Sandisk Corporation (SNDK) Earnings Call Transcript & Summary

Okay, great. Good afternoon, everyone. Great pleasure. It's a great pleasure -- just to remind everyone, I'm Mark Newman from U.S. -- Bernstein's U.S. IT hardware analyst. Great pleasure to welcome David Goeckeler, CEO of Sandisk.

Thank you, Mark.

And also Luis Visoso, CFO.

Thank you.

Thanks very much for joining us today.

Well, thanks for having us. We're Happy to be here.

And also, just before I get started, I want to wish you a happy birthday.

Thank you.

1 year yesterday, I believe.

Yes, that's right.

Yes, that's right.

From the spinoff?

Yes, yes, quick year.

And essentially public listing of -- re-public listing.

Re-public listing.

Of Sandisk. It's been a long ride.

Yes. It's been a lot of fun. Yes. It's been a lot of fun. Lot of fun.

Fantastic.

Just want to give the safe harbor, if you don't mind?

Absolutely, go ahead.

So we will be making forward-looking statements in today's discussion based on management's current assumptions and expectations, including with respect to our technology and product portfolio, our business plans and performance, market trends and opportunities and our future financial results. These forward-looking statements are subject to risks and uncertainties. We assume no obligation to update these statements. Please refer to our annual report and forms 10-K and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. We will also be making reference to non-GAAP financials and a reconciliation of our GAAP and non-GAAP financial results can be found on our website.

Great. Thanks very much. So to kick off, I would just like to touch on the -- this crazy pricing environment we've got currently in NAND flash. And on the earnings call -- the last earnings call, I asked you about long-term agreements, given how fast maybe prices are rising? And given the shortage in supply in the market, there's some pros and cons to long-term agreements. So I remember on the call, you talked about how long-term agreements have transitioned from price negotiating tools to more like critical supply assurance mechanisms, I believe, is how you put it on the call. Just maybe if you could just talk a bit more about how you think about those pros and cons? Because lots of investors are asking about are you signing up to LTAs given that pricing is going up 50%, 60% a quarter? Is there going to be any chance that do you have any hard price caps that restricts your upside further down the line? But of course, there's also some benefit to having a long-term agreement, which is if you can have more stability longer term. So just think those pros and cons is obviously a hot topic on investors' minds right now given the current pricing environment.

Yes. I mean there's a lot to talk about here. So before we get into the specifics on kind of agreements and what we're trying to do, let's go up a level. And really, what's happening here is we're -- I think the NAND market is going through some fundamental changes, right, fundamental structural changes. And it's catalyzed by something we started talking about not this past earnings call but the one before that. If you look at calendar year 2016, now you're going to see data center is the largest market in NAND. Over 2 forecast cycles now, we've gone from believing that market was going to grow mid-20s to mid-40s to now mid- to high 60s in calendar year '26. So clearly, the demand side is moving very rapidly. And that -- those customers are becoming the largest consumers in the market. And that's a big change of a market that for the last 10, 15 years has been a device market, predominantly. And so what that is catalyzing is thinking about this supply -- how do we get supply-demand aligned? How do we do planning? How do our customers do planning? What's the business practices about? How we work with our customers? And kind of all that is changing very rapidly in this environment. So it's not just the price is moving very quickly. I mean price is just an artifact if we have a market. A market has supply and demand. It's not either short or long or anything else. It's just a market and that rationalizes every single day and the way supply meets demand is through price. So things are very dynamic right now, and that's kind of catalyzing people in the market to think differently about how we're going to do business together. And I would contend that as an extraordinarily positive development because this has traditionally been a market where on the supply side, we try to project what demand is going to be, right? And we've been very transparent about what we're investing to. We launched the company a year ago. We went on stage. We said...

A year and 1 day.

1 year and 1 day. So like something like a year and 3 weeks ago or something we went on stage and said, "This is what we believe about growth in the market. This is what we're investing behind mid- to high-teens bit growth. We're putting billions of dollars behind that thesis. We're putting hundreds of millions of dollars of R&D behind that thesis. And then we're going to see how it plays out, right?" And we were bullish on the market a year ago. We got some pushback on that. Market has turned out -- we thought the market was going to be undersupplied through the end of '26. We got some pushback on that, and we're kind of seeing how that is all being worked out right now. But I think this kind of now turmoil in the market is causing -- quite frankly, especially on the data center player side, if you look at what they're going to need over the next several years in supply, right, what their demand is going to be. And they're being more transparent with us on this because we're qualifying new products for them. We've been very -- we've been talking about new enterprise SSDs we've been building. We've been qualifying a new hyperscalers and so they come to us with their demand forecast, right? And so this isn't like next quarter or what's happening right now, but you look at the demand forecast out in '26, '27, '28. And there's some pretty impressive demand numbers. And our reaction to that is we're not going to be able to supply what you're asking for with the way the market is working now, which basically we just project what we think demand is going to be. We invest to that. And then really every quarter, the world's NAND supply is sold, and there's a clearing price every quarter. That's kind of the way the market's worked. And I think what the realization is, is giving that there's a new buyer, new use case, new demand driver, new economics of that buyer versus other buyers perhaps. It's kind of catalyzing this change for us to think about how do we get the supply and demand equation better aligned, right? And from our perspective, that is really, really positive. Because if we have a better view of demand, it's more likely we're going to get it right as far as what we invest to and they give us a better view of their demand. It's more likely they're going to get what they need, than not get what they need. And so that's catalyzing this conversation, which is, okay, how do we rationalize this into an agreement that lasts longer than a year or last longer than a quarter for pricing? And we're working through that, right? And we think that's extremely positive as far as what we're trying to do in our business is we're trying to obviously optimize the value of what we're producing every single day. And we want to dampen the volatility in this industry, right? We want to stop going through these kind of very episodic -- we're oversupplied, we're undersupplied all this kind of stuff and kind of smooth that out a lot more because we think what we build is extremely valuable. And if we can get more consistent in the market, we think that's good for everybody. So that's kind of what we're working through. Luis is the one that's like on point on talking to everybody about these and putting it together. So I'll let him talk a little bit more about how we're thinking through them.

Yes, Mark, Success for us is a sustainable and attractive financial model, right? And how do we make it over longer periods of time. It's not about maximizing every single dollar, but making sure that over time, we're maxing that value. And on price, to your question, right, we may have a portfolio of fixed pricing, variable prices that ensures that we can perform very well in an upmarket and very well in a down market. and outperform most times. So that's what we're working to deliver. Think about our portfolio of outcomes with different customers, with different nodes that maximize their value in any possible scenario.

And do you get any kind of -- if your customer is giving you a projection of 60% growth, 50% growth over the next 1 year, 2 years, 3 years or whatever time horizon, what kind of guarantee do you have? Do you have some kind of guarantee that they're going to buy that much? Is there appetite for prepayment from some of your customers? Is there any kind of level of commitment? Or is it more just based on their projections?

Yes. So I'll say -- I mean, first of all, I think everybody comes into this conversation from a very, very good place saying like, we want to work this out. Like we want to get to a model, a business model that works for everybody because we believe we build a very valuable product. They believe we build a very valuable product. Their companies are some of the most spectacular companies that have ever been created. Their business models are incredible. They don't want to be short of components. And so everybody comes into this from the right place and it really is just trying to figure out what is that model where we feel like the economics are attractive for us on a long-term basis. They feel like the economics are attractive for them on a long-term basis. And then we make sure that there's going to be -- things are going to get tough at some point, right? There's going to be quarters where things maybe are not what we thought they were going to be. But our business as such, like we have to build a fab. And when we turn the fab on wafers come out and they come out every single day, and there's more tomorrow than there was yesterday because we're investing for growth. So what we're looking for them is what Luis said, that predictable, sustainable, growing, financially attractive demand, and it's how do we put a business construct around that, whether it's 1 year, 2 years, 3 years, up to 5 years, that we both have confidence we're going to get what we need out of that. They're going to get what they need, we're going to get that predictable demand, growing demand that we can run our business in a very, very financially attractive way. And I think we're working through that right now. In many ways, we're kind of inventing a business model. And look, we're very aware of what's been tried in the past, what works, doesn't work. I think kind of the premise of your original question, is this going to be a regrettable at some point? And we're pretty convinced that it's not going to be the case, right? We're trying to maximize these 2 things, as Luis said, we need to get very attractive financials for our business, and then we need to sustain that.

Predictability and economics basically, these are 2 things.

Predictability, consistency. Remember, the fab runs every day. You can't take a quarter off. You can't take 2 quarters out. That's where the cycle comes from, right? And so -- and customers, I mean, again, they're not -- everybody comes to this from a good place. They're not necessarily trying to create issues for us. They just don't run our business. We run our business. So it's about understanding what each of us need out of this and putting a business practice around that, that works for everyone. And look, we're a deep participant in the market, right? We have very, very unique insights on what people are willing to pay for different products, what pricing is going to be in the future. And so I think to trust that we're going to like set this up in a way where it's attractive for everybody involved.

Do you ever really expect that prices will be up this fast? When we talked 6 months, 12 months ago, of course, you were bullish. I was also bullish. However, it's -- I think it's okay. Things turned out to be, I think, a lot better than we all expected. Is that not true?

I would say it's happened very rapidly. I mean in many ways, I think about our business is like this coiled spring, right? We have been investing in R&D for 25 years to build some of the most sophisticated semiconductor technology in the world, 3D, NAND, right? It's incredible technology. And we have 25 years of accumulated experience of doing that. We've got 25-plus years of spending billions of dollars on fabs and infrastructure. I mean we have some of the most spectacular fabs in the world in Japan with our partner. And for a very long time, the value of that has not really been recognized. I mean I know this very clearly because when I took this job at the separation of Western Digital, everybody told me, "Are you crazy? Why are you going into the NAND business? Nobody's ever made any money." And I had the conviction that this was a really, really valuable franchise if we could get the business model right, if we could get the economics correct with our customers. We were clearly providing something the world needed. It was clearly very difficult. It was clearly very capital intensive. And I think that because of these changes in the market, I think this cannot be underestimated. The biggest thing I see right now is a lot of people with a lot of old game film on the way memory works. "Oh, this is just a cycle. It's going to come back. I've been doing this for 30 years. Let me tell you what's going to happen in the future." And we look at that and go, maybe it's a luxury we haven't been in this industry for 30 years. Because when I look at it, the buyer is different. The use case is different. We're in one of the most spectacular deployments of AI. I mean it's incredible what's going on around us. So I think just waiting for the past to come back is not a very good strategy. And what we're really trying to stay very close to our customers, and they get it. It's like, no, look, we need to figure out a way that we can drive this business forward in a different way. This is a spectacular business and a spectacular industry, and if we get the business practices right, everybody is going to get what they want. Everybody is going to be a winner here. And we're not -- we're going to kind of get out of this, hey, let's try and guess what demand is. Let's try to guess what supply is, let's try and figure out -- because we have to invest years ahead of time. And once we invest, it's like a 10-year horizon, we need to get that consistent supply. You build the fab, you fill it with equipment, you do all the R&D, wafers come out every single day. Every single day, the wafers are coming out, right? You got to sell them. And so I think that what's happening right now, look, you see all the artifacts, the pricing and did you think it would happen all this fast. And I think what you're seeing happen is a very big, very liquid market with some of the most spectacular technology companies on earth are all transforming that market in a very short period of time to get what they need out of it in the future. Because in the future, it's more valuable than it is in the present. And nobody wants to be in a situation where I can't get what I need. So we have to figure out a different way to run this business, and we're doing that in real time.

Is the calculus now changing the gap between the demand and supply being seemed like so wide right now. Is it now changing the catalyst where companies such as Sandisk and your partner, Kioxia, considering to actually add capacity? Because so far, there's not been much.

No, no, no.

There's not -- actually in the NAND industry, there's not much capacity additions, but perhaps besides YMTC in China adding a little bit, there's actually not much capacity in NAND flash coming online. So is that something you're looking at given how strong demand is right now?

So -- again, let's go back to our Investor Day. We got up on stage and said we're going to invest billions of dollars in this business. Hundreds of millions of dollars in R&D every year. Some of the most brilliant technologists around and we're going to invest all that to grow high teens for as far as the eye can see. It's a pretty big commitment. So we are spending a lot of money. We are spending. And again, up until like July or August, people had conviction that like in the December quarter, pricing was going to be down, right? That was the prevailing wisdom. I had people calling me up and saying, "Oh, you're not going to make your December numbers because pricing will be down in December, the market is going to be oversupplied." So it's a little quick like a couple of months later to say, are you going to like go in for billions more. I mean I think what we need to do is we need to get this conviction around what is the long-term demand. And the way we get that conviction is having the conversations we talked about earlier. So we continue to invest for that bit growth. We're very comfortable with that. By the way, I'll challenge your terms a little bit. I mean markets don't really have shortages. They just have balance. You can lower the price of any product and demand will go up. That doesn't mean it's an economic thing you want to invest behind. So we need to understand what is the sustained growth rate of attractive business.

To maximize profit.

To maximize, yes, to maximize the value of the franchise we own, that's our job, right? We have a responsibility to do that.

Makes sense. On data center growth, can we talk more specifically about Sandisk mix? Because -- where are you today? And I know data center is increasing as a percentage of your mix. Can you talk about quantitatively or qualitatively, like where you are, where you expect to get to in terms of your exposure to data center?

Yes. So I'll talk about it a little bit. Luis has a lot of detailed comments on that as well. Look, I kind of see 3 like big arcs of horizon of Sandisk, right? Sandisk -- I wasn't around at the time, I have an enormous amount of respect for the people that were, I mean, Sandisk was a tremendous consumer franchise, IP franchise. It really built its name on that. I think you can look back at the period of time that Sandisk was a part of Western Digital was the rise of the client business. In that respect, it makes a lot of sense to me. I mean NAND was replacing the hard drive in the PC. We exited. Sandisk now sits today is like 25% share in the Edge business. And I think the third arc going forward is that arc of building out the enterprise business and the data center business. We basically been at that since I came in, right, reorganized the company and put some different people in place and we're making -- we're very, very optimistic where we are with that product portfolio. And we've been transparent about that. We -- 2 quarters ago, I think we were like low mid-20s sequential growth in data center, last quarter, it was 64% sequential growth in data center. And we see that pace increasing throughout the rest of the year. So we feel really good. And in many ways, it's the strength of that portfolio, that again is part of what's catalyzing these conversations on the more long-term business agreements because people see that, that enterprise SSD portfolio is very, very valuable, right? So I think you can assume that going forward, we're very confident of our position in that market. We're always going to have a balanced portfolio, right? We're always going to have a balanced portfolio. But it's good to have a very strong market to grow into as a business owner.

Yes, no, I think you covered it, David. I think the only thing I would add is just as data center is -- the market is exploding, we're bringing amazing technologies to the market, right, with big sale, and we have our Stargate products. So everything is happening at exactly the right time, and that gives us momentum.

Actually, on your Stargate comment, can you talk a bit about this Stargate, 128 terabyte Stargate, QLC eSSD, I believe it is, now in qualification, do you think that unlocks new incremental TAM as it potentially replaces hard disk drive with the QLC?

I was with you right until you said the hard disk part, all right. Look, there's 2 big products that are driving the data center business right now on enterprise SSD. It's a compute focused drive, 8-terabyte 16-terabyte, PCIe Gen 5, very fast interface, that product. We have a great product in that part of the market we introduced a couple of years ago that's driving all this growth we talked about. Now we have a new product coming out, which is more of the storage side of it. So 64 to 128, 256, 512, even terabyte is on the road map. That product is what we code named Stargate. That is a complete clean sheet ASIC build for that. We have lots of runway. We introduced that 128 level is what we're qualifying and then we'll start rolling that forward. And there's a lot of pieces that make up that, right? It's BICS 8 to start with, which is phenomenal QLC performance even on BICS 8, 2-terabit die, right? So you can -- the form factor is not that big. You got to have a high-density die. Then it's the ASIC and all the work that's been done over the last 3 to 4 years to build that. So again, as Luis said, all those pieces are now coming together in a world-class product and the market is responding very -- our customers are responding very well to that. That product has not started shipping for revenue yet. So all this growth we've talked about has been without that product. So when that kicks in, we expect that will, of course, drive better growth for us. Now is that product replacing HDDs? Is that what's driving the growth? I'm not a big believer in that thesis.

That's more the -- that would go more into the KV cache, the separate storage trade that NVIDIA is talking about?

That would more mean the compute one. This is just a -- it's a storage class like the data lake you're going to create.

Got it. The storage, storage equipment, okay. Got it. Also, you're talking about BICS 8. BICS 8 has been very successful so far. There's been some recent commentary, chatter -- market chatter about you accelerating BICS 10 technology to 2026 to meet hyperscaler needs. Anything you could talk about BICS 10?

I think you called that right, it's chatter. Like I mean we have a BICS 8 plan. We've been very consistent with it. We expect to exit this fiscal year with it, the predominant node in our portfolio. BICS 10 is a great node. Don't get me wrong. We're not accelerating BICS 10 to meet demand. We can meet the demand and the bit growth we need with the CapEx plans and BICS 8 plans that we have. Very -- as you can imagine, a very sophisticated fab plan behind month by month, what is the nodal mix going to be. And there's a lot of work that goes into making sure that's set up right and it's not something you can change overnight. But we don't -- look, BICS 10 is a great node. Don't get me wrong. Like we're always working on multiple nodes. I mean, that's one of the great things in NAND. I mean, I think this is why one of the reasons the NAND market is so spectacular. I mean we just have Moore's Law, if you want to call it that, is alive and well. There's a lot of R&D productivity that we can put into this market. And that's a big part of NAND now becoming a big part of the AI architecture. It's the most scalable semiconductor technology. It's inevitable that was going to become part of that architecture as models get bigger, caches get larger, content lengths get bigger, you have to bring the most scalable semiconductor technology. That's not -- there's no negative comment on DRAM or HBM. That's like brilliant technology. But at some point, you need the scale and that becomes a big tailwind for NAND. And I think for the last maybe up until 2 quarters ago, everybody was asking me, does AI really impact NAND? And I think that question is kind of being put to bed now. The answer to that it's like definitely yes.

I think Jensen Huang put that.

Well, yes, he -- we completely agree that like -- yes.

Switching gears a little bit. How do you view the competitive threats from the Chinese, so YMTC in China? And there was some -- there's been some, again, market chatter, although I think this time, it is actually backed up, this market chatter, to some extent because there was an announcement from the Pentagon saying that YMTC and CXMT have been removed from the list of entities that are working with the Chinese military, but then that announcement was then rescinded, I understand. So slightly confused about what's going on there. I doubt you want to talk too much about that specifically. But just how do you think about the Chinese -- that competitive set and how that may change going forward?

So I mean, a couple of comments. I mean anybody that's in this business is very capable, right? So we take all of our peers very, very seriously. When we talk about our market numbers of supply-demand, they're completely in all of our numbers, right? And so we have factored in. Again, this is why we say things like we're very confident with mid- to high-teens bit growth because we're factoring all the stuff you're talking about goes into our thinking and our equations. So -- the thing -- you're right. I mean, I certainly can't speak for the U.S. government. I take it at their word. That was a DoD list. It was retracted right away. It wasn't the stuff out of commerce or export controls and all that. And I'm sure that will get clarified going forward.

Got it. Can we talk a little bit about HBF, High Bandwidth flash. You recently formed this partnership with SK hynix on HBF. Can you talk -- first of all, any progress you can talk about on HBF and I also wanted to ask how is your partnership with SK hynix? Like how do you actually collaborate with them?

So if you -- again, you started with happy birthday. So if I look back on what -- we made a lot of progress during our first year. And one of the things I may be the happiest with is the progress we've made on HBF. So a year ago, this week or whatever we got on stage and we introduced this whole concept of High Bandwidth Flash. And let's just be kind about it. We got some people that were a little bit skeptical about what we were saying, right? And what are these guys talking about? Is this real? And no, we were very serious about it because this came out of some work of our engineering team. Again, I think one of the things about Sandisk heritage is our R&D prowess, a lot of -- company really known for innovation. And a lot of our -- some of our engineers started thinking a number of years ago when they -- I mean they saw AI. They're very close. And they kind of have this conviction, hey, we've got very scalable technology or how do we make it -- how do we apply it to AI. And they started thinking about these questions. And if you're a NAND designer, you've kind of spent the last 25 years of like being told constantly give me more density. Density, density, density. I want more density. Give me more density. And I mean, okay, 2D, 3D, like memory holds closer together, like all kinds of crazy stuff to always deliver more density. But then if you actually start asking those same people, what if you start thinking about higher bandwidth instead of just more density? What if you start thinking about how could you increase the endurance as opposed to just more density? So people started thinking about those questions. Oh, we actually can come up with some ideas for how to solve those. And out of that comes this idea for high-bandwidth flash. We believe we can take the flash technology we have. Again, the BICS 8 technology we have going to BICS 10, going to BICS 11 and all the whole road map, and we think we can change that by building a new die that is much more suitable for AI. And out of that -- because we believed, I think our R&D team believed that at some point, this AI technology is going to need the density of NAND. And anytime something is 10x something like that's an area worth spending time on because that's a major difference. And so we made a lot of progress. And going into the Investor Day, we talked a lot about do we want to talk about this. And we decided we should talk about it. We're asking people to invest in the company. We're spending time on this. We think we're very optimistic about it. So we started -- we talked about it. And there was a little bit of skepticism at the beginning. One of the companies that wasn't so skeptical was SK hynix. They called us up and said, "Hey, can we work together on this because we think it's a good idea." And that was very important because if you're going to make a market, it's hard to make a market by yourself. It's better if you make a market, you have a ecosystem. And so we're working with them on the specification of how the HBF system would work. What are the interfaces to it, those kind. We're not like collaborating on the die. We're not collaborating on a controller. We're doing all that stuff ourselves. They're doing all their piece. But we're collaborating how HBF would fit into a system. And again, looking back over our first year, I'm just extremely happy about where we sit here a year from now and nobody is asking skeptical questions about HBF. We're talking about how HBF is the future, like bringing -- models have gotten bigger, caches have gotten bigger, content lengths have gotten bigger, number of tokens have gotten bigger, like all this kind of stuff has kind of went in the direction we thought it was going to go kind of came to the point where at CES, somebody very important in the AI world got up and said, "Hey, storage needs to be rearchitected for AI." And we're like, yes, we agree with that. We're kind of -- we're ahead of that a little bit. And so I think it's -- where we've landed after 1 year is, I think, just fantastic. And the relationship with our partner, SK on this technology is great, right? They're working on their NAND stuff, but we're collaborating on the system, which helps everybody adopt it. And we're working with customers on how they could use it in both devices and the cloud. Because again, this is not like we're building a plug compatible piece of technology for something else. The system is going to have to change to accommodate our technology. And to do that, you have to know exactly what the use case is going to be, how is it going to scale, all these kinds of things, and that's quite difficult. And so we're going through that process, and we're optimistic that, that's going to lead to something very interesting, and we'll have more to say about that when we get more details around that. But in the meantime, we build -- we continue to -- we're building the NAND die. We expect to have that towards the end of this year. And then we're working on the controller in the system to put it together. Maybe a year from now, we'll have that. We can put in customers' hands where they can start using the system, kind of understanding of how we work with their infrastructure.

And how is customer interest so far? Have you had already preliminary discussions with customers about this? Or is it more working with the GPU makers at this stage?

No. We've been working with customers for quite some time on this technology and this idea. So it's a long process. It's like pure innovation, right? It's pure like you're building something new. And so it takes a lot of collaboration. We're experts in building storage. They're experts in building data centers or building devices and it's the collaboration of those 2 expertises, putting them together on what's possible to build here that allows us to build a better system, and we're in that process.

Presumably, you still have to work with the GPU makers for this?

Well, yes, we've got to work with the people that are building the infrastructure.

Right, right. What does success look like for HBF? I think you talked before about it's really focused more on inference, not training, is that right?

Yes, it's inference. It's inference. It's not -- look, I mean, nobody would sit up here and say we're going to replace HBM in training. That would be like a crazy thing to say. Like that's like brilliant technology.

Speed requirement.

Yes. But inference is very different. The model is already built. It's a very predictive read. It's a big model. You got to pump it into a CPU somewhere or a GPU. So you can run inference against it. It's a very different kind of problem. And also inferences where you really have to scale, right? You build the model and then you propagate the model and you drive inference everywhere, whether it's on your device, whether it's on your phone, your laptop or in the cloud. If it's in the cloud, you're going to have to scale inference around the globe at incredible levels. And I think that's where -- when you start to talk about technology that's 10x more dense, that has a scalability road map in front of it. Once you hop on that NAND road map, now you're going to get -- you still have those nodal transitions in front of you that is providing you significantly more supply every time we turn the crank on the node. And that's a great place to be if you need a lot of storage and it turns out AI needs a lot of storage.

It does. Certainly sounds very exciting on paper. So I would hope just watching it closely. Hoping to hear more.

Stay tuned. We're excited about.

Yes, yes. Can we -- so I guess my follow-up question was around -- we talked about how strong demand is. And actually, you made the comment, David, about this demand versus supply in the end shipments, there's a clearing price. So in the end...

It's a market. It's a big market.

It's a market. So...

Like it's not -- we don't set the price. The market sets the price.

So my question really is on the demand side and what are you seeing happening there? Because there are some customers that are not going to be able to get enough. I'm hearing that from some of the OEMs. HP just reported yesterday, they talked about how they can't get enough memory that they're lumping DRAM and NAND together. Are you seeing that in the market? Are you seeing that some of the customers that essentially maybe they're not as important as hyperscalers, I'm not sure or they can't -- that's not as important or they can't afford. Are you starting to see some kind of demand destruction because of this higher pricing?

Everybody is important, right? So let's start with that, everybody it's important but I'll let Luis -- he's very close to them.

Yes. So we treat every customer very importantly. Some of them are more willing to talk to us about their longer-term needs. They are willing to make commitments longer term. And some others would prefer to have this quarterly process where we negotiate price every single quarter. And in that process, so you're not going to have all the availability, right? In a market that is tighter, you're going to give preference to those customers with which you have a longer-term agreement and so that's what we're doing. But every day, we're making sure we're allocating the bits to the right places. And if customers are willing to come to us and talk about longer-term pricing, I mean, we're happy to do that. Happy to do that.

Any other long-term opportunities we haven't talked about that you're excited about for Sandisk is going forward that perhaps we haven't talked about or Wall Street is not aware of currently?

Look, I mean, I think our consumer franchise is in fantastic shape. It's an area we're investing in the brand. And I think there is -- I think that that's just a tremendous franchise. People tend not to focus on it as much because the other ones move faster, but we have incredible reach. We have incredible brand power. We're now treating that more like a real consumer business. And so I'm very optimistic about what's going to happen there over the next couple of years. I think our technology road map is extremely strong. I mean I think BICS 8 is an extremely strong technology and it stems from our relationship with Kioxia. Again, we invest together in R&D. I think people tend to focus on the JV is like a manufacturing, which it is, but it's really that R&D piece, where we're able to invest the number of engineers as if we have the highest share in the industry. And it's that sustained 25 years of working together that allows us just to bring incredibly powerful technology at the lowest incremental cost per bit to get that incremental technologies. So it Puts us in a cost leadership position. We just extended the JV for another 5 years in Yokkaichi. I think that was a huge step forward for us. Again, it's -- it just highlights a little bit of that -- this difference on supply demand. We're putting money behind where we're going to get supply from 2030 to 2034. And people are very focused on where they're going to get supply for next quarter. We need to align those time frames a little better. That's what the -- the business practice piece is all about. As Luis said, the enterprise SSD portfolio is coming together as a world-class portfolio. It couldn't be at a better time. It absolutely couldn't be a better time, right? The pull is there. It's hard to push a new product into the market. It's a lot easier. People are pulling you along. That's in a very, very good spot. And I think the team inside of Sandisk is just completely on fire as an independent company. I mean it is just a very, very exciting place to be. So we're having a lot of fun. And we think we can -- maybe we have the audacity to believe that a lot of that old tape that people keep playing in their mind about waiting for when is the next cycle going to come? Like we're very focused in making sure this is a sustainable model, and we kind of get some of that out of the system. We've changed the way the industry works. We -- our piece of it. I can't change anybody else. We can change our piece of it, so everybody wins. And I think as we do that, this is just a spectacular franchise. And it's kind of why I'm here and why I chose to come to this business a year ago because -- and that's why Luis 6 months before that, agreed to join me and we just think this is an unbelievable opportunity. And we're having a lot of fun doing it, and we think we -- there's an incredible amount of value creation in our future.

Well, I think also on your comment about you can't control what others are doing, but I think you can influence via some kind of leadership in the industry in terms of telegraphing how your managing supply, how you're thinking about things, how you're thinking about economics, then that can actually impact the industry can actually impact but you can't guarantee that they're going to do the same thing. You can't guarantee they're going to add more supply...

Look, I think we have -- I wouldn't go quite as far as what you were saying. But I think we have an interesting position as a standalone NAND company because we can talk about how we're going to manage the NAND business. And we can talk about how we think the best way to run this business is. And I think we try to be very transparent about that, right? I mean I think this is -- I watch all of the -- a lot of the stuff in the media and all that, and it's like, oh my gosh, like there's not enough. There's not enough or whatever. It's like, look, we've been saying for a year, this is what we're investing to. And nobody like you got to ask for more a little earlier. And I think people are listening. That's good. Like again, everybody is very important. We want everybody to get everything they need to -- I mean our customers have spectacular businesses. And we're envious of what they're able to do. And we think we're providing an incredible technology, and that technology is not easy. And that technology is extremely IP-intensive, and it's extremely capital intensive. And there's not a lot of companies in the world where you have both of those. You usually have one or the other. We have both. And so what this is about is getting the right return on that business, for what we're investing. And again, I think everybody wins. And I think it's an incredibly dynamic market. And I don't think I'll just say it 1 more time, if your frame of reference is, "Oh, this is just another up cycle and ride the price curve and all this," I don't think that's what's happening here. What's happening here is a very big, very important technology for the world is undergoing a fundamentally structural transition and it's going to come out of it in a very different place.

Long-term -- new memory paradigm, isn't it like that? New memory paradigm. Didn't someone like that 10 years ago? I think. Anyway, I wanted to see if there's any questions from the audience. Hands up if you have any questions. All right. Everyone is just so convinced, I think, by the arguments today. Okay. Okay. Well, I think we'll wrap up.

Thank you.

Thanks very much.

Thank you. We really appreciate it. Thank you, Mark. Appreciate it.

Mark, Thank you. Thank you.