and temperature
fluctuations.
The flash memory market is primarily comprised of NOR and NAND technologies. NOR is traditionally used
for code storage and is characterized by fast read speeds. NOR generally costs more per megabyte and has lower
storage capacities than NAND. NAND flash memory is traditionally used for embedded and removable data storage
and is characterized by fast write speeds and high capacities. We internally develop flash memory technologies,
produce the flash memory primarily through the flash ventures with Toshiba and utilize this production output in
products that we design and sell to our various end markets.
Our Primary Markets. We currently focus on four primary markets:
•Consumer. We make and sell flash storage products that address multiple consumer markets. Certain flash
storage cards are used as the film for all major brands of digital cameras. Our cards are also used to store
video in solid-state digital camcorders and to store digital data in many other devices, such as maps in GPS
devices. In addition, portable game devices now include advanced features that require high capacity
memory storage cards and we provide SD cards, Memory Stick PRO Duo
TM
cards and Cruzer»CrossFire
TM
line of USB drives that are all specifically packaged for the gaming market. Primary card formats for
consumer devices include CF, SD, Memory Stick»and xD-Picture Card
TM
.
•Mobile Phones. We provide embedded, semi-removable and removable storage for mobile phones. We are
a leading supplier of microSD, SD and the Memory Stick product line of removable storage cards used in
mobile phones. Multimedia features in mobile phones, such as camera functionality, audio/MP3, games,
video or internet access, have been increasing in popularity. These features require additional storage
capacity in the mobile phone and transferability of data between devices.
•Digital Audio and Video Players. Digital media players allow consumers to download, store and play
music and video. We sell a broad line of digital media players with both embedded and removable memory
under our Sansa»brand with varying combinations of audio and video capabilities.
•Computing. We provide multiple flash storage devices and solutions for a variety of computing, industrial
and enterprise markets. USB flash drives allow consumers to store computer files on keychain-sized devices
and then quickly and easily transfer these files between laptops, desktops and other devices. USB flash
drives are fast, easy to use, have replaced floppy disks and other types of external storage media, and are
evolving into intelligent storage devices. In addition, we sell solid state drives that are flash-based storage
devices with capacities currently up to 72 gigabytes. We believe solid state drives will become a major
market for flash memory over the next several years as the solid state drives increasingly replace hard disk
drives in personal computer and enterprise server products.
Our Sales Channels. Our products are delivered to end-users through more than 222,000 worldwide retail
storefronts and also by bundling data storage cards with host products or by embedding our data storage products in
host devices sold by our OEM customers.
Our sales are made through the following channels:
•Retail. We ship SanDisk brand products directly to consumer electronics stores, office superstores, photo
retailers, mobile phone stores, mass merchants, catalog and mail order companies, internet and e-commerce
retailers, drug stores, supermarkets and convenience stores. We also sell our products to smaller or regional
retailers through distributors.
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