SanDisk 2012 Annual Report Download - page 118

ITEM 1A. RISK FACTORS
Our operating results may fluctuate significantly, which may harm our financial condition and our stock
price. Our quarterly and annual operating results have fluctuated significantly in the past and we expect that they
will continue to fluctuate in the future. Our results of operations are subject to fluctuations and other risks,
including, among others:
• competitive pricing pressures, resulting in lower average selling prices and lower revenues;
• inability to reduce manufacturing costs to keep pace with reductions in average selling prices, resulting
in lower or negative product gross margins;
• excess, insufficient or mismatched captive memory output or capacity, resulting in lower average
selling prices, financial charges and impairments, lost sales and market growth opportunities, lower
gross margins or other consequences;
• timing, volume and cost of wafer production from Flash Ventures as impacted by fab start-up delays
and costs, technology transitions, lower than expected yields or production interruptions;
• inability to penetrate or gain market share in new or growing markets for flash memory, including the
client and enterprise SSD markets, and the failure of existing or new markets for flash memory to grow
or develop;
• potential delays in product development or lack of customer acceptance of our solutions, particularly
OEM products such as our embedded flash storage solutions, and client and enterprise SSD solutions;
• fluctuations in customer concentration and the loss of, or reduction in orders from, one or more of our
major customers that account for a significant portion of our revenues;
• lengthy, costly and unpredictable design, qualification and sales processes for a limited number of
customers in the enterprise SSD market;
• increased costs and lower gross margins due to more frequent product updates, returns of obsolete
products and warranty claims from our more complex SSD solutions and firmware;
• excess inventory or lost sales resulting from unpredictable or changing demand for our products;
• failure to manage the risks associated with our ventures and strategic partnerships with Toshiba;
• fluctuations or declines in our license and royalty revenues due to license agreement renewals on less
favorable terms, non-renewals, business performance of our licensees, or if licensees or we fail to
perform on contractual obligations;
• inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable
yields, new technologies such as 1Y-nanometer or subsequent process technologies, X3 NAND
memory architecture, BiCS technology, 3D ReRAM, or other advanced alternative technologies;
• disruptions in our supply chain, whether due to natural disasters, emergencies such as power outages,
fires or chemical spills, or employee strikes or other job actions;
• inability to enhance current products or develop new products on a timely basis or in advance of our
competitors;
• increased memory component and other costs as a result of currency exchange rate fluctuations for the
U.S. dollar, particularly with respect to the Japanese yen;
• inability to obtain non-captive memory supply of the right product mix and quality in the time frame
necessary to meet demand, or inability to realize an adequate margin on non-captive purchases;
• insufficient non-flash memory materials or capacity from our suppliers and contract manufacturers to
meet demand or increases in the cost of non-memory materials or capacity;
• insufficient assembly and test or retail packaging and shipping capacity from our Shanghai, China
facility or our contract manufacturers, or labor unrest, employee strikes or other disruptions at any of
these facilities;
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