SanDisk 2013 Annual Report Download - page 123

manufacturing capacity or equipment to NAND flash and vice-versa. Furthermore, some of these
competitors manufacture and sell products that are complementary to flash memory products, and
may be able to leverage their competencies and customer relationships to gain a competitive
advantage. Current and future memory manufacturer competitors could produce alternative flash
or other memory technologies that could compete against our NAND flash technology or our
alternative technologies, which may reduce demand or accelerate price declines for our products.
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 NAND flash technology in new applications. If our scaling of NAND flash technology
slows down relative to our competitors, our business and operating results would be harmed and
our investments in captive fabrication facilities could be impaired.
•Flash Memory Card and USB Drive Manufacturers and Resellers. We compete with manufacturers
and resellers of flash memory card and USB drives, which purchase or have a captive supply of flash
memory components and assemble memory cards. Price fluctuations, the timing of product
availability and resources allocated to marketing programs can harm our branded market share and
reduce our sales and profits. We also sell flash memory in the form of private label cards, wafers or
components to certain OEMs who sell flash products that may ultimately compete with our branded
products in the retail or commercial channels. The sales volumes and pricing to these OEMs can be
highly variable and these OEMs may be more inclined to switch to an alternative supplier based on
short-term price fluctuations or the timing of product availability, which could harm our sales and
profits.
•Client Storage Solution Manufacturers. In the market for client computing SSDs, we face
competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from
third-party client SSD solution providers such as Kingston, and from hard drive manufacturers such
as Seagate and WDC. In this market, we compete with these industry players largely on the basis of
performance capabilities, price and product reliability. Many of the large NAND flash producers
have long established relationships with computer manufacturers, or are computer manufacturers
themselves, which gives them a competitive advantage in qualifying and integrating their client
storage solutions in this market as well as the ability to leverage competencies that have been
developed through these relationships in the past. Hard drive manufacturers may also have a
competitive advantage in their ability to leverage their existing relationships and brand recognition
with customers, as well as their ability to leverage existing technology in creating hybrid drive
products. Our failure to compete effectively against these industry players could harm our business
and results of operations.
•Enterprise Storage Solution Manufacturers. In the market for enterprise data center SSDs, we face
competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from
enterprise SSD solution providers such as Fusion-io and LSI, and from hard drive manufacturers
such as Seagate and WDC. Many of these competitors have significantly more experience with the
software components that are required for successful enterprise SSD solutions, and our failure to
continue to develop software expertise could harm our ability to effectively compete in this market.
Many established and start-up companies are contributing to the development of the enterprise
data center SSD market. Our competitors in this market may be able to leverage existing resources
and competencies or acquire or develop other strategic relationships with established or start-up
companies before we are able to, which could give them a competitive advantage, and if we are
unable to independently develop comparable capabilities, we may be unable to effectively compete.
Our ability to generate revenue or adequate margins for certain products may be limited by our ability to
secure, at competitive prices or at all, components or materials required to produce those products. Our
products require certain non-flash memory components and materials for which we do not have captive
supply. Our ability to generate revenue or adequate margins could be impacted by an inability to source
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Annual Report