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

To: Pam who wrote (26312)	7/6/2004 8:39:11 AM
From: Art Bechhoefer	Respond to of 60323

Pam, here are the inferences I draw from the Micron announcement: 1. They will convert a portion of one of their plants to produce a single flash memory with 2gb capacity. 2. They make the announcement now in order to alert potential distributors and customers. 3. They are aiming for one part of the flash memory market, probably for applications including upscale camera phones, PDA's, digital camcorders, or notebook computers. 4. If they decide to package the chip as an SD or mini SD, they will pay royalties to SanDisk. If they expect to be competitive in this field, they will probably have to use MLC designs, which also may produce royalties for SNDK. The MU entry into flash memory chip production will add production capacity by creating another fabricating facility no earlier than the end of 2004. But because MU aims at a very small niche in flash memory demand, I don't see a glut here. If they are successful in producing a low cost 2 gb flash unit, I can see some long term pressures on SanDisk and Samsung, especially if demand slows down for high end chips. But the more likely scenario is that demand will pick up, especially for digital camcorders, and that will be enough to allow the low cost producers to make a reasonable profit (as opposed to a killing) in the market. I would not draw any conclusions about this development having an adverse impact on SanDisk profits for 2004 or 2005. However, the MU announcement also says they will be going eventually to 58 nm technology, which would increase productivity and lower their costs if the technology is successful. Because MU has rather large sources of capital, it's possible they would be able to adopt this newer technology faster than either Samsung or Toshiba/SanDisk. Art