SanDisk’s key growth drivers
In the previous part of the series, we saw that SanDisk (SNDK) is making efforts to grow in the embedded space. It’s looking to use its NAND (negative-AND) flash chips in various embedded solutions such as autonomous cars, industrial applications, home automation, and entertainment applications.
Let’s take a look at the other consumer segments that drove the company’s fiscal 1Q16 revenue.
SanDisk started its business with removable products. They still command the largest share of its overall revenue. These products include USB flash drives and micro SD cards. The segment’s revenue rose 6% YoY (year-over-year) in fiscal 1Q16, driven by demand for its new retail products such as iXpand and Ultra Dual USB Drives. On the commercial front, demand for micro SD cards grew in the connected home and industrial sectors.
Client SSDs (solid state drives) are used in end-consumer devices such as PCs (personal computers) and laptops. The segment’s revenue rose 6% YoY in fiscal 1Q16 despite the fact that fiscal 1Q15 included revenue from a large customer, which it lost in fiscal 2Q15. If we exclude the revenue earned from this customer from the fiscal 1Q15 client SSD revenue, the segment’s revenue rose 55% YoY in fiscal 1Q16. This shows the company’s dependence on a few large customers and its ability to grow even without a key customer.
Analysts believe that this large customer was Apple (AAPL), which switched to Samsung (SSNLF) for its SSD needs. Qualcomm (QCOM) is also facing a situation similar to SanDisk’s. Qualcomm has lost its key customer, Samsung, and is on the verge of losing part of its business from Apple to Intel (INTC). It remains to be seen if Qualcomm can boost its revenue without its key customers.
There’s more good news in the client SSD segment. SanDisk has secured a design win from a major OEM (original equipment manufacturer) for its 15nm (nanometer) X3-based client SSDs. It expects to secure more design wins for this product in fiscal 2Q16.
Another major segment that drove SanDisk revenue is enterprise solutions. This segment will be enhanced further after the company’s merger with Western Digital (WDC). We’ll shed more light on this in the next part of the series.
The iShares US Technology ETF (IYW) invests in large-cap technology stocks, with 13.4% holding in the semiconductor industry. It has 15.4% exposure in AAPL, 2.3% in QCOM, and 0.45% in SNDK.