Flash Dance: Samsung's Impact on M-Systems, SanDisk and Saifun

Samsung’s results, published on Friday, have a number of repercussions for the three Israeli flash companies. It appears that Samsung is having difficulty increasing its production capacity with the cheaper MLC technology, which accounted for 23% in the second quarter with SLC accounting for the rest. This means less royalties for the owners of the MLC patents, SanDisk Corporation (Nasdaq: SNDK), as a result of which the company fell on Friday to a price not seen since September 2005.

Asked in the analysts’ conference about the new NAND technology that it planned to introduce in coming years, Samsung’s chip manager said that in 2008 they would integrate MLC technology with 'four bit memory cells.' This means that, above all, that the company will continue to work with SanDisk’s patented technology, in contrast to claims by Saifun Semiconductors Ltd. (Nasdaq:SFUN) CEO Dr. Boaz Eitan that Samsung said in the past that it would stop using MLC in 2008. This was probably the trigger that sent Saifun down by almost 10% in trading on Friday.

I am not jumping to the conclusion that Samsung’s comment means it will work together with M-Systems Flash Disk Pioneers (Nasdaq: FLSH) on its x4 technology, since it may well be that Samsung believes it can develop the same technology on its own. On the other hand, it could be that they will still adopt Saifun’s NROM technology, which is why they preferred on Friday to confuse their rivals (Toshiba and SanDisk) by releasing misleading information, as is the practice in any technological war for a multi-billion dollar market.

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.