SanDisk 2007 Annual Report Download - page 53

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Technology. Since our inception, we have focused our research, development and standardization efforts on
developing highly reliable, high-performance, cost-effective flash memory storage products in small form factors to
address a variety of emerging markets. We have been actively involved in all aspects of this development, including
flash memory process development, module integration, chip design, controller development and system-level
integration, to help ensure the creation of fully-integrated, broadly interoperable products that are compatible with
both existing and newly developed system platforms. We intend to start limited production on 3-bits/cell
technology, or X3, in fiscal year 2008 and we are also investing in the development of 4-bits/cell, or X4, storage
technologies. In addition, we are investing in the development of three-dimensional, or 3D, memory architecture
with multiple read-write capabilities. We have also initiated, defined and developed standards to meet new market
needs and to promote wide acceptance of these standards through interoperability and ease-of-use. We believe our
core technical competencies are in:
• high-density flash memory process, module integration, device design and reliability;
• securing data on a flash memory device;
• controller design;
• system-level integration;
• compact packaging; and
• low-cost system testing.
To achieve compatibility with various electronic platforms regardless of the host processors or operating
systems used, we developed new capabilities in flash memory chip design and created intelligent controllers. We
also developed an architecture that can leverage advances in process technology designed for scaleable, high-
yielding, cost-effective and highly reliable manufacturing processes. We design our products to be compatible with
industry-standard interfaces used in standard operating systems for personal computers, mobile phones, gaming
devices, digital media players and other consumer and industrial products.
Our patented intelligent controller technology, with its advanced defect management system, permits our flash
storage card products to achieve a high level of reliability and longevity. Each one of our flash devices contains
millions of flash memory cells. For example, our 4 gigabyte cards may contain as many as 35 billion storage cells. A
failure in any one of these cells can result in loss of data such as picture files, and this can occur several years into the
life of a flash storage card. The controller chip inside our cards is designed to detect such defects and recover data
under most standard conditions.
Patents and Licenses. We rely on a combination of patents, trademarks, copyright and trade secret laws,
confidentiality procedures and licensing arrangements to protect our intellectual property rights. See Item 1A,
“Risk Factors.”
As of the end of fiscal year 2007, we owned, or had rights to, more than 860 United States patents and more
than 550 foreign patents. We had more than 1,440 patent applications pending in the United States, and had foreign
counterparts pending on many of the applications in multiple jurisdictions. We continually seek additional
international and United States patents on our technology.
We have various patent licenses with several companies including, among others, Hynix Semiconductor, Inc.,
or Hynix, Intel Corporation, or Intel, Lexar Media, Inc., or Lexar, a subsidiary of Micron Technology, Inc., or
Micron, Matsushita, Renesas Technology Corporation, or Renesas, Samsung, Sharp Electronics KK, or Sharp, Sony
and Toshiba. From time-to-time, we have also entered into discussions with other companies regarding potential
license agreements for our patents.
Trade secrets and other confidential information are also important to our business. We protect our trade
secrets through confidentiality and invention assignment agreements.
Supply Chain. Our supply chain is an important competitive advantage.
•Silicon Sourcing. All of our flash memory card products require silicon chips for the memory and
controller components. The majority of our memory is supplied from the flash ventures with Toshiba and our
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