Half the Fixed Costs, Whatever You TakeNarrow moat

Sandisk (SNDK) — moat facet

Sandisk pays half the fixed costs of eight fabs whether or not it takes a single wafer: a fab's operating leverage, without a fab's ability to idle a line.

1. ReportedThe obligation is unconditional and disclosed as such: variable costs are paid against a rolling three-month forecast that is binding and cannot be cancelled, and "the Company is obligated to pay for half of Flash Ventures' fixed costs regardless of the output the Company chooses to purchase." Flash Ventures has historically operated at approximately 100% of its manufacturing capacity.
   Sandisk Corporation, Form 10-K FY2026 — Note 10, Related Parties and Related Commitments and Contingencies, and the related Item 1 and Item 7 disclosure on Flash Ventures. Sandisk procures all of its flash-based memory wafers from Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd.; it holds a 49.9% ownership interest and Kioxia 50.1% in each. Wafers are manufactured by Kioxia at its wafer fabrication facilities in Japan using equipment individually owned or leased by each Flash Ventures entity; each entity purchases wafers from Kioxia at cost and resells them to Sandisk and Kioxia at cost plus a markup, with each partner generally entitled to 50% of output. The facilities are Y3 (Flash Partners, 2004), Y4 (Flash Alliance, 2006), Y5 (Flash Forward, 2010), New Y2 (production from 2016), Y6 (2018), K1 at Kitakami (2019), Y7 (2022) and K2 at Kitakami, whose output began in the year ended 3 July 2026. Sandisk is obligated to pay for variable costs based on a rolling three-month forecast, and purchase orders placed with Flash Ventures for up to three months are binding and cannot be cancelled; it is obligated to pay for half of Flash Ventures' fixed costs regardless of the output it chooses to purchase, and is committed to fund 49.9% to 50.0% of each entity's capital investments where operating cash flow is insufficient. Flash Ventures has historically operated at approximately 100% of manufacturing capacity; during 2026, 2025 and 2024 Sandisk temporarily reduced its utilisation and incurred costs of $11 million, $75 million and $249 million respectively, recorded as charges to cost of revenue. It participates in common R&D activities with Kioxia and is contractually committed to a minimum funding level, with R&D commitments due for 2027 of $138 million. Sandisk accounts for its ownership under the equity method; the entities are VIEs and Sandisk determined it is not the primary beneficiary of any of them, concluding on its 49.9% ownership, the voting structure and the manner in which day-to-day operations are conducted that it lacked the power to direct most of the activities that most significantly impact economic performance. Its 49.9% interest in the earnings of the entities is recognised one quarter in arrears in Other income (expense), net. Summarised financial information for the ventures: net sales of $2,775 million, $2,315 million and $2,252 million and net losses of $85 million, $63 million and $9 million for 2026, 2025 and 2024, with a gross loss of $93 million in 2026; total assets $7,320 million and total net equity of investees $1,025 million. Notes receivable and investments in Flash Ventures totalled $679 million. Sandisk made net payments to Flash Ventures of $3.6 billion, $3.4 billion and $3.4 billion in 2026, 2025 and 2024 and received distributions of $107 million and $176 million in 2026 and 2025. Maximum estimable loss exposure is $2,897 million: notes receivable $577 million, equity investments $102 million, operating lease guarantees $923 million and inventory and prepayments $1,295 million. Flash Ventures sells to and leases back a portion of its tools from a consortium of financial institutions; Sandisk guarantees half of all outstanding obligations under each lease agreement, totalling JPY149.0 billion or $923 million, in annual guarantee instalments of $378 million in 2027, $245 million in 2028, $126 million in 2029, $96 million in 2030 and $78 million in 2031. Prepayments toward Sandisk's share of future building depreciation of $840 million remain to be credited against future wafer purchases, with a further $402 million committed through fiscal 2035. On 29 January 2026 the FAL and FPL Second Commitment and Extension Agreements extended Flash Alliance and Flash Partners from 31 December 2029 to 31 December 2034, so that all three ventures co-terminate on that date; an Agreement to Enhance Collaboration commits Sandisk Technologies to pay Kioxia $1.2 billion over 2026 through 2029 in consideration of Kioxia's manufacturing services and the continued availability of supply, amortised straight-line into cost of revenue. On expiry each entity commences a wind-up and is dissolved, with net proceeds distributed in kind or cash pro rata. Flash Ventures-related commitments total $6,559 million: $2,627 million in 2027, $2,577 million in 2028-2029, $1,318 million in 2030-2031 and $37 million beyond. — FY2026 · publ. 2026-08-17 · source ↗
2. ReportedThe obligation is unconditional and disclosed as such: variable costs are paid against a rolling three-month forecast that is binding and cannot be cancelled, and "the Company is obligated to pay for half of Flash Ventures' fixed costs regardless of the output the Company chooses to purchase." Flash Ventures has historically operated at approximately 100% of its manufacturing capacity. That cla...
   Sandisk Corporation, Form 10-K FY2026 — Note 10, Related Parties and Related Commitments and Contingencies, and the related Item 1 and Item 7 disclosure on Flash Ventures. Sandisk procures all of its flash-based memory wafers from Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd.; it holds a 49.9% ownership interest and Kioxia 50.1% in each. Wafers are manufactured by Kioxia at its wafer fabrication facilities in Japan using equipment individually owned or leased by each Flash Ventures entity; each entity purchases wafers from Kioxia at cost and resells them to Sandisk and Kioxia at cost plus a markup, with each partner generally entitled to 50% of output. The facilities are Y3 (Flash Partners, 2004), Y4 (Flash Alliance, 2006), Y5 (Flash Forward, 2010), New Y2 (production from 2016), Y6 (2018), K1 at Kitakami (2019), Y7 (2022) and K2 at Kitakami, whose output began in the year ended 3 July 2026. Sandisk is obligated to pay for variable costs based on a rolling three-month forecast, and purchase orders placed with Flash Ventures for up to three months are binding and cannot be cancelled; it is obligated to pay for half of Flash Ventures' fixed costs regardless of the output it chooses to purchase, and is committed to fund 49.9% to 50.0% of each entity's capital investments where operating cash flow is insufficient. Flash Ventures has historically operated at approximately 100% of manufacturing capacity; during 2026, 2025 and 2024 Sandisk temporarily reduced its utilisation and incurred costs of $11 million, $75 million and $249 million respectively, recorded as charges to cost of revenue. It participates in common R&D activities with Kioxia and is contractually committed to a minimum funding level, with R&D commitments due for 2027 of $138 million. Sandisk accounts for its ownership under the equity method; the entities are VIEs and Sandisk determined it is not the primary beneficiary of any of them, concluding on its 49.9% ownership, the voting structure and the manner in which day-to-day operations are conducted that it lacked the power to direct most of the activities that most significantly impact economic performance. Its 49.9% interest in the earnings of the entities is recognised one quarter in arrears in Other income (expense), net. Summarised financial information for the ventures: net sales of $2,775 million, $2,315 million and $2,252 million and net losses of $85 million, $63 million and $9 million for 2026, 2025 and 2024, with a gross loss of $93 million in 2026; total assets $7,320 million and total net equity of investees $1,025 million. Notes receivable and investments in Flash Ventures totalled $679 million. Sandisk made net payments to Flash Ventures of $3.6 billion, $3.4 billion and $3.4 billion in 2026, 2025 and 2024 and received distributions of $107 million and $176 million in 2026 and 2025. Maximum estimable loss exposure is $2,897 million: notes receivable $577 million, equity investments $102 million, operating lease guarantees $923 million and inventory and prepayments $1,295 million. Flash Ventures sells to and leases back a portion of its tools from a consortium of financial institutions; Sandisk guarantees half of all outstanding obligations under each lease agreement, totalling JPY149.0 billion or $923 million, in annual guarantee instalments of $378 million in 2027, $245 million in 2028, $126 million in 2029, $96 million in 2030 and $78 million in 2031. Prepayments toward Sandisk's share of future building depreciation of $840 million remain to be credited against future wafer purchases, with a further $402 million committed through fiscal 2035. On 29 January 2026 the FAL and FPL Second Commitment and Extension Agreements extended Flash Alliance and Flash Partners from 31 December 2029 to 31 December 2034, so that all three ventures co-terminate on that date; an Agreement to Enhance Collaboration commits Sandisk Technologies to pay Kioxia $1.2 billion over 2026 through 2029 in consideration of Kioxia's manufacturing services and the continued availability of supply, amortised straight-line into cost of revenue. On expiry each entity commences a wind-up and is dissolved, with net proceeds distributed in kind or cash pro rata. Flash Ventures-related commitments total $6,559 million: $2,627 million in 2027, $2,577 million in 2028-2029, $1,318 million in 2030-2031 and $37 million beyond. — FY2026 · publ. 2026-08-17 · source ↗
3. ReportedIt reduced its utilisation of its share of capacity in 2024, 2025 and 2026, and charged $249 million, $75 million and $11 million respectively to cost of revenue for the privilege. The 2023 version, when the business was inside Western Digital, was $296 million of unabsorbed overhead plus $108 million of inventory write-downs.
   Sandisk Corporation, Form 10-K FY2026 — the separation, financing, Nanya investment and share repurchase disclosures. Prior to 21 February 2025 Sandisk was wholly owned by Western Digital Corporation; on that date WDC distributed 116,035,464 shares, or 80.1%, of Sandisk's outstanding common stock to WDC holders at one-third of a share per WDC share, retaining 28,827,787 shares or 19.9%, and Sandisk began trading on the Nasdaq Global Select Market under SNDK on 24 February 2025. WDC has since disposed of shares through debt-for-equity exchanges in June 2025 and February 2026 and has announced it expects to monetise all remaining shares by the end of 2026. Subsequent to the separation Sandisk conducted a quantitative impairment analysis which indicated the carrying value of its reporting unit exceeded fair value, and recorded a goodwill impairment charge of $1.8 billion in the year ended 27 June 2025; no impairment was recorded in fiscal 2026. On 21 February 2025 Sandisk entered a Loan Agreement comprising a seven-year $2.0 billion Term Loan B facility and a five-year $1.5 billion revolving credit facility, borrowing $2.0 billion and making a net distribution payment of $1.5 billion to WDC; on 4 March 2026 it settled the remaining Term Loan principal in full using cash on hand, recognising a $46 million loss on debt extinguishment, and had drawn no amounts under the revolver as of 3 July 2026. In March 2026 Sandisk made an equity investment in Nanya Technology Corporation, a publicly traded entity with a readily determinable fair value; unrealised gains of $807 million for the year were recognised through the statement of operations and the marketable equity securities are subject to a statutory lock-up period of three years during which Sandisk is restricted from transferring or selling the shares, subject to limited exceptions under applicable Taiwanese law. On 30 April 2026 the board approved a $6.0 billion share repurchase programme and on 5 August 2026 an additional $14.0 billion programme; during the year ended 3 July 2026 Sandisk repurchased 3 million shares for an aggregate purchase price of $4.5 billion, with $1.5 billion remaining available at year end. Subsequent to the balance sheet date the Company entered into two additional New Business Model agreements with an aggregate transaction price of $31.3 billion, providing for customer purchase commitments for specified product volumes over multi-year periods supported by financial guarantees including cash deposits and other financial instruments. Sandisk also states it expects AI-driven demand to persist through calendar year 2027 and beyond, and that it anticipates increased capital investments in fiscal 2027 as it transitions to newer nodes. In September 2024 SanDisk China completed the sale of 80% of its equity interest in SanDisk Semiconductor (Shanghai) to JCET Management, resulting in a pre-tax gain of $34 million and leaving a 20% retained interest; the January 2025 Equity Transfer Agreement transferred WDC's interest in the Unis Venture, 48% owned by Sandisk and 52% by Unis, which markets and sells Sandisk products in China. — FY2026 · publ. 2026-08-17 · source ↗
4. ReportedThe 2023 version, when the business was inside Western Digital, was $296 million of unabsorbed overhead plus $108 million of inventory write-downs. Notice the direction of that series.
   Sandisk Corporation, Form 10-K FY2026 — the separation, financing, Nanya investment and share repurchase disclosures. Prior to 21 February 2025 Sandisk was wholly owned by Western Digital Corporation; on that date WDC distributed 116,035,464 shares, or 80.1%, of Sandisk's outstanding common stock to WDC holders at one-third of a share per WDC share, retaining 28,827,787 shares or 19.9%, and Sandisk began trading on the Nasdaq Global Select Market under SNDK on 24 February 2025. WDC has since disposed of shares through debt-for-equity exchanges in June 2025 and February 2026 and has announced it expects to monetise all remaining shares by the end of 2026. Subsequent to the separation Sandisk conducted a quantitative impairment analysis which indicated the carrying value of its reporting unit exceeded fair value, and recorded a goodwill impairment charge of $1.8 billion in the year ended 27 June 2025; no impairment was recorded in fiscal 2026. On 21 February 2025 Sandisk entered a Loan Agreement comprising a seven-year $2.0 billion Term Loan B facility and a five-year $1.5 billion revolving credit facility, borrowing $2.0 billion and making a net distribution payment of $1.5 billion to WDC; on 4 March 2026 it settled the remaining Term Loan principal in full using cash on hand, recognising a $46 million loss on debt extinguishment, and had drawn no amounts under the revolver as of 3 July 2026. In March 2026 Sandisk made an equity investment in Nanya Technology Corporation, a publicly traded entity with a readily determinable fair value; unrealised gains of $807 million for the year were recognised through the statement of operations and the marketable equity securities are subject to a statutory lock-up period of three years during which Sandisk is restricted from transferring or selling the shares, subject to limited exceptions under applicable Taiwanese law. On 30 April 2026 the board approved a $6.0 billion share repurchase programme and on 5 August 2026 an additional $14.0 billion programme; during the year ended 3 July 2026 Sandisk repurchased 3 million shares for an aggregate purchase price of $4.5 billion, with $1.5 billion remaining available at year end. Subsequent to the balance sheet date the Company entered into two additional New Business Model agreements with an aggregate transaction price of $31.3 billion, providing for customer purchase commitments for specified product volumes over multi-year periods supported by financial guarantees including cash deposits and other financial instruments. Sandisk also states it expects AI-driven demand to persist through calendar year 2027 and beyond, and that it anticipates increased capital investments in fiscal 2027 as it transitions to newer nodes. In September 2024 SanDisk China completed the sale of 80% of its equity interest in SanDisk Semiconductor (Shanghai) to JCET Management, resulting in a pre-tax gain of $34 million and leaving a 20% retained interest; the January 2025 Equity Transfer Agreement transferred WDC's interest in the Unis Venture, 48% owned by Sandisk and 52% by Unis, which markets and sells Sandisk products in China. — FY2026 · publ. 2026-08-17 · source ↗

• Sandisk Corporation Form 10-K, FY2026 (SEC EDGAR)