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SanDisk assumes no obligation to update these forward-looking statements which speak as up to date hereof. With that, I will turn the call over to Eli.Eli Harari Thank you, Jay, and good afternoon, everyone. We are very pleased with our excellent second quarter results continuing the positive trend of the past several quarters and setting the stage for a strong finish to 2010. I will lyric my remarks in the prevailing industrywide demand supply conditions and our Fab 5 announcement last week with our partner Toshiba. I will then comment on today's announcement regarding my decision to retire as Chairman and CEO of SanDisk at the end of this calendar year and our succession plan. Sanjay and Judy will provide details on the second quarter and the outlook for the second half of this year. We believe the NAND Flash industry continues to experience a healthy demand supply balance as evidenced by modest price declines throughout the second quarter. In the second half, our customer demand is expected to exceed our supply driven primarily by strong mobile OEM sales as well as seasonal improvement in retail demand. Our own supply situation is looking quite tight in the second half, the result of our OEM business doing much better than we had forecasted just six months ago and we continue to work closely with our customers in this environment. We now have greater visibility and are more confident in the sustained demand from our diversified channels and market and, therefore, we have now approved the final phase of Fab 4 extension which will result in additional petabytes in the first half of 2011. Last week in Yokkaichi, Japan we signed the Fab 5 agreement with our long-term strategic partner Toshiba. This represents a major strategic decision for us, one that will allow us to keep face with the projected strong growth in our Flash market in the coming decade.
Due to long construction and equipment lead times, this decision is now timely and necessary and the Fab 5 contribution to our existing supply base will become meaningful starting in late 2011.The Fab 5 agreement provides us flexibility to participate in up to 50% of the investment and corresponding capacity allocation with our actual percentage participation being determined at our discretion. Furthermore, beyond the initial startup ramp and within certain limits we have the flexibility to time our own production ramp rate to best meet our customers' demand profile. Fab 5 will take several years to ramp to full capacity at which point it is expected to be one of the largest, most efficient and most advanced NAND Flash memory fab in the world. It will be capable of supporting extreme UV, that's UV lithography tools when they become available for production and we also see possibly our first trial for 3D redrive when this technology becomes ready for commercialization. Fab 5 will require substantial capital investments. It will be spread primarily over 2011 through 2014 as well as startup costs in the second half of 2011. We have not finalized our Fab 5 production plans beyond the initial minimum commitment and we will provide Fab 5 CapEx projections in the first quarter of 2011 when we have better playing visibility. We believe that the much-improved strength of our balance sheet and the growing scale and diversity of our business support this important investment in Fab 5. Moving now to today's announcement of my retirement from SanDisk and our succession plan; I consider myself to have been the luckiest guy in our industry these past 22 years. Together with our team we built SanDisk from the proverbial idea sketch on a napkin into a great company in an industry that we pioneered.
This year I turn 65. Also, this year SanDisk is stronger than ever and poised to do even better in the years ahead. This is good timing to pass the baton to a new leader. We are very fortunate that my partner and co-founder, Sanjay Mohrotra, has accepted the CEO roll effective January 1, 2011.Read the rest of this transcript for free on seekingalpha.com