SanDisk 2011 Annual Report Download - page 69

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We have invested with Toshiba in high volume, state-of-the-art NAND flash manufacturing facilities in
Japan. Our commitment takes the form of capital investments and loans to Flash Partners Ltd., Flash Alliance
Ltd. and Flash Forward Ltd., our ventures with Toshiba (which we refer to collectively as “Flash Ventures”),
credit enhancements of Flash Ventures’ leases of semiconductor manufacturing equipment, take-or-pay
commitments to purchase up to 50% of the output of the Flash Ventures at manufacturing cost plus a mark-up
and sharing in the cost of our joint research and development activities related to flash memory with Toshiba. We
refer to the flash memory which we purchase from the Flash Ventures as captive memory. Our strategy is to have
a mix of captive and non-captive supply and we have, from time-to-time, supplemented our sourcing of captive
flash memory with purchases of non-captive memory, primarily from Toshiba, Samsung and Hynix.
Our industry is characterized by rapid technology transitions. Since our inception, we have been able to
scale NAND flash technology through fifteen generations over approximately twenty-two years. However, the
pace at which NAND flash technology is transitioning to new generations is expected to slow due to inherent
physical technology limitations. We currently expect to be able to continue to scale our NAND flash technology
through a few additional generations, but beyond that, there is no certainty that further technology scaling can be
achieved cost effectively with the current NAND flash technology and architecture. We also continue to invest in
future alternative technologies, including Bit-cost scaleable 3-Dimensional NAND, or BiCS, and our
3-Dimensional resistive RAM, or 3D ReRAM, both of which we believe may be viable alternatives to our current
NAND flash technology when it can no longer scale at a sufficient rate, or at all. However, even when the current
NAND flash technology can no longer be further scaled, we expect it to coexist with potential alternative
technologies for an extended period of time.
In addition to flash memory, our products include controllers that interface between the flash memory and
digital consumer devices. We design our own memory controllers and have them manufactured at third-party
wafer foundries. Our finished flash memory products, which include the NAND flash memory, controller and
outer casing, are assembled at our in-house assembly and test facility in Shanghai, China, and through our
network of contract manufacturers.
We sell our products globally to retail and OEM customers. We continue to expand our retail customer base
to new geographic regions, as well as to outlets such as mobile storefronts, supermarkets and drug stores. We
also sell directly and through distributors to OEM customers. These OEM customers either bundle or embed our
memory solutions with products such as mobile phones, tablets, ultrabooks, notebooks, digital cameras, gaming
devices, GPS devices, servers and other computing devices, or resell our memory solutions under their brand into
retail channels. This strategy allows us to leverage the market position, geographic footprint and brand strength
of our customers to achieve broad market penetration for our products.
Our Products
Our products are sold in a wide variety of form factors and include the following:
•Removable Cards. Our removable data storage solutions are available in a variety of consumer form
factors. For example, our ultra-small microSD removable cards, available in capacities up to
64 gigabytes, are designed for use in mobile phones. Our CF removable cards, available in capacities
up to 128 gigabytes, with up to 100 megabyte per second write-speeds, are well-suited for a range of
consumer applications, including digital cameras. Our professional products include the SanDisk
Ultra®, SanDisk Extreme®and SanDisk Extreme®PRO™ product lines, which are designed for
additional performance and reliability.
•Embedded Products. Our embedded products include our iNAND™ embedded flash product line, with
capacities up to 64 gigabytes, which is designed to respond to the increasing demand for embedded
storage for mobile phones, tablets, eReaders and other portable devices.
•USB Drives. Our Cruzer®line of USB flash drives are used in the computing and consumer markets,
are available in capacities up to 64 gigabytes, are highly-reliable and are designed for high-
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