SanDisk 2008 Annual Report Download - page 22

We face competition from numerous manufacturers and marketers of products using flash memory, as well
as from manufacturers of new and alternative technologies, and if we cannot compete effectively, our results of
operations and financial condition will suffer. Our competitors include many large companies that may have
greater advanced wafer manufacturing capacity and substantially greater financial, technical, marketing and other
resources than we do, which allows them to produce flash memory chips in high volumes at low costs and to sell
these flash memory chips themselves or to our flash card competitors at a low cost. Some of our competitors may
sell their flash memory chips at or below their true manufacturing costs to gain market share and to cover their
fixed costs. Such practices occurred in the DRAM industry during periods of excess supply and resulted in
substantial losses in the DRAM industry. Our primary semiconductor competitors include Hynix, IMFT, Micron,
Samsung and Toshiba. We, along with Hynix, IMFT, Samsung and Toshiba, are increasing NAND output and
are expected to continue to produce significant NAND output in the future. In addition, current and future
competitors produce or could produce alternative flash or other memory technologies that compete against our
NAND-based flash memory technology or our alternative technologies, which may reduce demand or accelerate
price declines for NAND. Furthermore, the future rate of scaling of the NAND-based flash technology design
that we employ may slow down significantly, which would slow down cost reductions that are fundamental to
the adoption of flash memory technology in new applications. If the scaling of NAND-based flash technology
slows down or alternative technologies prove to be more economical, our business would be harmed, and our
investments in captive fabrication facilities could be impaired.
We also compete with flash memory card manufacturers and resellers. These companies purchase or have a
captive supply of flash memory components and assemble memory cards. Our primary competitors currently
include, among others, A-DATA, Buffalo, CnMemory, Dane-Elec, Elecom, FUJI, Gemalto, Hagiwara, Hama,
Imation, I-O Data, KingMax, Kingston, Kodak, Lexar, Memorex, Micron, Netac, Panasonic, PNY, RITEK,
Samsung, Sony, STMicroelectronics, 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, Coby, Creative, Microsoft, Royal
Philips Electronics, Samsung and Sony. In the USB flash drive market, we face competition from a large number
of competitors, including Hynix, Imation, Kingston, Lexar, Memorex, PNY, Sony and Verbatim. In the market
for SSDs, we face competition from large NAND flash producers such as Intel, Samsung and Toshiba, as well as
from hard drive manufacturers, such as Seagate, Samsung, Western Digital and others, who have established
relationships with computer manufacturers. We also face competition from third-party solid-state drive solutions
providers such as Kingston, STEC Inc., and Transcend.
Furthermore, many companies are pursuing new or alternative technologies or alternative forms of NAND,
such as phase-change and charge-trap flash technologies which may compete with NAND-based flash memory.
New or alternative technologies, if successfully developed by our competitors, and if we are unable to scale our
technology on an equivalent basis, could provide an advantage to these competitors.
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