SanDisk 2014 Annual Report Download - page 122

Revenue in the U.S. increased in fiscal year 2013, compared to fiscal year 2012, due primarily to
increased sales of client and enterprise SSD products, retail cards for mobile devices and USB drives.
Revenue in Asia-Pacific increased in fiscal year 2013, compared to fiscal year 2012, due primarily to
increased sales of client and enterprise SSD products and embedded products for mobile devices, partially
offset by lower OEM sales of cards for mobile and gaming devices, and lower sales of wafers and
components. Revenue in EMEA increased in fiscal year 2013, compared to fiscal year 2012, due primarily
to increased sales of client and enterprise SSD products, retail cards for mobile devices and USB drives.
Revenue in other foreign countries increased in fiscal year 2013, compared to fiscal year 2012, due
primarily to higher sales of USB drives and cards for mobile devices.
Our revenue is designated based on the geographic location where the product is delivered, or in the
case of license and royalty revenue, the location of the headquarters of the licensee, and therefore may not
be indicative of the actual demand in those regions.
Gross Profit and Margin.
Percent Percent
FY 2014 Change FY 2013 Change FY 2012
(In millions, except percentages)
Gross profit ......................... $3,067.8 7% $ 2,867.5 70% $ 1,683.2
Gross margin ........................ 46.3% 46.5% 33.3%
Gross margin was approximately the same in fiscal year 2014, compared to fiscal year 2013, as our
blended average selling price per gigabyte and our blended average cost per gigabyte both declined by
22%. Gross margin in fiscal year 2014 was negatively impacted by a decreased mix of removable product
revenue, an increased mix of client SSD revenue, increased amortization of acquisition-related intangible
assets and increased share-based compensation. Gross margin in fiscal year 2014 was positively impacted
by an increased mix of enterprise SSD revenue, a decreased mix of embedded revenue and a weaker
Japanese yen relative to the U.S. dollar.
Gross margin increased in fiscal year 2013, compared to fiscal year 2012, due primarily to a favorable
industry supply and demand environment coupled with a higher product mix of enterprise SSD products
and high-performance retail products. These factors led to no year-over-year change in our average selling
price per gigabyte, while our cost per gigabyte declined by 20%. Cost declines in fiscal year 2013, compared
to fiscal year 2012, were derived primarily from our increased mix of 19-nanometer wafers, lower
depreciation costs for fab equipment, and weakening of the Japanese yen relative to the U.S. dollar,
partially offset by increased non-flash memory costs and decreased usage of X3-technology memory, both
due to the increased mix of SSD and embedded products.
Research and Development.
Percent Percent
FY 2014 Change FY 2013 Change FY 2012
(In millions, except percentages)
Research and development ............... $ 852.3 15% $ 742.3 23% $ 602.7
% of revenue ........................ 13% 12% 12%
The increase in our research and development expense for fiscal year 2014, compared to fiscal year
2013, was due primarily to higher employee-related costs of $73 million, higher facility costs of $20 million,
an increase in third-party services of $12 million and an increase in higher equipment depreciation of
$9 million, partially offset by lower third-party license costs of $10 million. The higher employee-related
costs were due primarily to an increase in salary and benefits of $69 million and share-based compensation
52