SanDisk (SNDK) The Primary Inventor Of Flash Memory But Cant Afford A Fabrication Plant Says Industry Expert; Increased Pricing Forces Firms To Share Manufacturing Facilities

67 WALL STREET, New York - January 4, 2012 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Energy Efficiency, Cloud Computing and Telecommunications - Semiconductor Content Increase Across Verticals - Semiconductor Manufacturer Consolidation

Companies include: ARM Holdings' (ARMH); AMD (AMD); AT&T (T); ATI (ATI); AUO (AUO); Aixtron (AIXG); and many more.

In the following brief excerpt from the Semiconductors Report, interviewees discuss the outlook for the sector and for investors.

Kevin Cassidy joined the Stifel, Nicolaus & Co., Inc., research team in connection with Stifel's acquisition of Thomas Weisel Partners LLC in July of 2010. Mr. Cassidy joined Thomas Weisel Partners in August 2007, covering the power management and broadline segments of the semiconductor industry. Prior to joining TWP, he was a Research Analyst at Piper Jaffray & Co. Mr. Cassidy brings over 20 years of practical semiconductor industry experience through various sales positions. He has an electrical engineering degree from the University at Buffalo, The State University of New York, and a B.S. in mathematics and physics from SUNY Geneseo.

TWST: You cover semiconductor processors and components. What are processors and components? How do you define the space?

Mr. Cassidy: Everyone knows what a PC is. So just about every piece of electronics that uses semiconductors is similar to a PC, although it may come in a different shape. Each one has a central processing unit, that's what the Intel (INTC) chip is in a PC, which is the processor. Every system has memory, so either you have DRAM memory and nonvolatile memory. Nonvolatile memory keeps the information even when you turn off your system so you can access the information when you turn it on again. Every system has a way to communicate to the processor, so that's the input/output.

The output could be a video screen or an Ethernet port where the data goes out when you connect your computer, and then the input of course is either touch or the keyboard. Correlating with every one of those is a chip that does those functions. Intel isn't the only processor company in the world, but it is probably the most famous.There are processors that are dedicated just for working in routers. The communications equipment that Cisco (CSCO) makes use processors, but the latest processors are different than Intel processors.

Your cellphone typically uses ARM-based processors, so everything has a processor. There are a lot of different varieties in the market. I cover companies that make those processors.We can't cover every name, but I cover about 18 companies. The components are the glue that connects the processor to the memory and to the I/O so there are other chips that go around it too. So they're all different companies that all specialize in these different markets. There are also the memory companies. I cover the memory companies like SanDisk (SNDK). There are a lot of exciting things happening in all of these markets.

TWST: Are there other important drivers in the space?

Mr. Cassidy: All the ways that we communicate electronically are being upgraded. That's not as obvious for the average consumer, but it's a huge growth market. In the U.S., there are 300 million people. In China, it's billions of people, and there's three different phone networks in China. One is China Mobile (CHL). China Mobile has 600 million subscribers, and they're mostly all still using 2G. They haven't even moved up to 3G yet. China is deploying antennas to support 3G signals. This should result in all those people to buy new phones and upgrade to 3G connections. This is a marketing person's dream. The inflation rate for China for wages is somewhere close to 20%. So they're making more money, they have more disposable income, and they can afford to buy these 3G phones now.

TWST: With the demand growing so much, are there supply concerns in the space?

Mr. Cassidy: I think there will be a supply problem in the future. Take as an example, Micron Technologies (MU). Micron is another company that still manufacturers their own ICs. Micron manufactures memory ICs, DRAMs and NAND flash. But each new generation of semiconductor process, technology is more expensive. Micron teamed with Intel to manufacture flash ICs because the cost - over $3 billion - for building a new fab is getting prohibitive. AMD (AMD) just recently gave up on manufacturing their own chips, and they took all their manufacturing plants and spun it out as a separate company called GLOBALFOUNDRIES. GLOBALFOUNDRIES needed to work out a deal with New York State to build their next fab just north of Albany. New York State is contributing around $1 billion to the build GLOBALFOUNDRIES next fab. With a new fab costing $3 billion, companies have to make sure there will be a market with enough volume to justify this expense.

The primary inventor of flash memory company, SanDisk, shares its manufacturing in Japan with Toshiba (6502.TYO). So even SanDisk - that sells flash chips into USB drives, MP3 players, cell phones, etc. - can't afford their own fab. Last night SanDisk announced slowing the capacity expansion of a new facility. In my memory, that's the first time ever that a semiconductor company has slowed a capacity expansion phase. It seems SanDisk is saying, "Let's just wait and make sure demand is there before we spend any more money."

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