SanDisk 2010 Annual Report Download - page 132

for a wide variety of digital devices such as smartphones, tablets, eReaders, cameras, camcorders, media players,
USB drives and other computing devices.
Our Strategy
Our strategy is to be an industry-leading supplier of NAND flash storage solutions and to develop large
scale markets for NAND flash-based storage products. We maintain our technology leadership by investing in
advanced technologies and NAND flash memory fabrication capacity in order to produce leading-edge, low-cost
NAND memory for use in a variety of end-products, including consumer, mobile phone and computing devices.
We are a one-stop-shop for our retail and OEM customers, selling in high volumes all major NAND flash storage
card formats for our target markets. Our revenues are driven by product sales as well as the licensing of our
intellectual property.
We believe the markets for flash storage are generally price elastic, meaning that a decrease in the price per
gigabyte results in increased demand for higher capacities and the emergence of new applications for flash
storage. We strive to continuously reduce the cost of NAND flash memory, which we believe, over time will
enable new markets and expand existing markets and allow us to achieve higher overall revenue.
We create new markets for NAND flash memory through our design and development of NAND
applications and products. We are founders or cofounders of most major form factors of flash storage cards in the
market today. We pioneered the Secure Digital, or SD™, card, together with a subsidiary of Toshiba and
Panasonic Corporation, or Panasonic. The SD card is currently the most popular form factor of flash storage
cards used in digital cameras. Subsequent to pioneering the SD card, we worked with mobile network operators
and handset manufacturers to develop the miniSD™ card and microSD™ card to satisfy the need for even
smaller form factor memory cards. The microSD card has become the leading card format for mobile phones.
With Sony Corporation, or Sony, we co-own the Memory Stick PRO™ format and co-developed the SxS
memory card specification for high-capacity and high-speed file transfer in flash-based professional video
cameras. We also worked with Canon, Inc. to co-found the CompactFlash®, or CF, standard. More recently, in
November 2010, we, along with Nikon Corporation and Sony announced the joint development of a set of
specifications designed to address the future requirements of professional photography and video markets. The
three companies have proposed the specifications to the CompactFlash Association, the international standards
organization, in order to standardize the format. Through our internal development and technology obtained
through acquisitions, we also hold key intellectual property for USB drives and SSDs. We plan to continue to
work with a variety of leading companies in various end markets to develop new markets for flash storage
products.
Our team has a deep understanding of flash memory technology and we develop and own leading-edge
technology and patents for the design, manufacture and operation of flash memory and data storage cards. One of
the key technologies that we have patented and successfully commercialized 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. We have an extensive patent portfolio that
has been licensed by several leading semiconductor companies and other companies in the flash memory
business. Our cumulative license and royalty revenues over the last three fiscal years were approximately
$1.28 billion.
We have invested with Toshiba in high volume, state-of-the-art NAND flash manufacturing facilities in Japan.
Our commitment takes the form of capital investments and loans to the flash ventures with Toshiba, credit
enhancements of these ventures’ leases of semiconductor manufacturing equipment, take-or-pay commitments to
purchase up to 50% of the output of these flash ventures with Toshiba 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 refer
to the flash memory which we purchase from the SanDisk-Toshiba ventures as captive memory. Our strategy is to
have a mix of captive and non-captive supply and we have, from time-to-time, supplemented our sourcing of
captive flash memory with purchases of non-captive memory, primarily from Toshiba, Samsung and Hynix.
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