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Why SanDisk’s embedded segment is key for growth

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Aug. 18 2020, Updated 10:36 a.m. ET

SanDisk’s embedded segment

SanDisk’s (SNDK) embedded segment includes its iNAND embedded flash product line, multi-chip packages, and iNAND solutions, which combine NAND and mobile DRAM in an integrated package. The custom embedded solutions are the embedded storage chips for mobile phones, tablets, and other portable devices and wearables.

To distinguish the embedded section from SanDisk’s SSD solutions segment, the embedded segment includes non-SSD products that are attached to a host system board. In May 2014, SanDisk launched the iNAND embedded flash drive (or EFD) product family aimed at entry-level tablets and smartphones in China and other high-growth markets. This product line includes the iNAND Standard™, iNAND Ultra™, and iNAND Extreme™ EFDs.

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To learn in detail about what is driving embedded solutions growth, please read Smartphones and tablets drive SanDisk’s embedded device growth. An increase in SanDisk’s growth is likely to benefit ETFs like the PHLX SOX Semiconductor Sector Index Fund (SOXX), the SPDR S&P 500 ETF (SPY), and the iShares Core S&P 500 ETF (IVV) that have significant exposure to SanDisk.

On a year-over-year (or YoY) basis, embedded quarterly revenues declined 16%, due to a shift in customer to client SSD solutions. However, on a quarter-over-quarter basis, it posted a growth of 30%. Custom embedded and iNAND solutions growth is responsible for this sequential growth. As mentioned in the earlier part of the series, embedded solutions contributed 8% of the growth in the company’s commercial revenues. Apple (AAPL) is a key customer of SanDisk’s embedded NAND chips.
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Declining contribution to overall revenues

As the embedded SSDs are increasingly being used in tablets and other portable devices, the contribution of SanDisk’s embedded segment to overall revenues has witnessed a decline. Its contribution dropped from 27% in 2013 to about 21% in the nine months ended FY 2014. However, the segment’s contribution increased marginally in 3Q14.

Although high-end smartphones and tablets will bring significant revenues for SanDisk, the company expects the SSD division to benefit more from this trend than its embedded segment will.

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