SanDisk 2013 Annual Report Download - page 118

Future alternative non-volatile storage technologies or other disruptive technologies could make NAND
flash memory or the alternative technologies that we are developing obsolete or less attractive, and we may not
have access to those new technologies on a cost-effective basis, or at all, or new technologies could reduce the
demand for flash memory in a variety of applications or devices, any of which could harm our operating results
and financial condition. Due to inherent technology limitations, the bit growth and cost reduction from
2D NAND flash technology transitions is slowing down. We currently expect to be able to continue to scale
our current 2D NAND flash memory architecture through at least two more technology nodes
(1Y-nanometer and 1Z-nanometer), but beyond that there is no certainty that further technology scaling
can be achieved cost effectively with the 2D NAND flash memory architecture. In the first quarter of fiscal
year 2011, we began investing in our 3D NAND flash technology, which we have referred to as BiCS, and
other alternative technologies. In 3D NAND technology, the memory cells are packed along the vertical
axis as opposed to the horizontal axis as in the current 2D NAND flash technologies. As we progress with
our 3D NAND development, we are evaluating and modifying certain aspects of our technology
architecture to optimize for manufacturability, scalability, cost and product specifications, targeting a
broader range of applications. We continue to invest in other alternative technologies, primarily our
3D ReRAM technology. We believe that both 3D NAND and 3D ReRAM technologies may be viable
alternatives to 2D NAND flash memory, when 2D NAND flash memory can no longer cost-effectively
scale at a sufficient rate, or at all. However, even when 2D NAND flash memory can no longer be further
scaled, we expect 2D NAND flash technology and potential alternative technologies to coexist for an
extended period of time. The success of our overall technology strategy is also dependent in part upon the
development by third-party suppliers of advanced semiconductor materials and process technologies, such
as extreme ultraviolet, or EUV. Our technology development of NAND, 3D NAND and 3D ReRAM is
done in conjunction with Toshiba, and the success of our development could be influenced by whether we
are able to agree with Toshiba on a technology path or the timing and amount of investment. There can be
no assurance that we will be successful in developing 3D NAND, 3D ReRAM or other technologies in a
timely manner or at all, or that we will be able to achieve the yields, quality or capacities to be cost
competitive with existing or other alternative technologies. Furthermore, we cannot guarantee that
3D NAND, 3D ReRAM or other technologies we develop will be sufficient alternatives for 2D NAND
flash memory, will match or exceed all of the performance characteristics of 2D NAND flash technology,
will be developed at a rate that matches market needs, will result in cost reductions that will enable us to
be competitive, or will be well-suited, in a timely manner or at all, for all of the applications in the end
markets that 2D NAND flash memory currently addresses or may address in the future. Additionally,
3D NAND, 3D ReRAM or other technologies may require different capital equipment or manufacturing
processes than existing 2D NAND which could impact the cost reduction benefits obtainable through these
technologies.
Many companies, including some of our competitors, have developed or are attempting to develop
alternative non-volatile technologies such as magnetoresistive RAM, or MRAM, ReRAM, Memristor,
vertical or stacked NAND, phase-change and charge-trap flash technologies and other technologies.
Samsung has announced the launch of its 3D NAND flash technology, known as 3D VNAND, with volume
production beginning in 2014, and other companies have indicated they are working on 3D NAND
technologies. At this time, these technologies are still emerging and it is unclear how these new
technologies will compare to our 3D NAND technology and what implications 3D NAND approaches may
have for our industry or our business in terms of cost leadership, technology leadership, supply increases
and product specifications. For example, the specifications of competitors’ 3D NAND may make it more
competitive in certain products than the 2D NAND currently produced by us. Successful broad-based
commercialization of one or more of these technologies could reduce the competitiveness and future
revenue and profitability of our current and future generations of 2D NAND flash technology, and it could
reduce the competitiveness and future revenue and profitability of the potential alternative 3D NAND or
3D ReRAM technologies that we are developing or even supplant them in their entirety. In addition, we
generate license and royalty revenue from NAND flash technology, and if NAND flash technology is
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