Hi Cary,
What is the relationship between SNDK's IP and Samsung's IP? What kind of damage could Samsung do?
As far as Nand flash is concerned, Samsung is a licensee of Sandisk's patent portfolio and probably the biggest contributor to the 52MM that Sandisk received in the last Q as Lic/Royalty Income. My understanding is that MLC carries a much higher license fee and Samsung would be paying significant fees once they start moving their output to MLC. This is expected to happen this Q onwards, which means we should see some lic fees from MLC in the 3Q and 4Q as the fees are collected on a one Q lag.
Samsung has plentiful manufacturing capacity and significant resources that has helped them stay ahead of most players (including Toshiba but it seems like Toshiba may have narrowed that gap with 70nm or may have even move ahead of Samsung) in terms moving to finer geometries and keeping costs low. This includes Nand, DRAM, etc. Samsung's annual capex budget is much higher than Toshiba's (the second largest Nand producer) and they continue to build new plants and depreciate them fast enough by realizing better prices for their output which is far superior than their competitors in terms of quality and yet at a lower cost because it is at lower nm's. Also, having many different types of semicons to manufacture they are able to allocate their resources optimally to balance their strategic and tactical objectives. They have been known to successfully switch capacity from DRAM to Nand (and possibly vice-versa when they see excess capacity in Nand). Samsung is also believed to be receiving significant subsidy from the Korean govt but I have no evidence supporting this premise. Samsung could literally flood the market with Nand chips anytime they decide to to and wipeout most smaller players but having the largest marketshare they would be the biggest loser financially from lower Nand prices also. By accelerating Nand o/p and lowering Nand prices significantly, they could extend the depreciation cycle for Toshiba/Sandisk's new 300mm Fab and could mute its impact. FV/FP are only in Nand business and there is no cross subsidy that Samsung has. Samsung can run one or more of their business units at a loss for a long time, for startegic reasons, before losing sleep over it. Sandisk is in good shape for now but I do not believe Toshiba's B/S has the resources to match Samsung's capex budgets. Samsung is plush with Cash. That is one of the biggest problems with most of the DRAM manufacturers also, no one has the money for brand new fabs and it is harder to raise it when there is not much money to be made in it. Look what they have done to IFX, MU, Hynix, etc. But what are the odds that they can make Toshiba/Sandisk go away from Nand business? In the near-term (next few years) they could hurt Toshiba/Sandisk but it is very unlikely they will make them disappear.
-Pam |
