SanDisk in license talks with Toshiba; adds NEC as supplier

Electronic News, July 14, 1997 by Jim DeTar

SanDisk has been working for seven years now with Matsushita, which is the company's primary supplier. Matsushita provides the majority of production today in its 32-megabit architecture. SanDisk has now also begun introducing 64-megabit double-density flash.

In addition to Matsushita, SanDisk's second supplier is LG Semicon. Both of these companies are supplying 32M chips and moving to 64M on 0.5-micron process technology. However, SanDisk is in the final stages of development and qualification of a 0.35-micron process. And, according to SanDisk president and CEO Eli Harari, that process will be running in three foundries: Matsushita, LG and its planned third manufacturing partner, NEC. Dr. Harari said he expects to see production from NEC by the end of this year.

Over breakfast recently, Dr. Harari and SanDisk senior VP of marketing and sales Leon Malmud discussed the company's plans to expand its manufacturing capacity, the current status of the CompactFlash Association (CFA) that SanDisk founded and other key issues driving the rapidly expanding flash memory industry.

SanDisk was founded in June 1988. Its stated mission from inception was to deliver to OEMs flash data storage products that are cost-effective, that are enabling in many cases, that are highly reliable and that are built in very high volumes.

The company has focused on mass markets. Its intent is not to deliver niche products for niche markets, but rather to identify markets that, over time, would develop into large-scale markets. "We've been very highly focused in that regard. We've not changed our business strategy from day one," Dr. Harari said. "We have been very successful in developing, with other companies, industry standards that are critical for expansion of the markets, starting with PCMCIA."

SanDisk was one of the founding members of the Personal Computer Memory Card Industry Association (PCMCIA), one of the six founding members who developed the PC Card and, more specifically, the PC Card ATA for storage. According to Dr. Harari, SanDisk is working with all the disk drive companies, as well as the other flash suppliers.

And then several years back, the company began to develop and promote the CompactFlash standard for even smaller form factor flash data storage products.

EN: Can you give us an update on where the CompactFlash Association stands right now? I know you're competing with Intel in the flash market.

Dr. Harari: "There really are three different small form factor contenders, if you will. Intel Miniature Card; Toshiba Smart Media, which is a solid-state floppy disk; and our own CompactFlash. We were first to market with CompactFlash. When we had introduced CompactFlash in October 1995, we already had very strong design wins, and we, most importantly, had a working product that was developed in cooperation with very, very large customers. Strategic customers, such as Kodak and Canon. CompactFlash was not just an idea of SanDisk; it was really developed in cooperation with these customers, and other very, very large strategic customers.

"CompactFlash, from its inception, was driven by the user community as opposed to Miniature Card, which was really driven by Intel, the supplier, and SSFDC (Solid State Flash Disk Card), which was driven by, again, the supplier, Toshiba. Because we have really supported this user-driven standard, we've been very successful in establishing CompactFlash as a de facto standard. Certainly in the digital camera market, where we have worked very closely with all the leading suppliers for the last seven or eight years.

"This year there will be maybe 40 digital cameras that will be introduced to the market, and about three quarters of those...will use CompactFlash, supplied either by SanDisk or by our competitors."

EN: How many member companies are there which belong to the CFA?

Mr. Malmud: "Seventy at this time."

EN: The size of the CompactFlash market...can you throw some figures out? How big a market are we talking about?

Dr. Harari: "It's an embryonic market today. It's just starting. We are, at this point, probably supplying 90 percent of that market, and you could say that last quarter we actually stated that we shipped about 130,000 units. This is the first real quarter of any shipment. The first quarter, we were around 80,000 units. The biggest thing that's driving CompactFlash that we see is digital cameras that are moving in concept from having embedded flash as they ship out the door to having non-embedded flash and being bundled with the CompactFlash."

EN: What's the advantage to changing the design like that?

Dr. Harari: "The advantage is, of course, that they can ship the unit out the door at lower cost; there isn't the cost of the embedded flash, eight-megabit or 16-megabit chips. And the second advantage, of course, is that the user can decide how much memory you want to have."

"What all market studies have shown is that all users want to have incremental storage. This camera here has the ability to download into your desktop, or enable you to view your pictures on the TV. But if you have embedded storage and that's all you've got, and not the ability to increment--to buy additional digital film--you go to Hawaii, you use up your two megabyte or four megabyte, and it's 20 or 30 pictures, and then what? You don't carry your computer with you to Hawaii.