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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Ausdauer who wrote (14830)	9/17/2000 7:08:09 PM
From: limtex	Read Replies (1) \| Respond to of 60323

Aus - Isn't MMC a joint deal between SNDK and Siemens? Best regards, L

To: Ausdauer who wrote (14830)	9/18/2000 10:02:49 AM
From: EJhonsa	Read Replies (2) \| Respond to of 60323

If SanDisk is due royalty payments for MMC (MMC is a removable flash card with both an intelligent controller and a flash memory reservoir) because it is covered by the '987 patent, then SNDK will have a built in cost advantage. Just curious here: do you know how much Sandisk generally gets in royalties in terms of % of sales? The reason that I ask this is that for years, Qualcomm had the benefit of collecting 3-5% royalties from its competitors in the CDMA handset and base station markets, but this never helped them out too much. Their competitors had superior products, and benefitted from the economies of scale that came from their larger sizes. Both businesses were generating significant losses for Qualcomm until they sold them off last year. I haven't read anything that suggests Hitachi has superior technology when compared to Sandisk with regards to MMC (feel free to correct me if I'm wrong on this), but the economies of scale issue could really benefit Hitachi, given the breadth and diversity of their semiconductor operations. Then again, if a lot of the purchased components and manufacturing processes related flash card production have nothing to do with the production of other semiconductors, Sandisk's early lead in MMC could give them the economies of scale advantage; but still, unless this advantage is large, a competitor such as Hitachi still could wreak havoc on their margins, especially since the latter's a very large, diversified company that can offset weak margins in one business with strength in others. This leads me to wonder: with regards to the sale of CF cards at capacity levels that were offered by Sandisk's competitors, has Sandisk generally had a cost advantage, or is the company's dominant market share merely the result of being a first-mover within this industry? I guess the point that I'm trying to get at is that, given Sandisk and Hitachi are at the same level in terms of maximum card capacity (ignoring Dane-Elec's 128MB card), the MMC market might become commodotized, with Sandisk being just another player that's subject to the whims of supply and demand, market conditions, component shortages, etc. If they can create some sort of competitive advantage, whether by means of charging steep royalties, benefitting from economies of scale, etc., then the situation becomes much better. Granted, companies operating in commodity businesses can still have their shares perform very well provided that there's growth in the industry. Micron's an excellent example (see finance.yahoo.com; however, history's shown that it's much better to own shares in companies like Intel instead, provided that one has the ability to do so. Then there's the Siemens issue, which still confuses me. I read the Techweb article that you provided a link to, and the comments regarding how Siemens will initially focus on the ROM version of the MMC, while Sandisk will produce the Flash version. However, given the comments that Siemens will eventually produce the flash version as well, and given that the article was written 3 years ago, I'm wondering whose chip it is that's going into the SL45, which I expect will be a huge seller in Europe not only due to the MP3 feature, but also due to some of the advanced voice recording and wireless data features inherent in it. There's also the press release Hitachi and Siemens put out (http://semiconductor.hitachi.com/news/pressrelease.cfm?marcmnum=pmmn5pp001d1&menuselection=by_date), but it didn't make complete reference to which kind of MMC card Siemens will be producing. I did searches on "flash," "flash memory," and "MMC" at Infineon's web site, and all I could find was the following '97 press release (http://www.infineon.com/us/pr/archive/11_05_97.html). No new information's been offered. I think that I'll send Infineon's IR department an e-mail, out of hope of getting further clarification on this subject. BTW, I suspect Dane-Elec is a Hitachi VAR. I'm not sure about that. They definitely use Hitachi's chips, but given what I read at Hitachi's site (see semiconductor.hitachi.com, I think that they assemble the cards they sell on their own. Eric