Summary
SanDisk has renewed its license agreement with Samsung on terms that are more agreeable to Samsung although less profitable for SanDisk. The royalty rate is still higher than the industry norm, though, which has negative implications to companies who are not yet SanDisk licensees, like Micron and Hynix and Kingston technology, as well as for existing licensees, whose rates could creep up when renewal time comes around. This would include Intel, Toshiba, Numonyx, and the many card companies like STEC, SMART Modular, Sanmina-SCI Viking, and many more.
Analysis
Although Samsung's royalty payments to SanDisk were until recently a tightly-guarded secret, SanDisk's teleconference to discuss the announcement cited in a recent EDN article reveals that Samsung was paying a whopping 7% of total flash revenues to SanDisk, a figure that will be cut in half when the new agreement takes effect in August 2009. Even so, a 3.5% royalty is very high for the semiconductor industry, which is more accustomed to royalty rates ranging between 1-2%, a figure that memory makers tend to find intolerable nonetheless.
By slicing this royalty stream in two, SanDisk will have to tap into the many other users of the company's technology to make up the difference, but Objective Analysis believes that it is quite possible for the company to make up for the loss. Samsung will see a strong benefit to their cost structure, which should help the company regain profitability in the near term.
The NAND flash market and the flash card market perform to very different dynamics than much of the rest of the semiconductor market. To gain a butter understanding of how this market's dynamics and the characteristics of each player, see the report: "Understanding the NAND Market" at www.Objective-Analysis.com/Reports.html.
