SanDisk 2012 Annual Report Download - page 125

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claims. Furthermore, certain of our retailers and distributors are experiencing financial difficulty, and continued
negative business or economic conditions could exacerbate liquidity issues for them. Negative changes in the
credit-worthiness or the ability to access credit, or the bankruptcy or shutdown of any of our significant retail or
distribution partners would harm our revenue and our ability to collect outstanding receivable balances. We also
provide inventory on a consigned basis to certain of our retailers, and a bankruptcy or shutdown of these
customers could preclude us from taking possession of our consigned inventory, which could result in inventory
charges.
In transitioning to new technologies and products, we may not achieve OEM design wins, our OEM
customers may delay transition to new technologies, our competitors may transition more quickly than we do, or
we may experience product delays, cost overruns or performance issues that could harm our business. The
transition to new generations of products, such as products containing 19-nanometer, 1Y-nanometer or
subsequent process technologies and/or X3 NAND memory architecture, is highly complex and requires new
controllers, new test procedures and modifications to numerous aspects of our manufacturing processes, resulting
in the need for extensive qualification of the new products by our OEM customers and us. If we fail to achieve
OEM design wins with new technologies such as 19-nanometer, 1Y-nanometer or the use of X3 in certain
products, or if our OEM customers choose to transition to these new technologies more slowly than our roadmap
plans, 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. Furthermore, 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. If our competitors transition to these new technologies more quickly
than we are able to, our ability to compete effectively would be harmed.
We develop new applications, technologies and standards, which may not be widely adopted by consumers
or enterprises, or, if adopted, may reduce demand for our older products. We devote significant resources to the
development of new applications, products and standards. New applications may require significant upfront
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. Failure of
consumers or enterprises to adopt our new applications, standards or technologies could harm our results of
operations as we fail to reap the benefits of our investments. 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. If new standards are broadly accepted and we do not adopt these new
standards in our products, our revenues and results of operations may be harmed.
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. We face different competitive pressures in different markets, and we compete to varying
degrees on the basis of, among other things, price, quality and timely delivery of products, product performance,
availability and differentiation, and the development of industry standards and formats. The success of our
competitors may harm our future revenues or margins and may result in the loss of our key customers.
•NAND Manufacturers. We compete with NAND flash memory manufacturers, including Hynix, Intel,
Micron, Samsung and Toshiba. These competitors are large companies that may have greater and more
advanced wafer manufacturing capacity, substantially greater financial, technical, marketing and other
resources, better recognized brand names and more diversified and lower cost 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 competitors at a low cost. In addition, many of our
competitors have more diversified semiconductor manufacturing capabilities and can internally
produce integrated solutions or hybrid products that may include a combination of NAND flash,
DRAM, custom ASICs or other integrated products, while our captive manufacturing capability is
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