Sandisk in the embedded system market:
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Jerome, Michal, et al,
After answering Michal's question about embedded system, I thought if it is possible for Sandisk to dominate the embedded flash market like it currently dominates the digital camera market and now the cell phone market.
Let's look at how Sandisk dominates those 2 markets. Sandisk's strategy is to develop a standard, protect it with patents, and get the OEMs to sign up. Part of Sandisk's success is its lead in flash technology. The OEMs sign up Sandisk because they know Sandisk will be able to bring to market higher capacity flash (first double cell 80Mb flash recently introduced). They also know because of the ATA technology invented by Sandisk - the ability to format out bad memory locations in a flash chip like in a hard disk drive - Sandisk will be able to get higher yield on their flash chips, therefore lower cost. And Sandisk doesn't try to have a monopoly on flash but it licences out its technology. Even though Sandisk's royalty rate is pretty high - in the order of 10% - the OEMs stand to benefit the most because if can still make a good chunk of money on high volume flash sales. As 80% of the digital camera manufacturers and 90% of the cell phone manufacturers sign up for Sandisk's flash format, the format becomes standard.
Once a format is adopted by the consumer, it will take 10, 15 years or much longer to change. Analog TV has been around for at least 40 years, it will take another 10 years for HDTV to take over. 35 mm silver film has been around for more than 60 years, I guess, and will be replaced now with film-less digital camera. It took about 5 years for the CD to win over the cassette tape, and DVD still hasn't replaced the CD. Well you get the picture. If I buy a digital cam which uses Compact flash for storage today, I expect to be able to keep my camera for the next 10 years without seeing the format disappearing. Similarly, if I buy a cell phone which uses the MultiMediaCard for storage, I don't want to have to throw away my cell phone in 10 years because that flash format no longer exists.
Unfortunately, in the embedded system market, the consumer would care less about which type of flash is used. The engineers who design the system, be it a security system or a digital answering machine, will pick a type of flash and design it into the circuit board and the users never "see" the flash. The door will be wide open for several players in this market. But then I just remember that Sandisk is probably the only company that has its flash supported by Windows CE. As you may not know, Microsoft would like to enter the embedded market with Windows CE, a down size OS of the large Windows 95. The beauty of Windows CE is it is upward compatible with Windows 95, i.e. an application running on Windows CE will run on Windows 95 (not vice-versa). The nice thing about this is the engineers and programmers can develop applications for an embedded system using a PC platform and that will save a lot of money and time. In my boring real job, I design embedded systems that use Wind River, Vertex, ..., OS and it's never easy to see what's going on inside the box and I have to use expensive emulators to look inside the box. With Windows CE, I will develop my application of a PC and I can print out messages to debug my software.
Microsoft recently bought Web TV - a company that hasn't made any money and probably will never make money - for close to 500 million. Bill Gates is not dumb to do this. His greatest concern is that couch potato people will start surfing the net on the TV using a web TV and they won't buy a PC with Windows 95 in it. Man, this is a bigger threat than even Sun Micro and its Java. So he wants to make sure that Web TV and all set-top boxes will use - you guess what - Windows CE. He is a smart crook. Why do we need an OS to just surf the net? But Bill will make sure that your web TV, your palmtop will run Windows CE, may be your cell phone, your digital answering machine and your security system will also run Windows CE, etc. etc. He will develop applications for Windows that will allow for instance your TV, set-top box, security system, cell phone, home appliances, etc. to be able to communicate with each others. Bill will get you hooked on Windows to secure his empire for the next 20 years.
Windows CE will become then the defacto standard for embedded systems and consumer electronics. And which little flash company will become a winner again? Sandisk obviously, because its flash supports Windows CE.
I absolutly agree with Ed and Jerome: Sandisk's future revenue will be either big, or Big, or BBBBBBIIIIIGGGGG. It's a matter of time before this stock will go to $100, or $200, or $300, who knows, because the sky is the limit. Do I sound like a hypist now? :)))
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See the following article for the article "Microsoft wants Web TV everywhere":
headlines.yahoo.com
Microsoft also wants your cable TV to run Windows CE:
www5.zdnet.com
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P.S. Now I think about the term "embedded system". Flight control boxes on airplanes, oil rig controller systems, engine control system in your car, etc. are not the only embedded systems. But consumer electronics such as web-TV, digital answering machine, smart appliances, home security system, etc. can all be considered as embedded systems and this is a huge market. |
