SanDisk CES presentation January 8 2007
Eli Harari: Chairman and CEO
Kate Purmal : Senior VP & General Manager Digital Content [not transcribed]
Eric Bone: Director Audio & Video Products [not transcribed]
Eli: Thank you Mark. Glad to be here. Welcome. Why don’t you come in and close the door. We have really a packed day today. A lot of very very exciting products. So I will move right on. This is a very exciting time for SanDisk. I really want to talk about 2006. We are not going to talk about Q4. By the way this is webcast.
In 2006 SanDisk really has established a very very strong brand awareness. We have got some internal market studies. We believe that the SNDK brand now is significantly more [pause]. Consumers are aware of the SNDK brand particularly in the US retail and we aim to propagate that throughout the world.
Probably the most important development in 2006 is really the start and really take off of the handset and the mobile card business. There we have a very very strong #1 market share but frankly we have a very strong market position, #1 in US retail.
The second very important development in 2006 is the solidification of #2 market shareposition in audio with our Sansa line that has been extremely well received. It is really the nucleus of what we are going to be talking about today.
What we are talking about today is that we are launching 5 new markets. We think that these markets are all distinct and all have the potential to become mega-markets over the next 1 to 3 years and certainly over the next 5 years will become a dominant part of the landscape for flash storage.
We have never been in the situation where 5 new markets are being launched at the same time. We think that flash memory, flash storage, which is really where we pioneered a lot of the technology, is now coming of age. It is getting the right cost structure and it is enabling many of these new markets.
The first of these markets is notebook computers and there is where we are going to be introducing our first SSDs, flash drives, that were developed actually at msystems. A very exciting new product. I actually will be the one presenting on that because we don’t have a lot of time. That is an entry into notebook computers. We think that it is finally beginning to be here.
The second major market is desktop computers. We are going to be talking about our Contour product, Vista ready-boost enabled. Again I will talk a little bit about that later on.
The third major market is personal video. This is of course the market that the PVP and PMP that the other companies have been releasing products. The uniqueness of our product that we are launching today, a 4 inch video product. It is one of the first if not the first major product with flash memory. Really relying on the power of flash MLC, allowing you to make a very small, very thin, very light weight, very rugged and durable player and Eric is going to cover that.
We think that that market now is ready to become mainstream. We think that the role of flash memory in portable video players is going to be the same as it has been in the last two years in MP3 players which is basically really taking over from the microdrives.
Another very exciting product for us that we have developed together with another company a small company called ZING, that is here together. xx the founder and CEO. The Sansa connect and Eric is going to cover that. It is a brand new space, really of the community.
The last product is a completely revolutionary new product that we are announcing today for the first time. USB TV which really takes us into the home. That product too was developed at msystems and it is now getting the benefit of SNDK’s significant experience (?) in the consumer electronic’s space.
Why are we doing all these things? Getting all these products together, really allows us to move up the value chain. Starting from our core competency of flash storage where we have been the pioneers. First conquered the digital film. Obsoleted regular film. Then the flash drive obsoleting the floppy.
USB flash drives are now moving upscale and becoming very smart. Then 1 1/2 years ago we introduced the secure content with the Gruvi and trusted flash. We think that is the fundamental building block from the durability (?) and DRM. Many of the products that we are showing today are based on that technology and we think that is going to become a very important element in consumer electronics.
Then moving along today to music, video, WiFi / Community and the home. Why are we doing these things? It is just not enough to be a very strong flash storage supplier. We want to take that technology and operate at a much higher level, to escape the commodity nature, at the component level and be an end product supplier to the end user. The reason why we can do this is that we do have great success in our 200,000 stores world wide.
Moving on to our first product. The first product that we ever introduced was in 1991. That was a 20 MB disk, solid state replacement, peripheral replacement. This is the mechanism of pulling it out. This is a 20 MB card using five 4 MB chips. We have come a long ways from that which is amazing.
Today we are introducing a device, 1.8 drop in, 32 GB device. So we have gone from 20 MB for about $1000 in 1991 to 32GB in 2007 for under $600. 16 years. This is really Moore’s law at work. The question is what are we going to be 15/16 years from now. This is our microSD card today. 2 GB card. Moore’s Law on steroids.
If we could take that, even at a slower rate, we could get to about a terabyte in one of these devices in the next 15 years. and that really tells you what that technology can do. If I stood here in 1991 and told you we would be at 32 GBs, you would have laughed me out of the room, but that is the nature of the technology. If I were to tell you 2 years ago that SanDisk was going to be a consumer electronics powerhouse. You would say ha ha. Its really happening at a very fast pace.
I am going to show you a demo here on the solid state disk. You know about durable performance and very fast performance. This is an actualy demo showing our 1.8” device compared to a regular device. very long battery life. Instant on. Very long battery life. This is on the table. What you can see here of the left is the SSD device on the right is the hard disk drive.
What you can see is that under any condition we have tremendous stability, tremendous reliability.
We are going to launch this product this quarter. We are actually sampling right now and we are going to start production this quarter. We think that this technology is extremely price elastic. It needs to come down in price. What we are going to do is combine msystems expertise at the system level with our MLC expertise to drive the cost down and also our very high speed controller. [he seems to talk about a controller 4 times- inaudible] This is really a very exciting market for us. We have come full circle
The market is projected by Gartner to grow to about 35 million units by 2010. I think that the market could well be better than that if we can get the price down to the consumer.
Also our plan is to take this today from an OEM business bundled in the unit, mostly to corporate america, into a consumer product where you can buy it in a store. It may not look like today’s device. It may look a little bit different, but it will be 64 GB, 128 GB, 256 GB for a very attractive price point for consumers. Basically we are not going to have to wait another 15 years, that’s what I’m telling you. We are really getting pretty close now.
One very important development, very exciting is Vista, a 7? GB operating system which has embraced flash memory in ReadyBoost, ReadyDrive, Robson. In any one of these architectures, what MSFT has said is in order to operate Vista on the desktop in a secure environment, use flash memory. Flash is more affordable than DRAM and of course is nonvolatile.
We are a partner of MSFT in the introduction of ReadyBoost. In fact today we are introducing the Contour. The contour is a very sleek device, 2, 4, and 8 GBs. Most importantly, to achieve the performance requirements of ReadyBoost, most of our competitors, or all of our competitors are using SLC flash.
All of our devices that support ReadyBoost are MLC. Not all MLC’s are the same. We have the advantage of consumers approaching with us.
With that I want to change gears and move to our foundation, the core competencies of the company and what you are seeing there is a representation of Yokaichi that we have together with Toshiba. Fab 3 has ramped up all of 2006. Currently fab 3 has been one
of the incredible assets for the company. Fab 3 has enabled us to achieve much of the cost structure but also very importantly to supply the market and gain significant market share.
We said at the beginning of last year we are going after market share and we intend to continue with that.
Fab 4 is still being built. It will start production at the end of this year. It is a monumental fab, but we believe that there is going to be phenomenal demand for flash memory. We want to be sure that we are not just developing all these great markets and applications and not being able to supply them all. Having to count on other people’s supply.
So we are thinking about flash production very different than most analysts, at least. The street really thinks about demand success, demand/supply in the next quarter or the last quarter and we are really thinking about the next 2 to 5 years.
You don’t build a fab on a dime. So you really need to believe that these markets will be there. That the technology will be there. That the cost structure will be there. So you really want to be sure that you are there but that you actually are the pioneer, the leader and the creator and an enabler of these markets so that when they are there, you are there to take advantage of them.
So really we are looking at it in a different way than the rest, [pause while rephrasing]. The rest of the industry, our competitors, are looking at it the same way.
I am an eternal optimist. This is absolutely a forward looking statement. I think that over the next 5 years with the penetration of flash memory all over the place in consumer electonics, in handsets [pause].
BTW we are not saying today about any handset products. It doesn’t mean that we don’t believe in those products. At 3GSM conference in February, that’s where we are going to announce about products in our mobile card line-up.
So of course the vertical integration nature of SanDisk is that we sell all the way to the end customer. That is a very unique capability that SanDisk has.
With that I want to move forward and introduce our next speaker, Kate Purmal. Kate just joined us recently. She was the general manager of U3 corporation. Kate comes to us because, first of all she is dynamite, but more important Kate is going to manage our content infrastructure, the content businesses because we think that content is crucial. to all of these consumer [pause]. Creating the new business models, the DRM, it makes it very simple to consumers. Getting all of these things.
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