SanDisk 2013 Annual Report Download - page 112

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 revenue;
• weakness in demand in one or more of our product categories, such as mobile embedded or SSDs,
or adverse changes in our product or customer mix;
• inability to reduce product costs to keep pace with reductions in average selling prices, resulting in
lower or negative product gross margin;
• potential delays in product development or lack of customer acceptance and qualification of our
solutions, including on new technology nodes, particularly OEM products such as our embedded
flash storage and SSD solutions;
• inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable
yields, new technologies such as 1Y and 1Z-nanometer process technologies, X3 NAND memory
architecture, 3D NAND technology, 3D ReRAM, or other advanced technologies, or the failure of
these new technologies to effectively compete with those of our competitors;
• fluctuations in customer concentration and the loss of, or reduction in orders from, one or more of
our major customers;
• inability to penetrate new or growing markets for flash memory, including the SSD markets, failure
of existing or new markets for flash memory to grow or develop, or failure to maintain or improve
our position in any of these markets;
• excess or mismatched captive memory output or capacity, resulting in lower average selling prices,
financial charges and impairments, lower gross margin or other consequences, or insufficient or
mismatched captive memory output or capacity, resulting in lost revenue and growth opportunities;
• 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;
• fluctuations or declines in our license and royalty revenue due to license agreement renewals on less
favorable terms, non-renewals, declines in sales of the products or use of technology underlying the
license and royalty revenue by our licensees, or if licensees or we fail to perform on contractual
obligations;
• lengthy, costly and unpredictable design, qualification and sales processes for OEM customers,
particularly with embedded and SSD products;
• increased costs and lower gross margin due to potentially higher warranty claims from our more
complex solutions;
• 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;
• the rate of growth of our captive flash memory supply fails to keep pace with that of our
competitors for an extended period of time, resulting in lost sales opportunities and reduced market
share;
• insufficient non-flash memory materials or capacity from our suppliers and contract manufacturers
to meet demand or increases in the cost of non-flash memory materials or capacity;
• 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;
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