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

To: Michael Kim who wrote (20415)	6/7/2001 7:21:41 AM
From: orkrious	Read Replies (1) \| Respond to of 60323

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To: Michael Kim who wrote (20415)	6/7/2001 12:14:57 PM
From: Art Bechhoefer	Respond to of 60323

Michael, royalties are almost always based on a percent, say 5 percent, of the selling price. So if the price of the unit drops, so does the royalty. But note that as a product becomes more of a commodity, the low cost producer ultimately gets most of the sales. A 5 percent royalty payment, or for that matter, even a 2 percent payment might be just enough to make the product uncompetitive with similar products not subject to royalty payments. Here we have SanDisk, through its association with Toshiba and others, becoming not only the largest producer of removable flash memory but also the lowest cost producer. It's very much like INTEL, which for many years was the low cost producer of microprocessors because it used technology that allowed more transisters per square centimeter than the competition. SanDisk is now pretty much in that category--the lowest cost producer as a result of being able to use .15 micron technology, and even thinner wires later on. It is useful to remember that the initial flash units produced for SNDK about five years ago used .35 micron technology, and that existing production in Taiwan is about .21. I think my figures are accurage, but someone correct me if I'm wrong. Art Bechhoefer