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No. of Recommendations: 5
Silicon Storage and Sandisk are going after different segments of the flash memory market. Silicon Storage primarily makes embedded flash memory chips. These things go into devices such as cell phones, PDAs,, switches, routers, and set-top boxes. They're also occasionally used as BIOS chips for computers (the memory independent of the hard drive which a computer uses to start up). SSTI's claim to fame here is there SuperFlash technology, which allows them to make cheaper chips on a cost/MB basis when compared to competitors such as Intel and AMD. However, the density of their chips is nowhere as high as that of its rivals. While Intel's already capable of making 16 MB chips, and AMD's rolling out with 8 MB designs, SSTI's stuck at the 2 MB level right now. As more advanced, data-intensive applications begin running on handheld devices, the largest market for embedded flash chips, this lack of scalability will put SSTI at a major disadvantage.

Sandisk, meanwhile, is the undisputed leader in the CompactFlash memory card market. These chips, primarily used in digital cameras, audio recorders, and MP3 players, are slightly larger than embedded flash chips, and are capable of handling much more data. Sandisk's high-end CompactFlash chip can hold 192 MB worth of information, and I believe that a 256 MB chip is on its way. Eventually, as cell phones and PDAs start handling MP3s, streaming video, 3D games, advanced operating systems, and God knows what else, and as people begin demanding an easy way of transferring all this data from one phone to another so that one phone can handle all the apps previously on another phone (Bluetooth isn't enough for this), I think CompactFlash cards will start replacing embedded chips in these devices, even if they are slightly larger in size. Aside from having by far the highest density chips in this market, Sandisk also has some IP that it licenses to its competitors for a royalty.

Silicon Storage does make CompactFlash cards, and Sandisk does make embedded chips, but neither company's particularly strong in these niches.

In my opinion, Silicon Storage might be good for the short-term due to the huge capacity constraints currently hitting flash memory manufacturers, but could be in trouble as Intel and AMD start ramping production and put to rest these problems. Sandisk, meanwhile, doesn't look like it's going to lose its market-leading status any time soon. If CompactFlash cards end up replacing embedded chips in cell phones, then this company's going to reap a huge bonanza. If they don't, then Sandisk is going to see a couple more years of manic growth followed by an eventual slowdown and the inevitable multiple contractions that always follow such slowdowns.

Hope this helps,
Eric
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