SanDisk 2012 Annual Report Download - page 112

Our Sales Channels
Our products are sold through the following channels:
•OEM. Our OEM channel represents sales directly and through distributors to OEMs, system integrators
and value-added resellers who bundle, embed or integrate our data storage solutions. Our OEM channel
addresses a large variety of applications, including mobile phones, tablets, notebooks, gaming devices,
enterprise storage solutions, servers and other computing devices. We also sell our data storage
solutions to OEMs that offer our products under their own brand name in retail channels. We sell to our
OEM channel through our direct sales representatives as well as through independent manufacturers’
representatives.
•Retail. We sell our products directly and through distributors to consumer electronics stores, office
superstores, photo retailers, mobile phone stores, mass merchants, catalog and mail order companies, e-
commerce retailers, drug stores, supermarkets, convenience stores and kiosks in a wide variety of
locations. We sell to our retail channel through our direct sales representatives as well as through
independent manufacturers’ representatives.
Backlog
As of the end of fiscal years 2012 and 2011, our backlog was $278 million and $341 million, respectively.
Because our customers can change or cancel orders with limited or no penalty and limited advance notice prior to
shipment, we do not believe that our backlog, as of any particular date, is indicative of future sales.
Seasonality
Because the majority of our products are ultimately sold to consumers, our revenue is generally highest in
our fourth fiscal quarter due to the holiday buying season. In addition, our revenue is generally lowest in our first
fiscal quarter.
Customer Concentration
In fiscal years 2012, 2011 and 2010, revenues from our top 10 direct customers and licensees accounted for
approximately 43%, 48% and 44% of our total revenues, respectively. In fiscal year 2012, Apple Inc., or Apple,
accounted for 13% of our total revenues. In fiscal year 2011, Samsung Electronics Co., Ltd., or Samsung,
accounted for 10% of our total revenues. No customer accounted for 10% or more of our total revenues in fiscal
year 2010. The composition of our major customer base has changed over time, and we expect this pattern to
continue as our markets and strategies evolve. Sales to our customers are generally made pursuant to purchase
orders rather than long-term contracts.
Technology
Since our inception, we have focused our research, development and standardization efforts on developing
highly reliable, high-performance, cost-effective flash memory storage products in small form factors to address a
variety of markets. Our research and development efforts are designed to help ensure the creation of fully-
integrated, broadly interoperable products that are compatible with both existing and newly developed system
platforms. We have successfully developed and commercialized 2-bits/cell flash multi-level cell, or X2, and 3-bits/
cell flash multi-level cell, or X3, technologies, which have enabled significant cost reduction and growth in NAND
flash supply. In addition, we are investing in the development of Bit-cost scaleable 3-Dimensional NAND, or BiCS,
a vertical NAND technology, and 3-Dimensional resistive RAM, or 3D ReRAM, memory architecture. We have
also initiated, defined and developed standards to meet new market needs and to promote wide acceptance of these
standards through interoperability and ease-of-use. We believe our core technical competencies are in:
• high-density flash memory process, module integration, device design and reliability;
• securing data on a flash memory device;
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