SanDisk 2010 Annual Report Download - page 146

high volumes at low costs and to sell these flash memory chips themselves or to our flash card competitors at a
low cost. Some of our competitors may sell their flash memory chips at or below their true manufacturing costs
to gain market share and to cover their fixed costs. Such practices occurred in the DRAM industry during periods
of excess supply and resulted in substantial losses in the DRAM industry. Our primary semiconductor
competitors include Hynix, Intel, Micron, Samsung and Toshiba. These current and future competitors produce
or could produce alternative flash or other memory technologies that compete against our NAND flash memory
technology or our alternative technologies, which may reduce demand or accelerate price declines for NAND.
Furthermore, the future rate of scaling of the NAND flash technology design that we employ may slow down
significantly, which would slow down cost reductions that are fundamental to the adoption of flash memory
technology in new applications. If the scaling of NAND flash technology slows down or alternative technologies
prove to be more economical, our business would be harmed, and our investments in captive fabrication facilities
could be impaired. Our cost reduction activities are dependent in part on the purchase of new specialized
manufacturing equipment, and if this equipment is not generally available or is allocated to our competitors, our
ability to reduce costs could be limited.
We also compete with flash memory card manufacturers and resellers. These companies purchase or have a
captive supply of flash memory components and assemble memory cards. Our primary competitors currently
include, among others, A-DATA, Buffalo, CN Memory, Dane-Elec, Dexxxon Digital Storage, Inc., dba Emtec
Electronics, or EMTEC, Kodak, Elecom, FUJI, Gemalto, Hagiwara, Hama, Hynix, Imation, Memorex, I-O Data,
Kingmax, Kingston, Lexar, Netac, Panasonic, PNY, PQI, RITEK, Samsung, Sony, STMicroelectronics, Toshiba,
Transcend, and Verbatim.
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 revenues or margins and may result in the loss of our key customers. For example,
Toshiba and other manufacturers have increased their market share of flash memory cards for mobile phones,
including the microSD card, which have been a significant driver of our growth. In the digital audio market, we
face competition from well established companies such as Apple, ARCHOS, Coby, Creative, Philips, Microsoft,
Samsung and Sony. In the USB flash drive market, we face competition from a large number of competitors,
including EMTEC, Hynix, Imation, Kingston, Lexar, Memorex, PNY, Sony and Verbatim. In the market for
SSDs, we face competition from large NAND flash producers such as Intel, Samsung and Toshiba, as well as
from hard drive manufacturers, such as Seagate, Samsung, Western Digital and others, who have established
relationships with computer manufacturers. We also face competition from third-party SSD solutions providers
such as A-DATA, Kingston, Phison Electronics Corporation, STEC and Transcend.
We sell flash memory in the form of white label cards, wafers or components to certain companies who sell
flash products that may ultimately compete with our branded products in the retail or OEM channels. This could
harm our branded market share and reduce our sales and profits.
Furthermore, many companies are pursuing new or alternative technologies or alternative forms of NAND,
such as phase-change and charge-trap flash technologies which may compete with NAND flash memory. New or
alternative technologies, if successfully developed by our competitors, and we are unable to scale our technology
on an equivalent basis, could provide an advantage to these competitors.
These new or alternative technologies may enable products that are smaller, have a higher capacity, lower
cost, lower power consumption or have other advantages. If we cannot compete effectively, our results of
operations and financial condition will suffer.
We believe that our ability to compete successfully depends on a number of factors, including:
• price, quality and on-time delivery of products;
• product performance, availability and differentiation;
• success in developing new applications and new market segments;
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