SanDisk 2014 Annual Report Download - page 116

For fiscal year 2015, our expectations include:
• We expect that industry bit-supply growth for 2015 will be approximately 35% to 40%, similar to the
estimated industry supply growth rate in 2014 and 2013.
• We expect that our captive bit-supply growth for fiscal year 2015 will be near the upper end of the
industry supply growth rate of 35% to 40%, compared to our captive bit-supply growth of 20% in
fiscal year 2014 and 18% in fiscal year 2013.
• In 2015, we plan to increase our inventory levels in order to better meet customer service
requirements and accommodate variations in forecasted demand from our customers as well as
variations in fab output. Including both our captive supply and the non-captive supply we expect to
purchase, we expect our 2015 revenue bit growth to be no more than 30%. As we rebuild our
inventory levels in fiscal year 2015 and due to the expected loss of a large customer for our client
SSDs, we expect our revenue to experience a year-over-year decline in both the first and second
quarters and then return to year-over-year growth in the second half of fiscal year 2015.
• We expect both our blended average selling price per gigabyte and our blended average cost per
gigabyte to decline in fiscal year 2015. Our blended average selling price per gigabyte and our
blended average cost per gigabyte both declined 22% in fiscal year 2014.
• We expect our fiscal year 2015 blended average cost reduction per gigabyte to be between 15% and
25%. We expect our cost reduction in fiscal year 2015 to come primarily from the 1Y-nanometer
and 15-nanometer technology transitions, increased usage of X3 memory, and an expected positive
impact from the Japanese yen to U.S. dollar exchange rate for Japanese yen denominated wafer
purchases, partially offset by a higher usage of non-captive memory and start-up costs related to our
manufacturing facilities.
As part of our efforts to continuously reduce the cost of NAND flash, we are currently focused on
transitioning our products to 1Y-nanometer and 15-nanometer technologies, with the 15-nanometer node
ramping across fiscal year 2015. Our 1Y-nanometer and 15-nanometer nodes have increased
manufacturing equipment requirements relative to previous nodes, which reduce the cost reduction
benefits obtainable through these technologies compared with previous technology node transitions. We
continue to develop our 3D NAND architecture and we expect to invest in a 3D NAND pilot line in the
second half of fiscal year 2015 and ramp volume production of 3D NAND in fiscal year 2016. One of our
competitors has introduced products based on its 3D NAND technology, and other competitors have
announced the expected launch in 2015 of products incorporating 3D NAND technologies. At this time,
these technologies are still emerging and it is unclear how these new technologies will compare to our 3D
NAND technology and what implications other 3D NAND approaches may have for our industry or our
business in terms of cost leadership, technology leadership, supply increases and product specifications. We
believe that continued 2D NAND scaling is the most efficient method of reducing NAND costs in the near
term and addressing the broadest range of market opportunities and therefore continue to focus on scaling
2D NAND flash through the 15-nanometer technology node. We are also investing in 3D ReRAM
technology, which we believe may be a viable alternative to NAND flash memory in the future. We expect
2D NAND, 3D NAND and potential future technologies, including 3D ReRAM, to co-exist for an
extended period of time.
Fiscal Year 2014 Acquisition
In July 2014, we completed the acquisition of Fusion-io, a leading developer of flash-based, Peripheral
Component Interconnect Express (‘‘PCIe’’) hardware and software solutions that enhance application
performance in enterprise and hyperscale data centers. We acquired all of the outstanding shares of
Fusion-io through an all-cash transaction. The total purchase price was $1.07 billion, net of cash acquired.
Of the total Fusion-io purchase price, $382 million was allocated to amortizable intangible assets and
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