SanDisk 2007 Annual Report Download - page 61

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cards. Our primary competitors currently include, among others, A-Data, Buffalo, CN Memory, Dane-Elec,
Elecom, FUJI, Hagiwara, Hama, Imation, I/O Data, Kingmax, Kingston, Kodak, Lexar, Memorex, Netac,
Panasonic, PNY, RITEK, Samsung, Sony, Toshiba, Tradebrands, Transcend and Verbatim.
Some of our competitors have substantially greater resources than we do, have well recognized brand names or
have the ability to operate their business on lower margins than we do. The success of our competitors may
adversely affect our future revenues or margins and may result in the loss of our key customers. For example,
Toshiba and other manufacturers have increased their market share of flash memory cards for mobile phones,
including the microSD card, which have been a significant driver of our growth. In the digital audio market, we face
competition from well established companies such as Apple, ARCHOS, Creative, Microsoft, Samsung and Sony. In
the USB flash drive market, we face competition from a large number of competitors, including Imation, Kingston,
Lexar, Memorex, PNY, Sony, Trek 2000 International Ltd. and Verbatim. In the market for solid state drives, we
may face competition from large NAND flash producers such as Samsung and Intel, as well as from hard drive
manufacturers, such as Seagate Technology, Hitachi, Ltd., and others, who have established relationships with
computer manufacturers.
Furthermore, many companies are pursuing new or alternative technologies or alternative forms of NAND,
such as phase-change technology, charge-trap flash and millipedes/probes, which may compete with flash memory.
For example, our competitors are developing new technologies such as charge-trap flash and three-dimensional
technology which if successful and if we are unable to scale our technology on an equivalent basis, could provide an
advantage to these competitors.
These new or alternative technologies may enable products that are smaller size, higher capacity, lower cost,
lower power consumption or have other advantages. If we cannot compete effectively, our results of operations and
financial condition will suffer.
We believe that our ability to compete successfully depends on a number of factors, including:
• price, quality and on-time delivery to our customers;
• product performance, availability and differentiation;
• success in developing new applications and new market segments;
• sufficient availability of supply, the absence of which could lead to loss of market share;
• efficiency of production;
• timing of new product announcements or introductions by us, our customers and our competitors;
• the ability of our competitors to incorporate standards or develop formats which we do not offer;
• the number and nature of our competitors in a given market;
• successful protection of intellectual property rights; and
• general market and economic conditions.
While we believe we are well-positioned to compete in the marketplace based on the foregoing factors, there
can be no assurance that we will be able to compete successfully in the future.
The semiconductor industry is subject to significant downturns that have harmed our business, financial
condition and results of operations in the past and may do so in the future. The semiconductor industry is highly
cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price
declines, evolving standards, short product life cycles and wide fluctuations in product supply and demand. The
industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product
cycles of both semiconductor companies’ and their customers’ products and declines in general economic
conditions. These downturns have been characterized by reduced product demand, production overcapacity, high
inventory levels and accelerated declines in selling prices. For example, the flash memory industry experienced
excess supply and a rapid decline in prices in the first half of fiscal year 2007 and industry analysts expect this to
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