SanDisk 2009 Annual Report Download - page 72

pre-loaded flash memory cards, may not gain market acceptance, and we may not be successful in penetrating the
new markets that we target. Sony’s recent announcement that it intends to transition its future devices from the
Memory Stick®format to the SD format could negatively impact our market share or margins since there are a
greater number of competitors selling SD products.
New applications may require significant up-front investment with no assurance of long-term commercial
success or profitability. As we introduce new standards or technologies, it can take time for these new standards
or technologies to be adopted, for consumers to accept and transition to these new standards or technologies and
for significant sales to be generated, if at all.
Competitors or other market participants could seek to develop new standards for flash memory products
that, if accepted by device manufacturers or consumers, could reduce demand for our products. For example,
certain handset manufacturers and flash memory chip producers are currently advocating and developing a new
standard, referred to as Universal Flash Storage, or UFS, for flash memory cards used in mobile phones. Intel
Corporation, or Intel, and Micron Technology, Inc., or Micron, have also developed a new specification for a
NAND flash interface, called Open NAND Flash Interface, or ONFI, which would be used primarily in
computing devices. Broad acceptance of new standards, technologies or products may reduce demand for some
of our products that may be based on different standards. If this decreased demand is not offset by increased
demand for new form factors or products that we offer, our results of operations would be harmed.
Alternative storage solutions such as high bandwidth wireless or internet-based storage, including cloud
computing, could reduce the need for physical flash storage within electronic devices. These alternative
technologies could negatively impact the overall market for flash-based products, which could seriously harm
our results of operations.
Consumer devices that use NAND-based flash memory do so in either a removable card or an embedded
format. We offer NAND-based flash memory products in both categories; however, our market share is strongest
for removable flash memory products. If designers and manufacturers of consumer devices, including mobile
phones, increase their usage of embedded flash memory, we may not be able to sustain our market share. In
addition, if NAND-based flash memory is used in an embedded format, we would have less opportunity to
influence the capacity of the NAND-based flash products and we would not have the opportunity for additional
after-market retail sales related to these consumer devices or mobile phones. Any loss of market share or
reduction in the average capacity of our product sales or any loss in our retail after-market opportunity could
harm our operating results and business condition.
In addition, we are investing in future alternative technologies, particularly our 3D semiconductor memory.
We are investing significant resources to develop this technology for multiple read-write applications; however,
there can be no assurance that we will be successful in developing this or other technologies or that we will be
able to achieve the yields, quality or capacities to be cost competitive with existing or other alternative
technologies.
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, substantially greater financial, technical, marketing and other
resources and more diversified businesses than we do, which may allow 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 Semiconductor, Inc., or Hynix, Intel, Micron, Samsung and Toshiba. These current
and future competitors produce or could produce alternative flash or other memory technologies that compete
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