SanDisk 2006 Annual Report Download - page 54

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Description of Our Business
Industry Background. We operate in the digital electronics industry, which encompasses traditional personal
computers, or PCs, consumer electronics, communications and industrial products. Our products use flash memory
to store digital information in devices such as mobile phones, digital still cameras, digital video camcorders, gaming
consoles, portable digital audio players and PCs. These applications require storage that is small in form factor,
portable and removable, highly reliable, high capacity, low in power consumption and capable of withstanding high
levels of shock vibration and temperature fluctuations.
The flash memory market is primarily comprised of NOR and NAND technologies. NOR is traditionally used
for code storage and is characterized by fast read speeds with generally higher costs per megabyte and lower storage
capacities than NAND. NAND flash memory is traditionally used for embedded and removable data storage and is
characterized by fast write speeds, high capacity and lower manufacturing cost than NOR flash memory. We are
focused on NAND-based products.
Our Primary Markets. We currently focus on four primary markets:
•Consumer. We make and sell flash storage cards that address multiple consumer markets. Certain flash
storage cards are used as the film for all major brands of digital cameras. Our cards are also used to store
video in solid-state digital camcorders and to store digital data in many other devices including maps in
global positioning system devices, or GPS, and personal data in personal digital assistants, or PDAs. In
addition, portable game consoles now include advanced features and functionality, including storage of
game results, digital audio, video playback and photo viewing. These features demand high capacity
memory storage cards. We manufacture brightly colored SD and Memory Stick PRO Duo
TM
cards for use in
gaming devices such as the Sony PSP», Nintendo»Wii
TM
and Microsoft xBox». Our Cruzer»CrossFire
TM
line of USB drives are geared toward the PC gaming market. Primary card formats for consumer devices
include CF, SD, Memory Stick»and xD-Picture Card
TM
.
•Computing. We provide multiple flash storage devices and solutions for a variety of computing, industrial
and enterprise markets. USB flash drives allow consumers to store computer files on keychain-sized devices
and then quickly and easily transfer these files between laptops, desktops and other devices. USB flash
drives are fast and easy to use, they have replaced floppy disks and other types of external storage media, and
are evolving into intelligent storage devices. NAND flash memory-based data storage allows industrial
customers and PC manufacturers to offer systems with solid state drives in lieu of traditional magnetic disk-
based drives. In January 2007, we introduced our first 32 gigabyte solid state drive in a 1.8 inch form factor
for the notebook PC market.
•Mobile Phones. We provide embedded, semi-removable and removable storage for mobile phones. We are
a leading supplier of microSD, miniSD, SD and Memory Stick PRO Duo removable storage cards used in
mobile phones. Multimedia features in mobile phones, such as camera functionality, audio/MP3, games,
video or internet access, have been increasing in popularity. These features require additional storage
capacity in the mobile phone and transferability of data to and from other devices.
•Digital Audio and Video Players. Digital audio players allow consumers to download, store and play
music. We sell a broad line of digital audio players with both embedded and removable memory under our
Sansa»brand. We have also launched our first digital video player under the Sansa brand.
Our Sales Channels. Our products are delivered to end-users through more than 200,000 worldwide retail
storefronts and also by bundling data storage cards with host products or by embedding our data storage products in
host devices sold by our OEM customers.
Our sales are made through the following channels:
•Retail. We ship SanDisk brand name products directly to consumer electronics stores, office superstores,
photo retailers, mobile phone stores, mass merchants, catalog and mail order companies, internet and
e-commerce retailers, drug stores, supermarkets and convenience stores. We also sell our products to smaller
or regional retailers through distributors.
5
Annual Report