India lucrative; betting big on flash biz: SanDisk CEO

Sanjay Mehrotra co-founder, president and CEO, SanDisk, says that company's focus on only flash has helped the company to create new market opportunities and the company had clocked revenue of USD 5 billion in 2012, of the total USD 23 billion industry.

SanDisk focus in India is to leverage the number one position and market share and at the same time to enhance sales and bring more products to the consumers. The company has its R&D centre in Bangalore where it houses 350 employees, going forward the company plans to increase the head count.

Below is the edited transcript of his interview to CNBC-TV18.

Q: Twenty five years never the temptation to wear-away from flash and try and do something different?

A: It is exciting to see that SanDisk is celebrating its 25th anniversary. In last 25 years, we have been dedicated, focused, passionately pursuing opportunities in flash and helped create new market opportunities and that served us well.

I believe that our focus on flash memory evangelising new applications for flash memory, led to the creation of USD 23 billion industry. SanDisk had revenues of USD 5 billion last year. So, the strategy to focus on flash has worked very well for our company.

Q: You have been a believer in specialization from day one?

A: Absolutely. When you are targeting markets and opportunities that will continue to grow, then why should one look elsewhere? Why not focus on creating even more and more opportunity in flash.
  
Q: In terms of opportunity, India is strategically placed in part of the global markets that most companies are trying to address. The finance minister announced in his Budget speech brought in sweeteners for fab makers and chip makers. Would you be interested now or is it too little too late?

A: Our focus for India is to leverage our No. 1 brand position, No. 1 market share, enhancing product sales and to bring more products for Indian consumers. Of the total Indian population, 50 percent are below the age of 25 years, which is a sweet spot for digital savvy population. So, we are looking at growth opportunities in the market trends in India.

Q: Not manufacturing?

A: In addition to sales, under R&D we have a design center in Bangalore where we do cutting edge work and flash memory design - systems, integration, firmware, software development as well as IT infrastructure. We have around 350 employees in Bangalore design center and we further plan to grow that centre n India.  

Q: What is the reason for not undertaking manufacturing activity in India, is it that you don't need additional production capacity at this point in time or is India not an attractive investment destination from a manufacturing point of view?

A: We manufacture our flash memory chip in Japan in joint venture (JV) with Toshiba. Our backend assembly and test activity like converting the flash memory chips into the products such as solid state drives or flash products or mobile applications is done in China at Shanghai factory. Both facility are well serving our global needs for production and continue to serve well in foreseeable future as well. At this point those manufacturing centers are working well and we don't need any capacity expansion.     

Q: On upping production capacity. In 2012 there was oversupply problem which was an industry wide problem and most manufacturers tried to address that by being prudent but adding capacity. Is the industry passed that, do you believe 2013 you are going to feel the need to add capacity?

A: In the first half of 2012, the industry felt the pinch of some excess supply in the second half the industry was already beyond that and experienced healthy demand-supply environment in the second half of 2012. We expect the industry to experience healthy demand-supply fundamentals in 2013.

At SanDisk, we have not yet made any decision on add new wafer capacity in 2013, but we may take a call later if the demand trend continues. We will study the market trends, demand trends as well as our progress on the technology front before taking a call for adding new wafer capacity production in our fabs in Japan.

Q: In terms of the outlook because while there is cautious optimism as far as the US is concerned, Europe continues to be extremely fragile and extremely vulnerable. India is also slowing considerably; also China. How does that impact your outlook for 2013 because you did miss street estimates and consensus for the first quarter?

A: In our January earnings call we provided for first quarter of 2013. We also discussed the industry demand and supply balance for 2013 along with projected outlook of revenue growth and continuing growth in terms of profitability for our business in 2013 as well.