SanDisk 2011 Annual Report Download - page 84

enhancements we develop may not be commercially successful. The success of our new products is dependent on
a number of factors, including market acceptance, OEM design wins, our ability to manage risks associated with
new products and production ramp issues. New flash storage solutions, such as embedded flash drives and SSDs,
that are designed for devices such as tablets, eReaders, ultrabooks, notebooks and desktop computers are
emerging rapidly and are expected to grow significantly in the coming years. We cannot guarantee that OEMs
will adopt our solutions, that products that include our solutions will be successful or that these markets will
grow as we anticipate. For certain solutions, such as SSDs, to be widely adopted, the cost of flash memory must
still decline further so that the price point for the end consumer is compelling. In addition, we will need to
develop new SSDs and other embedded flash solutions for mobile computing products and enterprise
applications, and our current or new solutions must meet the specifications required to gain customer
qualification and acceptance.
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 and
Micron have also developed a new specification for a NAND flash interface, called Open NAND Flash Interface,
commonly referred to as ONFI, which would be used primarily in computing devices. Broad acceptance of new
standards and products may reduce demand for our products.
We face competition from numerous manufacturers and marketers of products using flash memory and if we
cannot compete effectively, our operating results and financial condition will suffer. We face competition from
NAND flash memory manufacturers and from companies that buy NAND flash memory and incorporate it into
their end products.
NAND/Embedded Manufacturers. Our primary NAND flash memory manufacturer competitors include
Hynix, Intel, Micron, Samsung and Toshiba. Certain of these competitors are large companies that may have
greater advanced wafer manufacturing capacity, substantially greater financial, technical, marketing and other
resources, well recognized brand names 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 these competitors have substantially greater resources than we
do, have well recognized brand names or have the ability to operate their business on lower margins than we do.
The success of our competitors may harm our future revenues or margins and may result in the loss of our key
customers. Current and future competitors produce, or could produce, alternative flash or other memory
technologies that compete against our NAND flash technology or our alternative technologies, which may reduce
demand or accelerate price declines for NAND flash memory. Furthermore, the future rate of scaling of the
NAND flash technology design that we employ may slow down significantly, which would slow down cost
reductions that are fundamental to the adoption of NAND flash technology in new applications. If our scaling of
NAND flash technology slows down relative to our competitors, our business would be harmed and our
investments in captive fabrication facilities could be impaired. Our cost reduction activities are dependent in part
on the purchase of new specialized manufacturing equipment, and if this equipment is not generally available or
is allocated to our competitors, our ability to reduce costs could be limited.
Retail Manufacturers and Resellers. We also compete with flash memory card manufacturers and resellers.
These companies purchase or have a captive supply of flash memory components and assemble memory cards.
Our primary competitors currently include, among others, Kingston, Lexar, PNY, Samsung, Sony and Transcend.
In the USB flash drive market, we face competition from a large number of competitors, including EMTEC,
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