SanDisk 2010 Annual Report Download - page 137

This is a TAB type table. Insert
conts here. Annual Report
quarter of fiscal year 2007 in Toshiba’s Fab 4 facility, or Fab 4. In July 2010, we and Toshiba entered into an
agreement to create Flash Forward Ltd., or Flash Forward, to operate a 300-millimeter wafer fabrication facility
in Toshiba’s Fab 5 facility, or Fab 5, with initial NAND production scheduled for the third quarter of our fiscal
year 2011.
With the Flash Partners, Flash Alliance and Flash Forward 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 or will 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 and Toshiba at cost plus a mark-up. We are committed to purchase half of each
venture’s NAND wafer supply or pay for half of the venture’s fixed costs regardless of the output we choose to
purchase. We are also committed to fund 49.9% of each venture’s costs to the extent that the venture’s revenues
from wafer sales to us and Toshiba are insufficient to cover these costs. The investments in each venture entity
are shared equally between us and Toshiba. In addition, we have the right to purchase a certain amount of wafers
from Toshiba on a foundry basis.
Competition
We face competition from numerous flash memory semiconductor manufacturers and manufacturers and
resellers of flash memory cards, USB drives and digital audio players. We also face competition from
manufacturers of hard disk drives and from new technologies.
We believe that our ability to compete successfully depends on a number of factors, including:
• price, quality and on-time delivery of products;
• product performance, availability and differentiation;
• success in developing new applications and new market segments;
• sufficient availability of cost-efficient supply;
• efficiency of production;
• ownership and monetization of intellectual property rights;
• timing of new product announcements or introductions;
• the development of industry standards and formats;
• the number and nature of competitors in a given market; and
• general market and economic conditions.
We believe our key competitive advantages are:
• our tradition of technological innovation and standards creation which enables us to grow the overall
market for flash memory;
• our intellectual property ownership, in particular our patents, and MLC manufacturing know-how,
provides us with license and royalty revenue as well as certain cost advantages;
• Flash Ventures, which provides us with leading edge, low-cost flash memory;
• our flexible supply chain;
• that we market and sell a broader range of card formats than any of our competitors, which gives us an
advantage in obtaining strong retail and OEM distribution;
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