SanDisk 2009 Annual Report Download - page 64

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We have various patent licenses with several companies including, among others, Hynix, Intel Corporation,
or Intel, Lexar Media, Inc., or Lexar, a subsidiary of Micron Technology, Inc., or Micron, Panasonic, Renesas
Technology Corporation, or Renesas, Samsung, Sharp Electronics KK, or Sharp, Sony and Toshiba. From
time-to-time, we enter into discussions with other companies regarding potential license agreements for our
patents. In the three years ended January 3, 2010, we have generated $1.37 billion in revenue from license
agreements.
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 and is comprised of the following:
•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.
This represents captive memory supply and we are obligated to take our share of the output from the
flash ventures with Toshiba or pay the fixed costs associated with that capacity. See “Ventures with
Toshiba.” From time-to-time, we also purchase non-captive NAND memory supply primarily from
Toshiba, Samsung and Hynix. We source our 3D one-time programmable, memory on a foundry basis
at Taiwan Semiconductor Manufacturing Company, Ltd., or TSMC. We are guaranteed a certain
amount of the output from Toshiba, Samsung and Hynix if we provide orders within a required lead
time; however we are not obligated to purchase the guaranteed supply unless we provide an order for
future purchases. Our controller wafers are currently supplied by Semiconductor Manufacturing
International Corporation, or SMIC, TSMC, Tower Semiconductor Ltd., or Tower, and United
Microelectronics Corporation, or UMC.
•Assembly and Testing. We sort and test our wafers at Toshiba in Yokkaichi, Japan, and Ardentec
Corporation in Taiwan. Our flash memory products are assembled in both our in-house assembly and
test facility in Shanghai, China, and through our network of contract manufacturers, including STATS
ChipPAC Ltd., or STATS ChipPAC, in China, and Siliconware Precision Industries Co., Ltd., or SPIL,
in Taiwan. Our packaged memory final test, card assembly and card test is performed at our in-house
facility and at subcontractors such as SPIL and United Test and Assembly Center Ltd., in Taiwan, and
Beautiful Enterprise Co., Ltd., Flextronics International Ltd., or Flextronics, Global Brands
Manufacture Ltd. and STATS ChipPAC, in China. We believe the use of both our in-house assembly
and test facility as well as subcontractors reduces the cost of our operations, provides flexibility and
gives us access to increased production capacity.
Ventures with Toshiba
We and Toshiba have successfully partnered in several flash memory manufacturing business ventures,
which provide us leading edge, cost competitive NAND wafers for our end products. From May 2000 to May
2008, FlashVision Ltd., or FlashVision, operated and produced 200-millimeter NAND flash memory wafers. In
September 2004, we and Toshiba formed Flash Partners Ltd., or Flash Partners, which produces 300-millimeter
NAND flash wafers in Toshiba’s Fab 3. In July 2006, we and Toshiba formed Flash Alliance Ltd., or Flash
Alliance, a 300-millimeter wafer fabrication facility which began initial production in the third quarter of fiscal
year 2007 in Toshiba’s Fab 4.
With the Flash Partners and Flash Alliance ventures, hereinafter collectively referred to as Flash Ventures,
located at Toshiba’s Yokkaichi Japan operations, we and Toshiba collaborate in the development and
manufacture of NAND-based flash memory wafers using the semiconductor manufacturing equipment owned or
leased by each venture entity. We hold a 49.9% ownership position in each of the current Toshiba and SanDisk
venture entities. Each venture entity purchases wafers from Toshiba at cost and then resells those wafers to us
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