SanDisk 2010 Annual Report Download - page 145

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qualification and acceptance. Other products, such as slotMusic, slotRadio, slotVideo™ and our pre-loaded flash
memory cards, may not gain market acceptance, and we may not be successful in penetrating the new markets
that we target. Sony’s decision in 2010 to transition its future devices from the Memory Stick format to the SD
format could harm our market share or margins since there are a greater number of competitors selling SD
products.
New applications may require significant up-front investment with no assurance of long-term commercial
success or profitability. As we introduce new standards or technologies, it can take time for these new standards
or technologies to be adopted, for consumers to accept and transition to these new standards or technologies and
for significant sales to be generated, if at all.
Competitors or other market participants could seek to develop new standards for flash memory products
that, if accepted by device manufacturers or consumers, could reduce demand for our products. For example,
certain handset manufacturers and flash memory chip producers are currently advocating and developing a new
standard, referred to as Universal Flash Storage, commonly referred to as UFS, for flash memory cards used in
mobile phones. Intel and Micron have also developed a new specification for a NAND flash interface, called
Open NAND Flash Interface, commonly referred to as ONFI, which would be used primarily in computing
devices. Broad acceptance of new standards and products may reduce demand for some of our products.
Future alternative non-volatile storage technologies or other disruptive technologies could make NAND
flash memory obsolete, and we may not have access to those new technologies on a cost-effective basis, or at all,
which could harm our results of operations and financial condition. The pace at which NAND technology is
transitioning to new generations is expected to slow due to inherent physical technology limitations. We
currently expect to be able to continue to scale our NAND technology through a few additional generations, but
beyond that there is no certainty that further technology scaling can be achieved cost effectively with the current
NAND flash technology and architecture. We also continue to invest in future alternative technologies,
particularly our 3D Read/Write technology, which we believe may be a viable alternative to NAND when NAND
can no longer scale at a sufficient rate, or at all. However, even when NAND flash can no longer be further
scaled, we expect NAND and potential alternative technologies to coexist for an extended period of time. There
can be no assurance that we will be successful in developing 3D Read/Write technology or other technologies, or
that we will be able to achieve the yields, quality or capacities to be cost competitive with existing or other
alternative technologies.
Others are developing alternative non-volatile technologies such as ReRAM, Memristor, vertical or stacked
NAND, phase-change memory, charge-trap flash, and other technologies. Successful broad-based
commercialization of one or more of these technologies could reduce the future revenue and profitability of
NAND flash technology and could supplant the potential alternative 3D Read/Write technology that we are
developing. In addition, we generate license and royalty revenues from NAND technology and we own
intellectual property for 3D Read/Write technology, and if NAND is replaced by a technology other than 3D
Read/Write, our ability to generate license and royalty revenues would be reduced. Also, we may not have access
to or we may have to pay royalties to access alternative technologies that we do not develop internally.
Alternative storage solutions such as cloud storage, enabled by high bandwidth wireless or internet-based
storage, could reduce the need for physical flash storage within electronic devices. These alternative technologies
could negatively impact the overall market for flash-based products, which could seriously harm our results of
operations.
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 companies that may have
greater advanced wafer manufacturing capacity, substantially greater financial, technical, marketing and other
resources and more diversified businesses than we do, which may allow them to produce flash memory chips in
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