going fabless isn't good for Sandisk long run either
That's not what SanDisk aims for, if you heard the cc or saw a transcript. They are trying to achieve a balance between captive and non-captive production such that captive production is used close to 100% of capacity. In the current situation, their model, which involved buying some chips from Samsung, went to pieces because they couldn't even sell all of their own production, much less that which they purchased.
It's one thing to own your own production facilities for what some call a commodity business. You might become the lowest cost producer if you control your own production. But as Qualcomm has shown, when you own critical patents, you need not make your own chips but can rely on outside fabs to do the job. This turns out to be a better use of capital, especially when you are raking in royalties from outside producers that need your IP.
It's not clear at all to me that SNDK was wrong to invest so much in its own manufacturing capacity. The problem we have been seeing for the last year at least has more to do with excess capacity fueled by the desire of the major competitors, especially Samsung, to gain an overpowering market share by continually forcing down prices in order to force the weakest players out of the market entirely.
I think there's something wrong when companies are allowed to sell products below cost in order to drive out weaker competitors, and such practices should be prevented by administrative or legal action.
On the other hand, I also think that SanDisk, rather than pursue a policy of enhancing its position in consumer markets, should have devoted more energy toward creating applications for NAND flash that are less dependent on consumer well being and more dependent on necessities. An example would be the use of NAND chips to store medical information, carried by the patient, and capable of being displayed or read only with the patient's permission. SanDisk many years ago made a small effort to provide such a system for the military, but it went nowhere. One of the key problems today is that there are almost no applications that can be deemed essential while at the same time being ideally suitable for NAND flash alone. With applications that could constitute a basic application, irrespective of economic conditions, SanDisk and other suppliers would be less prone to the plummeting prices that make at least certain types of NAND flash unprofitable for all manufacturers.
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