Opinions: Shooting Yourself in the Foot - Commoditisation in the Tech World...

The news today that SanDisk, after announcing yet more significantly down financial results, is to lay off 15% of its workforce globally is perhaps not a huge shock to those who have been watching the company for some time. Some commentators have suggested this is another sign of the impact of the global credit crunch and economic crisis, however personally I think this news has its roots elsewhere.

As a PR Consultant, I was proud to handle the SanDisk account for a few years, and working for the company remains one of my highlights of my CV. One key reason for this is the sheer innovation the company is responsible for – the founders, Eli Harari and Sanjay Mehrotra INVENTED FLASH MEMORY. They INVENTED it. I still struggle to comprehend quite how significant this is – even having been fortunate to meet both during my time handling the account. Sanjay himself holds something like three hundred patents on Flash technology. Incredible…

However, despite inventing the backbone of much of the world’s modern technology, the cornerstone of storage, the company somehow managed to make its very own invention effectively worthless. Or at best a commodity.

When I first worked for SanDisk, it was February 2005, and a gigabyte of storage (at the time solely the domain of the professional photographer), would set the consumer back the best part of a hundred and fifty sheets at best. Fast forward to today and you’re looking at less than a tenner a gig – a phenomenal drop.

Additionally, you try buying a new mobile phone these days without getting a free 1GB sized memory card. I was at a sales conference in 2006 when one of the guys from the mobile division said the core aim of the next year was getting Nokia on board, to bundle SanDisk cards with mobile handsets. Many of the distributors rightly showed strong concerns that this would commoditise flash memory – and a year later, at the 2007 conference, many were dismayed by the same presenter proudly boasting that 1GB microSD cards would be given away with the majority of new handsets. Resellers and distributors felt their huge quantities of after-market stock were now effectively worthless.

Having taken flash outside of the digital photography market and into lifestyle (MP3, laptops, USBs – not to mention mobile), SanDisk and its competitors have managed to commoditise a valuable asset. Samsung’s aborted acquisition of SanDisk earlier this year points toward this also – the company has too volatile business to be reassuringly profitable in the future, due almost solely to managing to turn its invention, flash, from being a highly valuable necessity into an effectively worthless freebie.

Whether SanDisk can turn things around will be an interesting thing to watch and for sentimental reasons I sincerely hope it does. To invent something as significant as flash deserves all the respect Eli and Sanjay enjoy. To commoditise it however is a business disaster.

Well, the hard drive guys isn't having it much easier, although in fairness, hard drives never seem to drop below a certain price point, capacity just goes up.

I think you're forgetting one thing here, SanDisk holds all the patents, so for every piece of flash memory made and sold, a percentage is going to SanDisk. That alone will keep the company afloat for a long time. However, I think they've tried to expand into other areas outside of their expertise and made a few mistakes.

I would love to see some more MP3 players from SanDisk, as even the old Sansa I have compares well to more recent devices from other companies. They need to listen a bit more to customer feedback on these things and maybe even pay up for using some other companies patents to be able to offer better products. Of all of the companies trying to compete with Apple and the iPod I think SanDisk has the best chance of succeeding.