SanDisk Preps Secret-Weapon Chip

SanDisk got its 3D start from Matrix Semiconductor, a small, Santa Clara, Calif., company that SanDisk acquired for roughly $250 million in January 2006.

Matrix was the first company to commercially produce 3D memory chips, in which memory cells are stacked atop each other, like floors on a skyscraper, in addition to the traditional side-by-side layout. Each additional layer means extra storage capacity.

But the chips Matrix sold were not reprogrammable -- data could only be stored on them a single time, relegating them to niche markets like cartridges for video game consoles. SanDisk does not break out sales of its One Time Programmable, or OTP, 3D memory business, and analysts consider it too insignificant to warrant its own financial model.

The real allure for SanDisk were the re-writeable 3D chips that Matrix had in the lab. And SanDisk has spent the last couple of years toiling to get the technology into the market.

While SanDisk inherited about 100 patents when it acquired Matrix, SanDisk spokesperson Mike Langberg says the company now has 200 patents related to 3D memory.

And while SanDisk has aggressively cut costs across the company to offset the plummeting flash memory prices, laying off 10% of its workforce last year, the Matrix team of about 100 engineers has been largely untouched, says one insider.

In February, SanDisk CFO Judy Bruner told Wall Street analysts that the company would spend a total of $600 million in 2009 and 2010 on equipment for manufacturing 3D memory technology. At the time, Bruner indicated that the equipment was to support the existing OTP business.