SanDisk 2011 Annual Report Download - page 83

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design wins with new technologies such as 24 or 19-nanometer or the use of X3 in certain products, we may be
unable to achieve the cost structure required to support our profit objectives or may be unable to grow or
maintain our OEM market share. There can be no assurance that technology transitions will occur on schedule, at
the yields or costs that we anticipate, or that products based on the new technologies will meet customer
specifications. Any material delay in a development or qualification schedule could delay deliveries and harm
our operating results.
Future alternative non-volatile storage technologies or other disruptive technologies could make NAND
flash memory obsolete or less attractive, and we may not have access to those new technologies on a cost-
effective basis, or at all; or new technologies could reduce the demand for flash memory in a variety of
applications or devices, any of which could harm our operating results and financial condition. We have a three-
pronged strategy towards our investments and efforts in technology scaling and migration: (1) NAND scaling;
(2) BiCS technology; and (3) 3D ReRAM. The pace at which NAND flash technology is transitioning to new
generations is slowing down due to inherent 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. In the first quarter of fiscal year 2011, we made investments in BiCS and other technologies. In
BiCS technology, the memory cells are packed along the vertical axis as opposed to the horizontal axis as in the
current NAND flash technologies. We believe BiCS technology, if successful, could enable further memory cost
reductions beyond the existing NAND roadmap, until 3D ReRAM technology is developed and fully ramped into
high volume production. We also continue to invest in future alternative technologies, particularly our
3D ReRAM technology, which we believe may be a viable alternative to NAND flash technology, when NAND
flash technology can no longer scale at a sufficient rate, or at all. However, even when NAND flash technology
can no longer be further scaled, we expect NAND flash technology and potential alternative technologies to
coexist for an extended period of time. There can be no assurance that we will be successful in developing
3D ReRAM technology, BiCS 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.
Others are developing alternative non-volatile technologies such as MRAM, ReRAM, Memristor, vertical or
stacked NAND, phase-change memory, charge-trap flash and other technologies. Successful broad-based
commercialization of one or more of these technologies could reduce the future revenue and profitability of
NAND flash technology and could supplant the potential alternative 3D ReRAM or BiCS technologies that we
are developing. In addition, we generate license and royalty revenues from NAND technology and we own
intellectual property, or IP, for 3D ReRAM and BiCS technology, and if NAND flash technology is replaced by a
technology other than 3D ReRAM or BiCS, our ability to generate license and royalty revenues would be
reduced. Also, we may not have access to or we may have to pay royalties to access alternative technologies that
we do not develop internally. If our competitors successfully develop new or alternative technologies, and we are
unable to scale our technology on an equivalent basis, our competitors may have an advantage. These new or
alternative technologies may enable products that are smaller, have a higher capacity, lower cost, lower power
consumption or have other advantages. If we cannot compete effectively, our operating results and financial
condition will suffer.
Alternative technologies or storage solutions such as cloud storage, enabled by high bandwidth wireless or
internet-based storage, 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 operating results.
We develop new applications, products, technologies and standards, which may not be widely adopted by
consumers or, if adopted, may reduce demand for our older products; our competitors seek to develop new
standards which could reduce demand for our products. We devote significant resources to the development of
new applications, products and standards and the enhancement of existing products and standards with higher
memory capacities and other enhanced features. Any new applications, products, technologies, standards or
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