SanDisk 2012 Annual Report Download - page 113

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• controller design;
• firmware and software development;
• system-level integration;
• multi-die stacking and packaging technology; and
• low-cost system testing.
To achieve compatibility with various electronic platforms regardless of the host processors or operating
systems used, we continue to develop new capabilities in flash memory, advanced controllers and firmware
design. We also continue to evolve our architecture to leverage advances in manufacturing process technology.
Our products are designed to be compatible with industry-standard interfaces used in operating systems for PCs,
mobile phones, tablets, notebooks, digital cameras, gaming devices, GPS devices, servers and other computing
and electronics devices.
Our proprietary controller and sophisticated firmware technologies permit our flash storage solutions to
achieve a high level of reliability and longevity. Each one of our flash devices contains millions of flash memory
cells. A failure in any one of these cells can result in loss of data, such as picture files, and this can occur several
years into the life of a flash storage product. Our system technologies, including our controller chips and
firmware, are designed to detect such defects and recover data under most conditions.
Patents and Licenses
We rely on a combination of patents, trademarks, copyright and trade secret laws, confidentiality procedures
and licensing arrangements to protect our intellectual property, or IP, rights. See Item 1A, “Risk Factors.”
As of the end of fiscal year 2012, we owned, or had rights to, more than 2,300 United States, or U.S.,
patents and more than 2,200 foreign patents. We had more than 1,100 patent applications pending in the U.S.,
and had foreign counterparts pending on many of the applications in multiple jurisdictions. We continually seek
additional U.S. and international patents on our technology.
We have patent license agreements with many companies, including Hynix Semiconductor, Inc., or Hynix,
Intel Corporation, or Intel, Panasonic Corporation, Renesas Technology Corporation, Samsung, Sony
Corporation, or Sony, and Toshiba. In the three years ended December 30, 2012, we have generated $1.11 billion
in revenue from license and royalty agreements.
Trade secrets and other confidential information are also important to our business. We protect our trade
secrets through confidentiality and invention assignment agreements.
Supply Chain
Our supply chain is an important competitive advantage and is comprised of the following:
•Silicon Sourcing. All of our flash memory system products require silicon chips for the memory and
controller components. The vast majority of our memory is supplied by our ventures with Toshiba.
This represents captive memory supply and we are obligated to take our share of the output from these
ventures or pay the fixed costs associated with that capacity. See “Ventures with Toshiba.” We also
purchase non-captive NAND memory supply from other silicon suppliers to supplement our captive
memory supply. We generally design our controllers in-house and have them manufactured at third-
party foundries.
•Assembly and Testing. We sort and test our memory wafers at captive and third-party facilities in
China, Japan and Taiwan. Our products are assembled and tested at both our in-house facility in
Shanghai, China, and through our network of contract manufacturers, which are primarily in China and
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