SanDisk 2011 Annual Report Download - page 154

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Product revenues from customers are based on the geographic location where the product is delivered.
License and royalty revenue is attributed to countries based upon the headquarters of the licensee.
Long-lived assets by geographic area as of the end of fiscal years 2011 and 2010 are as follows (in
thousands):
January 1,
2012
January 2,
2011
United States .................................................................. $ 100,414 $ 111,733
Japan ........................................................................ 673,898 518,912
China ........................................................................ 187,773 112,133
Other foreign countries .......................................................... 28,971 27,131
Total .................................................................... $ 991,056 $ 769,909
Long-lived assets are attributed to the geographic location in which they are located. The Company includes
in long-lived assets property and equipment, long-term equity investments in Flash Ventures and equity
investments, and attributes those investments to the location of the investee’s primary operations.
Customer and Supplier Concentrations. A limited number of customers or licensees have accounted for a
substantial portion of the Company’s revenues. Revenues from the Company’s top 10 customers or licensees
accounted for approximately 48%, 44% and 42% of the Company’s revenues for fiscal years 2011, 2010 and
2009, respectively. In fiscal year 2011, Samsung Electronics Co., Ltd. accounted for 10% of the Company’s total
revenues through a combination of product, license and royalty revenues. All customers were individually less
than 10% of the Company’s total revenues in fiscal years 2010 and 2009.
All of the Company’s flash memory system products require silicon wafers for the memory and controller
components. The Company’s memory wafers or components are currently supplied almost entirely from Flash
Ventures and the controller wafers are primarily manufactured by third-party subcontractors. The failure of any of
these sources to deliver silicon wafers could have a material adverse effect on the Company’s business, financial
condition and results of operations. Moreover, the employees of Toshiba Corporation (“Toshiba”) that produce
Flash Ventures’ products are covered by collective bargaining agreements and any strike or other job action by
those employees could interrupt the Company’s wafer supply from Toshiba’s Yokkaichi, Japan operations.
In addition, key components are purchased from single source vendors for which alternative sources are
currently not available. Shortages could occur in these essential materials due to an interruption of supply or
increased demand in the industry. If the Company were unable to procure certain of such materials, it would be
required to reduce its manufacturing operations, which could have a material adverse effect upon its results of
operations. The Company also relies on third-party subcontractors to assemble and test a portion of its products.
The Company has no long-term contracts with some of these subcontractors and cannot directly control product
delivery schedules or manufacturing processes. This could lead to product shortages or quality assurance
problems that could increase the manufacturing costs of its products and have material adverse effects on the
Company’s operating results.
Concentration of Credit Risk. The Company’s concentration of credit risk consists principally of cash, cash
equivalents, short and long-term marketable securities and trade receivables. The Company’s investment policy
restricts investments to high-credit quality investments and limits the amounts invested with any one issuer. The
Company sells to OEMs, retailers and distributors in the U.S., EMEA and Asia-Pacific, performs ongoing credit
evaluations of its customers’ financial condition, and generally requires no collateral.
Off-Balance Sheet Risk. The Company has off-balance sheet financial obligations. See Note 12,
“Commitments, Contingencies and Guarantees.”
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