Crucial 2013 Annual Report Download - page 41

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40
NSG sales of NAND Flash products to trade customers increased 50% for 2012 as compared to 2011 primarily due to an
increase in gigabits sold partially offset by declines in average selling prices. NSG operating income declined from 2011 to
2012 primarily due to decreases in average selling prices mitigated by cost reductions. Cost reductions resulted primarily from
improvements in product and process technologies. NSG operating income for 2011 benefited from a $57 million gain from an
allocated portion of the Samsung patent cross-license agreement.
Wireless Solutions Group ("WSG")
For the year ended 2013 2012 2011
Net sales $ 1,221 $ 1,184 $ 1,959
Operating income (loss) (263)(368) 19
In 2013, WSG sales were comprised primarily of DRAM, NAND Flash and NOR Flash in decreasing order of revenue.
WSG sales increased 3% for 2013 as compared to 2012 primarily due to higher sales of mobile DRAM products as a result of
the acquisition of Elpida. We expect that WSG sales of mobile DRAM products will increase significantly in 2014 primarily
due to our acquisition of Elpida. WSG results of operations for 2013 included sales of $192 million and operating income of
$21 million from the acquired Elpida operations. Increases in WSG sales for 2013 from mobile DRAM were partially offset by
declines in sales of wireless NOR Flash products as a result of weakness in market demand and our customer group in
particular, as well as a continued transition by customers to NAND Flash. WSG sales in 2013 were also adversely impacted by
lower sales of NAND Flash products sold in multi-chip packages. The improvement in WSG operating margin for 2013 was
primarily due to reductions in manufacturing, SG&A and R&D costs.
In 2012, WSG sales were comprised of NOR Flash, NAND Flash and DRAM in decreasing order of revenue. The 40%
decrease in WSG sales for 2012 as compared to 2011 was primarily due to declines in sales of wireless NOR Flash products as
a result of weakness in market demand and our customer group in particular, as well as a continued transition by customers to
NAND Flash. WSG sales in 2012 were also adversely impacted by lower sales of NAND Flash products sold in multi-chip
packages. The decline in WSG operating margin for 2012 was primarily due to the reductions in average selling prices and in
NOR Flash sales volumes. In addition, WSG operating margin for 2011 benefited from a $95 million gain from an allocated
portion of the Samsung patent cross-license agreement.
Embedded Solutions Group ("ESG")
For the year ended 2013 2012 2011
Net sales $ 1,194 $ 1,054 $ 1,002
Operating income 271 158 236
In 2013, ESG sales were comprised of NOR Flash, DRAM and NAND Flash in decreasing order of revenue. ESG sales
increased 13% for 2013 as compared to 2012 primarily due to increased sales volume of NAND Flash, DRAM and NOR Flash
products as ESG continued to expand its customer base, partially offset by declines in average selling prices. ESG operating
income for 2013 improved from 2012 primarily due to higher gross margins as manufacturing cost reductions outpaced
declines in average selling prices.
In 2012, ESG sales were comprised of NOR Flash, DRAM and NAND Flash in decreasing order of revenue. The 5%
increase in ESG sales for 2012 as compared to 2011 was primarily due to increased sales volume of DRAM, NAND Flash and
NOR Flash products as ESG continued to expand its customer base, partially offset by declines in average selling prices. ESG
operating income for 2012 declined as compared to 2011 due to decreases in average selling prices and higher costs associated
with underutilized capacity in our NOR Flash facilities. In addition, ESG operating margin for 2011 benefited from a $33
million gain from an allocated portion of the Samsung patent cross-license agreement.