Dave, the only thing NOT good about my comparison is that QUALCOMM still has a lot more patents covering its chips than SanDisk has for its. The fact that QCOM is a fabless producer isn't really relevant in this discussion for as long as growth in demand makes it profitable for SanDisk to have its own fabrication facilities. The question that some analysts and investors have raised is whether so much new capacity is about to appear that it will be impossible for any company with its own factory to make money. The answer is speculative. But no one has come up with any data that would show companies like SanDisk at a disadvantage as a result of their owning or building their own factories. To the contrary, with demand increasing as fast as we have seen, it would be foolish NOT to build one's own facilities, and sooner rather than later.
For the record, QUALCOMM does not use Intel for any of its chips. They have used IBM, but most of their chips are made in Taiwan by Taiwan Semiconductor and United Microcomputer Corp. Nokia continues to rely on QUALCOMM chips, though some of its new CDMA models use its own chip. Texas Instruments makes most of the chips for Nokia GSM handsets, but so far very few chips other than QUALCOMM's go into any brand of CDMA phone. Samsung is beginning to make its own CDMA chips, but so far most of Samsung's handsets use QUALCOMM chips.
Now this is relevant. Even for the companies that are licensed by QUALCOMM and have agreed to pay royalties, to make a CDMA chip that works satisfactorily isn't easy. Nokia has had several failures, as has Motorola, which discontinued making its own CDMA chips because they couldn't compete either in performance or price with QUALCOMM.
As I said earlier, SanDisk makes products covered by patents, but it's also true that many of these products can be made without using SanDisk patents because there are several different workable designs for flash memory chips. Yet SanDisk has some key patents as well as manufacturing expertise, all of which helps keep SanDisk competitive, even with ruthless price cutters. Samsung may have competing chips, based in part on designs made by Lexar. But even some parts of these chips are covered by SanDisk patents. The SD form, for example, is covered by a SanDisk patent.
To assume, as some analysts have, that this is strictly a commodity business, is far too simplistic. What I'm saying, and what many others on this thread also acknowledge, is that SanDisk has enough of a technology edge--some of it proprietary--to remain competitive, probably for several years. SanDisk is not about to go down the tubes.
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