This Apple Inc. Supplier Has More Upside

SanDisk’s product innovation could take it higher.

Mukesh Baghel
Mukesh Baghel
Apr 23, 2014 at 3:20PM
Technology and Telecom

SanDisk (UNKNOWN:SNDK.DL) is a leading manufacturer of flash storage solutions, and the company's cutting edge technology and expertise is one of the primary reasons it has gained around 60% in the last year. As a result of its strong position in the industry, SanDisk is benefiting in a big way due to demand from smartphone makers like Apple (NASDAQ:AAPL) and other original equipment manufacturers.

Additionally, the terrific expected growth in data storage has also given rise to huge opportunities for SanDisk. Data storage demand is expected to grow from less than 1,000 exabytes this year to 6,000 exabytes in 2020. This further explains why SanDisk could be a good bet for the future, and its innovative moves should help it register good growth in the long run.

A "solid state" of affairs
SanDisk is seeing terrific growth in its solid-state drive, or SSD, business. This segment was up 61% year-over-year in the first quarter and could get better in the future. Moreover, higher sales of SSDs are improving the product mix of SanDisk's portfolio, as the drives are higher-margin products. Further, the company is gaining share in SSDs in the important enterprise market, where most of the data is expected to be generated.

SanDisk is helping customers deploy applications quickly, and also reduce the total cost of ownership. The company has enhanced its product offerings with a new CloudSpeed line of SATA SSDs to deliver a faster, more efficient product. In addition, SanDisk is also the first SSD provider to ship 19-nanometer multi-level cell-based enterprise SATA SSDs capable of supporting 10 full drive writes per day. This product is a result of SanDisk's Guardian technology platform, which improves the endurance and reliability of SSDs with its leading-edge NAND flash technology.

Given such moves in SSDs, it is quite natural to see that SanDisk expects enterprise SATA SSDs to be strong contributors to its revenue growth in 2014.

Making some good moves
In mobile, SanDisk's iNAND and iNAND MCP solutions are bringing in strong revenue growth. To keep the momentum in mobile going, SanDisk launched its next-generation, high-performance iNAND Extreme embedded storage solution at Mobile World Congress in February. This solution, manufactured on its 1Y nanometer technology, includes a unique dual-core storage controller, innovative new hardware and software data management algorithms, and the latest eMMC 5.0 specification.  

This technology is expected to deliver significantly lower latency and higher bandwidth, enabling smartphones and tablets to be faster and more efficient. On the basis of technology advances like these, SanDisk can continue benefiting as a result of supplying memory to Apple.

SanDisk supplies memory to Apple for both the iPhone and the MacBook. Last year, SanDisk replaced Toshiba and Samsung in the Mac, and this could be another reason why its enterprise business has been soaring. According to AppleInsider, almost half of businesses are now equipping workers with Macs due to better reliability than Windows.

The iPhone will be another important driver of SanDisk's revenue this year. According to Mehdi Hosseini of Susquehanna, the iPhone 6 will be a "more meaningful product refresh" of the flagship. Since SanDisk is a key embedded supplier to Apple, it could see growth once again from this customer when the product refresh happens later this year.

Also, SanDisk has strengthened its strategic position in the Chinese mobile market with several design wins at top China OEMs. SanDisk's iNAND and iNAND MCP solutions are being sold to all major smartphone vendors in China.

Bottom line
SanDisk has delivered solid returns to investors over the last year. This is likely to continue in the future, driven by the company's laser-like focus on innovation and well-to-do customers. So, investors should definitely consider adding SanDisk to their portfolios.