Updates on SNDK - An agreement today with Toshiba, and the growing dominance SNDK is showing in its market may indicate that we should take another look at the company (and recent weakness in the stock price may present a timing opportunity <g>)
Shares of SNDK, which is in the W&W Portfolio, have come under pressure lately, most notably due to concern about the Taiwan earthquake, however it appears that the effect on SNDK will be minimal. The stock, which had been over $90 mid-Sept closed at $54 on 10/4/99. It has since rebounded somewhat, closing today at $64.
SNDK, which was presented to this thread in great detail by Ausdauer, makes flash memory. Flash memory has seen its greatest use thus far in digital cameras, but other applications such as cell phones, MP3 players, and PDAs are large potential markets.
The 10/4/99 issue of Inter@ctive Week contained a short article "Zooming In On Digital Cameras" which said, in part "Today, most digital camera vendors have adopted one of two types of flash memory: CompactFlash, developed by SanDisk; or SmartMedia, developed by Toshiba America." The article stated that the smaller capacity of SmartMedia (32mb) was a drawback that may allow CompactFlash (128mb) to overtake it in unit sales by year-end 2000, particularly as high-quality, high-resolution cameras begin to ship in volume. "Indeed, analysts say more camera makers are starting to support CompactFlash."
Today, SanDisk and Toshiba announced an agreement to jointly develop and manufacture higher capacity flash memory
newsalert.com
October 07, 1999 02:17
Toshiba and SanDisk Agree to Jointly Develop and Jointly
Manufacture Gigabit Scale Flash Memories
SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 6, 1999--Toshiba Corporation and SanDisk Corporation (Nasdaq:SNDK) today announced the signing of a Memorandum of Understanding (MOU) to enter into a long term strategic partnership in the area of joint development and joint manufacturing of gigabit scale flash memories.
A new company will be established in January 2000 and will start the business using Toshiba's
Yokkaichi fab in Japan. New production capacity is planned at Dominion Semiconductor LLC, a Toshiba group company in Virginia, where the volume production will start in the first half of 2001. (SanDisk officials will conduct a conference call on the announcement at 6 a.m. (PST) on Oct. 7. The dial-in number is 415/217-0050.)
The key areas of cooperation outlined in the MOU are:
Toshiba and SanDisk intend to jointly develop 512 megabit (Mbit) and 1 gigabit (Gbit) flash memory chips and Secure Digital (SD) Memory Card controllers. The companies plan to employ Toshiba's future 0.16 micron and 0.13 micron NAND flash memory technology and SanDisk's multilevel cell (MLC) flash technology and controller system integration.
Toshiba and SanDisk intend to form and jointly fund a 50/50 joint venture manufacturing company which will manufacture all of the jointly developed flash memory products for both companies. By 2002, the flash memory production capacity of the joint venture is projected to be able to support more than $1 billion in annual sales.
When further additional manufacturing capacity is required, the joint venture manufacturing company is chartered to secure third party external sources including foundries. Toshiba and SanDisk will separately market and sell their share of the output of the joint venture production to their respective customers.
Yasuo Morimoto, president and CEO of Toshiba Corporation's Semiconductor Company, said, "We are confident that this collaboration will allow Toshiba to accelerate its participation in the rapidly growing market for flash storage in such applications as digital still cameras, voice recorders, video games and silicon audio players. We see our collaboration with SanDisk as highly beneficial to each other and to the customers we serve, as we will provide them with market-defining, state-of-the-art flash storage products."
Eli Harari, president and CEO of SanDisk, said, "This strategic cooperation between the two pioneers of flash storage represents for SanDisk a critically important milestone as we prepare to meet the major market growth opportunities projected for flash storage in the years ahead. Gigabit scale flash memory development is costly and technologically challenging.
"Toshiba and SanDisk will benefit immensely from combining Toshiba's advanced IC manufacturing technology with SanDisk's system and multilevel cell design technology. Our customers will benefit when the large scale production capacity of the joint venture manufacturing company comes on stream in 2001 through the shared investments by the two companies.
"This new capacity will allow SanDisk to significantly increase its flash production output beyond the growth that we can achieve at our current foundries with our proprietary D2 (double density or MLC) NOR flash memory. Finally, this cooperation further strengthens the SD Memory Card co-developed by Matsushita, SanDisk and Toshiba."
A definitive agreement, based on the principles outlined in the MOU, will be negotiated and is expected to be concluded by January, 2000. It will be subject to final approval by the boards of Toshiba and SanDisk.
The matters discussed in this news release contain forward looking statements that are subject to certain risks and uncertainties as described under the caption "Risk Factors" in the company's annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. The company assumes no obligation to update the information in this release. In addition, the following risks and uncertainties should be considered:
This announcement describes an MOU, which is not legally binding on the parties. Numerous issues relating to the joint development, joint manufacturing, financing and management of the activities contemplated in the MOU have yet to be worked out. There can be no assurance that the parties will be able to resolve all outstanding issues and sign the definitive agreement contemplated in the MOU. There can be no assurance that SanDisk or Toshiba will be able to secure the necessary funding to proceed with equipping the Dominion wafer fab or that the Dominion fab will be able to meet the yields, die cost and wafer output capacity contemplated under this MOU.
The development of the 512Mbit and/or 1Gbit flash memory chips is highly challenging. There can be no assurances that such development will be completed successfully in a timely manner and with cost effective designs. If there are significant delays in the development schedules, or if the resultant chip designs cannot yield cost effective designs or be manufacturable in high volumes, this could have a material adverse impact on SanDisk's operating results in 2001.
During the equipping, startup and production ramp phase of the Dominion wafer fab, the fab efficiency will be low and the output will be insufficient to cover running expenses. Therefore, during the startup period in 2001, SanDisk's expenses at Dominion could become material, adversely impacting operating results.
To support the new product development activities contemplated under the MOU, SanDisk's research and development spending may increase in 2000. Revenues from the sale of advanced flash products developed under this MOU may lag the R&D expenses associated with these products thereby adversely impacting SanDisk's operating results.
===========end of press release=======
Potential growth of the flash memory market was noted in a report by International Data Corporation dated 10/4/99:
idc.com
With Help from Digital Cameras, Flash Card Revenues Will Exceed $474Million in 1999
Flash Card Format Battle to Intensify
October 4, 1999 - Buoyed by increasing popularity of digital cameras, shipments of flash cards are expected to surpass 12 million in 1999, almost twice as much as in 1998. Revenues will also buck the downward trend of the overall memory market and pass $474 million, according to International Data Corporation (IC). Other fast-emerging markets such as smart phones and digital music have the potential to drive flash card applications even further.
"The growth of flash card shipments affirms the medium as an important mass-storage option," said Xavier Pucel, manager of IC's semiconductor research program. "The increasing popularity of digital cameras continues to be the key driving force of the flash card market,
but digital music players are on the verge of becoming a major growth factor as well."
Currently, the most popular formats for flash cards are SmartMedia and CompactFlash cards, which together will account for almost 90% of flash card shipments in 1999 due to their use in digital cameras.
"As demand for higher capacity and smaller form factor increases, both of these formats will come under attack from competing formats," Pucel said.
IC expects shipments for CompactFlash to increase at a compound annual growth rate (CAGR) of 62% through 2003; SmartMedia's CAGR will be only 39%. The real story, however, will be the 162% CAGR for other small form factors.
During 1999 and 2000, IC expects total megabytes shipped per card to grow considerably. "Increasing resolution in digital cameras and growing popularity of digital music players will create a need for more capacity," Pucel said. "This growth, combined with stabilizing flash
device prices, will help fuel revenues to new heights."
Competition in the market is currently limited. The top four vendors -- Toshiba, SanDisk, Samsung, and Hitachi -- shipped more than 80% of all units in 1998. However, as the market gains recognition, competition will heighten as smaller companies try to jump in on the opportunity.
IC recently published 1999 Worldwide Flash Memory Card Market Review and Forecast: Toshiba Leads in Shipments, but the Format Battle Is Far from Over (IC #W20296). This report examines which format will prevail in the flash card market. It includes shipment,
revenue, and average selling price forecasts through 2003, segmented by form factor. The report also analyzes the different applications for flash memory cards. It thoroughly reviews the 1998 market, looking at flash card shipments by application, and takes a detailed look at CompactFlash and SmartMedia shipments. For more information or to order a copy of the report, please contact Sally Donovan at 1-800-343-4952 or at sdonovan@idc.com. |
