10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

R QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number:  000-26734

SANDISK CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	77-0191793
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
951 SanDisk Drive Milpitas, California	95035
(Address of principal executive offices)	(Zip Code)

(408) 801-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes R No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer R Accelerated filer ¨ Non accelerated filer ¨ Smaller reporting company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No R

Number of shares outstanding of the issuer’s common stock, $0.001 par value, as of June 30, 2013: 240,389,588.

SanDisk Corporation

Index

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and July 1, 2012	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 and July 1, 2012	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and July 1, 2012	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
	Signatures	S - 1
	Exhibit Index	E - 1

PART I. FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

SANDISK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2013			December 30, 2012
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,054,131		$	995,470
Short-term marketable securities	1,533,898			1,880,034
Accounts receivable, net	636,093			626,025
Inventory	723,403			750,075
Deferred taxes	95,423			93,877
Other current assets	251,931			260,879
Total current assets	4,294,879			4,606,360
Long-term marketable securities	2,766,474			2,835,931
Property and equipment, net	674,249			665,542
Notes receivable and investments in Flash Ventures	1,204,740			1,460,112
Deferred taxes	115,789			168,718
Goodwill	202,336			201,735
Intangible assets, net	210,883			246,919
Other non-current assets	149,646			153,810
Total assets	$	9,618,996		$	10,339,127
LIABILITIES
Current liabilities:
Accounts payable trade	$	269,829		$	254,459
Accounts payable to related parties	168,019			214,806
Convertible short-term debt	—			906,708
Other current accrued liabilities	413,471			257,539
Deferred income on shipments to distributors and retailers and deferred revenue	256,664			248,155
Total current liabilities	1,107,983			1,881,667
Convertible long-term debt	809,626			789,913
Non-current liabilities	356,581			407,947
Total liabilities	2,274,190			3,079,527
Commitments and contingencies (see Note 11)
EQUITY
Stockholders’ equity:
Preferred stock	—			—
Common stock	240			241
Capital in excess of par value	5,124,289			5,027,271
Retained earnings	2,235,001			2,071,268
Accumulated other comprehensive income (loss)	(11,686		)	165,121
Total stockholders’ equity	7,347,844			7,263,901
Non-controlling interests	(3,038		)	(4,301		)
Total equity	7,344,806			7,259,600
Total liabilities and equity	$	9,618,996		$	10,339,127

The accompanying notes are an integral part of these condensed consolidatedfinancial statements.

1

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
	(In thousands, except per share amounts)
Revenues	$	1,476,263		$	1,032,255		$	2,816,992		$	2,237,816
Cost of revenues	789,614			742,297			1,588,997			1,517,617
Amortization of acquisition-related intangible assets	9,830			9,181			19,660			22,912
Total cost of revenues	799,444			751,478			1,608,657			1,540,529
Gross profit	676,819			280,777			1,208,335			697,287
Operating expenses:
Research and development	172,041			152,397			343,166			293,354
Sales and marketing	63,601			52,261			122,728			101,296
General and administrative	46,877			37,692			91,981			70,283
Amortization and write-off of acquisition-related intangible assets	1,742			2,244			4,111			4,307
Total operating expenses	284,261			244,594			561,986			469,240
Operating income	392,558			36,183			646,349			228,047
Interest income	12,751			15,004			25,656			29,993
Interest (expense) and other income (expense), net	(21,852		)	(32,201		)	(54,654		)	(72,506		)
Total other income (expense), net	(9,101		)	(17,197		)	(28,998		)	(42,513		)
Income before income taxes	383,457			18,986			617,351			185,534
Provision for income taxes	121,668			6,017			189,333			58,180
Net income	$	261,789		$	12,969		$	428,018		$	127,354
Net income per share:
Basic	$	1.08		$	0.05		$	1.77		$	0.53
Diluted	$	1.06		$	0.05		$	1.74		$	0.52
Shares used in computing net income per share:
Basic	241,519			242,276			242,019			242,579
Diluted	245,815			244,570			245,569			246,026

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
	(In thousands)
Net income	$	261,789		$	12,969		$	428,018		$	127,354
Other comprehensive income (loss), before tax:
Unrealized holding gain (loss) on marketable securities	(20,302		)	3,028			(14,075		)	11,762
Reclassification adjustment for realized gain on marketable securities included in net income	(865		)	(679		)	(551		)	(1,202		)
Net unrealized holding gain (loss) on marketable securities	(21,167		)	2,349			(14,626		)	10,560
Foreign currency translation adjustments	(60,815		)	55,938			(176,994		)	(47,043		)
Unrealized holding gain (loss) on derivatives qualifying as cash flow hedges	(7,263		)	30,141			(37,893		)	(38,920		)
Reclassification adjustment for realized (gain) loss on derivatives qualifying as cash flow hedges included in net income	17,933			1,529			19,374			(4,785		)
Net unrealized holding gain (loss) on derivatives qualifying as cash flow hedges	10,670			31,670			(18,519		)	(43,705		)
Total other comprehensive income (loss), before tax	(71,312		)	89,957			(210,139		)	(80,188		)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(17,074		)	8,194			(33,332		)	(3,008		)
Total other comprehensive income (loss), net of tax	(54,238		)	81,763			(176,807		)	(77,180		)
Comprehensive income	$	207,551		$	94,732		$	251,211		$	50,174

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	June 30, 2013			July 1, 2012
	(In thousands)
Cash flows from operating activities:
Net income	$	428,018		$	127,354
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	65,494			5,963
Depreciation	108,212			69,703
Amortization	121,246			132,280
Provision for doubtful accounts	1,142			(1,724		)
Share-based compensation expense	46,395			39,333
Excess tax benefit from share-based plans	(15,661		)	(11,021		)
Impairment and other	(5,516		)	(9,871		)
Other non-operating	(360		)	9,440
Changes in operating assets and liabilities:
Accounts receivable, net	(11,210		)	194,509
Inventory	27,507			(183,715		)
Other assets	21,573			60,274
Accounts payable trade	15,370			(3,410		)
Accounts payable to related parties	(46,787		)	(41,432		)
Other liabilities	109,021			(301,394		)
Total adjustments	436,426			(41,065		)
Net cash provided by operating activities	864,444			86,289
Cash flows from investing activities:
Purchases of short and long-term marketable securities	(1,997,087		)	(1,362,066		)
Proceeds from sales of short and long-term marketable securities	1,847,659			1,173,180
Proceeds from maturities of short and long-term marketable securities	506,905			407,430
Acquisition of property and equipment, net	(119,849		)	(240,294		)
Investment in Flash Ventures	—			(50,439		)
Notes receivable issuances to Flash Ventures	—			(142,316		)
Notes receivable proceeds from Flash Ventures	73,388			211,786
Purchased technology and other assets	(3,908		)	(222		)
Acquisitions, net of cash acquired	(142		)	(69,204		)
Net cash provided by (used in) investing activities	306,966			(72,145		)
Cash flows from financing activities:
Repayment of debt financing	(928,061		)	—
Proceeds from employee stock programs	163,016			50,672
Distribution to non-controlling interests	(87		)	—
Excess tax benefit from share-based plans	15,661			11,021
Share repurchase program	(369,994		)	(154,075		)
Net cash received (paid) for share repurchase contracts	—			(18,858		)
Net cash used in financing activities	(1,119,465		)	(111,240		)
Effect of changes in foreign currency exchange rates on cash	6,716			54
Net increase (decrease) in cash and cash equivalents	58,661			(97,042		)
Cash and cash equivalents at beginning of period	995,470			1,167,496
Cash and cash equivalents at end of period	$	1,054,131		$	1,070,454

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SANDISK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Summary of Significant Accounting Policies

Organization

These interim Condensed Consolidated Financial Statements are unaudited but reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of SanDisk Corporation and its subsidiaries (the “Company”) as of June 30, 2013, the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income for the three and six months endedJune 30, 2013 and July 1, 2012, and the Condensed Consolidated Statements of Cash Flows for the six months endedJune 30, 2013 and July 1, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10–K filed with the SEC on February 19, 2013. The results of operations for the three and six months endedJune 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The second quarters of fiscal years 2013 and 2012 ended on June 30, 2013 and July 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 99.07, 85.99 and 79.53 at June 30, 2013, December 30, 2012 and July 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Note 4, “Balance Sheet Information,” as well as cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows. Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using its flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Investments and Fair Value Measurements

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	June 30, 2013		December 30, 2012
Cash and cash equivalents	$	1,054,131	$	995,470
Short-term marketable securities	1,533,898		1,880,034
Long-term marketable securities	2,766,474		2,835,931
Total cash, cash equivalents and marketable securities	$	5,354,503	$	5,711,435

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	613,718	$	—	$	—	$	613,718	$	582,743	$	—	$	—	$	582,743
Fixed income securities	128,805		4,370,162		—		4,498,967		27,386		4,917,939		—		4,945,325
Derivative assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	662,517	$	149,796	$	—	$	812,313	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	66,912		1,466,986		—		1,533,898		16,589		1,863,445		—		1,880,034
Long-term marketable securities	13,094		2,753,380		—		2,766,474		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $241.8 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012, respectively.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the six months endedJune 30, 2013, the Company had no transfers of financial assets or liabilities between Level 1 and Level 2. As of June 30, 2013 and December 30, 2012, the Company had no financial assets or liabilities categorized as Level 3 and had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

Available-for-Sale Investments. Available-for-sale investments were as follows (in thousands):

	June 30, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
U.S. Treasury securities	$	128,798	$	8	$	(1	)	$	128,805	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	17,599		17		(23		)	17,593		28,339		41		(1		)	28,379
International government securities	10,210		1		(24		)	10,187		153,936		13		(3		)	153,946
Corporate notes and bonds	894,157		2,184		(1,159		)	895,182		864,170		3,890		(938		)	867,122
Asset-backed securities	174,920		62		(332		)	174,650		179,356		453		—			179,809
Mortgage-backed securities	1,533		—		(25		)	1,508		1,872		8		(14		)	1,866
Municipal notes and bonds	3,261,133		17,044		(7,135		)	3,271,042		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	4,488,350	$	19,316	$	(8,699	)	$	4,498,967	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

The fair value and gross unrealized losses on the available-for-sale securities that have been in a continuous unrealized loss position, aggregated by type of investment instrument, are summarized in the following table (in thousands). As of June 30, 2013, no securities have been in a continuous unrealized loss position for more than twelve months. Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	24,294	$	(1	)
U.S. government-sponsored agency securities	5,763		(23		)
International government securities	2,976		(24		)
Corporate notes and bonds	334,887		(1,159		)
Asset-backed securities	120,003		(332		)
Mortgage-backed securities	1,508		(25		)
Municipal notes and bonds	897,226		(7,135		)
Total	$	1,386,657	$	(8,699	)

The gross unrealized loss related to U.S. Treasury and government-sponsored agency securities, international government securities, corporate and municipal notes and bonds, and asset-backed and mortgage-backed securities was primarily due to changes in interest rates. The gross unrealized loss on all available-for-sale fixed income securities at June 30, 2013 was considered temporary in nature. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold an investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt security investments, the Company considered additional factors including the Company’s intent to sell the investments or whether it is “more likely than not” the Company will be required to sell the investments before the recovery of its amortized cost.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gross realized gains	$	967		$	949		$	1,685		$	2,024
Gross realized losses	(102		)	(270		)	(1,134		)	(822		)

Fixed income securities by contractual maturity as of June 30, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,450,513	$	1,455,297
After one year through five years	2,823,465		2,829,301
After five years through ten years	32,293		32,288
After ten years	182,079		182,081
Total	$	4,488,350	$	4,498,967

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both June 30, 2013 and December 30, 2012. See Note 6, “Financing Arrangements,” regarding maturity of the 1% Sr. Convertible Notes due 2013.

	June 30, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	—	$	—	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	809,626		1,345,260		789,913		1,159,370
Total	$	809,626	$	1,345,260	$	1,696,621	$	2,087,190

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Derivatives and Hedging Activities

The Company uses derivative instruments primarily to manage exposures to foreign currency. The Company’s primary objective in holding derivative instruments is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designated for trading or speculative purposes. The Company’s derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored by the Company on an ongoing basis.

The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value and provides qualitative disclosures about objectives and strategies for using derivative instruments, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as cost of revenues or other income (expense), or as other comprehensive income (“OCI”). The Company does not offset or net the fair value amounts of derivative instruments and separately discloses the fair value amounts of the derivative instruments as either assets or liabilities.

Cash Flow Hedges. The Company uses forward contracts designated as cash flow hedges to hedge a portion of future forecasted purchases in Japanese yen. The gain or loss on the effective portion of a cash flow hedge is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized, or reclassified into other income (expense) if the hedged transaction becomes probable of not occurring. Any gain or loss after a hedge is no longer designated, because it is no longer probable of occurring or it is related to an ineffective portion of a cash flow hedge, as well as any amount excluded from the Company’s hedge effectiveness, is recognized as other income (expense) immediately. As of June 30, 2013, the Company had forward contracts in place to hedge future purchases of approximately 24.5 billion Japanese yen, or approximately $247 million based upon the exchange rate as of June 30, 2013, and the net unrealized loss on the effective portion of these cash flow hedges was ($7.4) million. The forward contracts on the Company’s future Japanese yen wafer purchases will settle in fiscal year 2013.

Other Derivatives. Other derivatives that are non-designated consist primarily of forward and cross currency swap contracts to minimize the risk associated with the foreign exchange effects of revaluing monetary assets and liabilities. Monetary assets and liabilities denominated in foreign currencies and the associated outstanding forward and cross currency swap contracts were marked-to-market at June 30, 2013 with realized and unrealized gains and losses included in other income (expense). As of June 30, 2013, the Company had foreign currency forward contracts hedging exposures in European euros, British pounds and Japanese yen. Foreign currency forward contracts were outstanding to buy and sell U.S. dollar equivalents of approximately $107.9 million and ($72.5) million in foreign currencies, respectively, based upon the exchange rates at June 30, 2013.

The Company currently has a cross currency swap contract to exchange Japanese yen for U.S. dollars that requires the Company to comply with certain covenants, the strictest of which is to maintain a minimum liquidity of $1.0 billion. Liquidity is defined as the sum of the Company’s cash and cash equivalents and short and long-term marketable securities. This cross currency swap contract was outstanding to sell U.S. dollar equivalents of approximately $29.3 million based upon the exchange rate at June 30, 2013. Should the Company fail to comply with these covenants, the Company may be required to settle the unrealized gain or loss on the foreign exchange contract prior to the original maturity date. The Company was in compliance with these covenants as of June 30, 2013.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts. Fair value of derivative contracts as of June 30, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	72	$	—	$	—	$	—
Foreign exchange contracts not designated	7,682		19,064		—		994
Total derivatives	$	7,754	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	7,454	$	7,058	$	—	$	—
Foreign exchange contracts not designated	2,897		6,526		—		—
Total derivatives	$	10,351	$	13,584	$	—	$	—

Foreign Exchange and Equity Market Risk Contracts Designated as Cash Flow Hedges. The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended											Six months ended
	Amount of gain (loss) recognized in OCI					Amount of gain (loss) reclassified from AOCI to earnings						Amount of gain (loss) recognized in OCI						Amount of gain (loss) reclassified from AOCI to earnings
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(7,263	)	$	30,141	$	(17,933	)	$	(1,529	)	$	(37,893	)	$	(38,920	)	$	(19,374	)	$	4,785

Foreign exchange contracts designated as cash flow hedges relate primarily to wafer purchases in Japanese yen. Gains and losses associated with foreign exchange contracts designated as cash flow hedges are expected to be recorded in cost of revenues when reclassified out of AOCI. The Company expects to realize the majority of the AOCI balance related to foreign exchange contracts within the next twelve months.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(139	)	$	(799	)	$	(446	)	$	(5,246	)

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations. The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gain (loss) on foreign exchange contracts including forward point income	$	(3,194	)	$	(2,376	)	$	6,465		$	2,586
Gain (loss) from revaluation of foreign currency exposures hedged by foreign exchange contracts	1,975			2,242			(9,408		)	(1,969		)

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Balance Sheet Information

Accounts Receivable, net. Accounts receivable, net was as follows (in thousands):

	June 30, 2013			December 30, 2012
Accounts receivable from product revenues	$	763,246		$	766,583
Accounts receivable from license and royalty revenues	42,737			37,638
Allowance for doubtful accounts	(7,536		)	(6,627		)
Price protection, promotions and other activities	(162,354		)	(171,569		)
Total accounts receivable, net	$	636,093		$	626,025

Inventory. Inventory was as follows (in thousands):

	June 30, 2013		December 30, 2012
Raw material	$	400,078	$	404,634
Work-in-process	110,509		102,249
Finished goods	212,816		243,192
Total inventory	$	723,403	$	750,075

Other Current Assets. Other current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Tax-related receivables	$	189,059	$	186,223
Other non-trade receivable	11,668		—
Prepayment to Flash Forward Ltd.	15,433		20,577
Derivative contract receivables	7,754		19,064
Prepaid expenses	13,118		13,221
Other current assets	14,899		21,794
Total other current assets	$	251,931	$	260,879

Notes Receivable and Investments in Flash Ventures. Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	June 30, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	156,455	$	180,254
Notes receivable, Flash Alliance Ltd.	343,192		476,800
Notes receivable, Flash Forward Ltd.	141,314		162,810
Investment in Flash Partners Ltd.	202,796		232,547
Investment in Flash Alliance Ltd.	302,285		342,048
Investment in Flash Forward Ltd.	58,698		65,653
Total notes receivable and investments in Flash Ventures	$	1,204,740	$	1,460,112

Equity-method investments and the Company’s maximum loss exposure related to Flash Ventures are discussed further in Note 11, “Commitments, Contingencies and Guarantees – Flash Ventures” and Note 12, “Related Parties and Strategic Investments.”

The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the borrower, where material or known. Impairments, when required for credit worthiness, are recorded in other income (expense). The Company makes or will make

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

long-term loans to Flash Ventures to fund new process technologies and additional wafer capacities. The Company aggregates its Flash Ventures notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity. For all reporting periods presented, no loans were past due and no loan impairments were recorded.

Other Non-current Assets. Other non-current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	39,932	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	7,767		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	38,939		34,832
Total other non-current assets	$	149,646	$	153,810

Other Current Accrued Liabilities. Other current accrued liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Accrued payroll and related expenses	$	139,927	$	102,269
Derivative contract payables	10,351		13,584
Taxes payable	116,062		25,476
Other accrued liabilities	147,131		116,210
Total other current accrued liabilities	$	413,471	$	257,539

Non-current Liabilities. Non-current liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Deferred tax liabilities	$	10,178	$	28,672
Income tax liabilities	197,202		208,629
Deferred credits on intercompany transactions	50,147		58,548
Other non-current liabilities	99,054		112,098
Total non-current liabilities	$	356,581	$	407,947

Warranties. The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Balance, beginning of period	$	38,972		$	32,119		$	38,787		$	26,957
Additions and adjustments to cost of revenues	6,040			3,073			10,918			13,479
Usage	(6,657		)	(3,552		)	(11,350		)	(8,796		)
Balance, end of period	$	38,355		$	31,640		$	38,355		$	31,640

The majority of the Company’s products have a warranty of less than three years, with a small number of products having a warranty ranging up to ten years or more. For warranties ten years or greater, including lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure. A provision for the estimated future cost related to warranty expense is recorded at the time of customer invoice. The Company’s warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair or replacement costs, differ from the Company’s estimates, increases or decreases to its warranty liability would be required.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income (Loss). AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	June 30, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	6,765		$	15,919
Foreign currency translation	6,255			155,389
Hedging activities	(24,706		)	(6,187		)
Total accumulated other comprehensive income (loss)	$	(11,686	)	$	165,121

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended					Six months ended
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012
Available-for-sale investments	$	(7,525	)	$	841	$	(5,472	)	$	3,834
Foreign currency translation	(9,549		)	7,353		(27,860		)	(6,842		)
	$	(17,074	)	$	8,194	$	(33,332	)	$	(3,008	)

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended						Six months ended
AOCI Component	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			Income Statement Line Item
Unrealized gain on available-for-sale investments	$	865		$	679		$	551		$	1,202		Interest (expense) and other income (expense), net
Tax impact	(308		)	(248		)	(483		)	(417		)	Tax expense
Unrealized gain on available-for-sale investments, net of tax	557			431			68			785			Net of tax
Gain (loss) on hedging activities	(17,933		)	(1,529		)	(19,374		)	4,785			Cost of revenues
Tax impact	—			—			—			—			Tax expense
Gain (loss) on hedging activities, net of tax	(17,933		)	(1,529		)	(19,374		)	4,785			Net of tax
Total reclassifications for the period, net of tax	$	(17,376	)	$	(1,098	)	$	(19,306	)	$	5,570		Net of tax

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Goodwill and Intangible Assets

Goodwill. Goodwill balances are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of June 30, 2013	$	202,336

Goodwill increased by $0.6 million due to the resolution of a legal contingency matter during the first quarter of fiscal year 2013 related to an acquisition from fiscal year 2012.

Intangible Assets. Intangible asset balances are presented below (in thousands):

	June 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(87,764	)	$	113,196
Customer relationships	13,050		(12,784		)	266
Trademarks	5,700		(2,499		)	3,201
Covenants not to compete	3,100		(2,359		)	741
Acquisition-related intangible assets	222,810		(105,406		)	117,404
Technology licenses and patents	133,909		(77,955		)	55,954
Total intangible assets subject to amortization	356,719		(183,361		)	173,358
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(183,361	)	$	210,883

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may be impaired.  In the first quarter of fiscal year 2013, due to an increase in overall cost estimates and delays in the development timeline related to an in-process research and development (“IPR&D”) project from the Pliant Technology, Inc. (“Pliant”) acquisition, the Company performed impairment tests on the related amortizable intangible assets and indefinite-lived IPR&D intangible asset and determined that none were impaired.  Due to continued project delays, including subsequent to the end of the second quarter of fiscal year 2013, which resulted in the same impairment indicators identified in the first quarter of fiscal year 2013, the Company again tested the recoverability of the amortizable intangible assets and noted that as of the end of the second quarter of fiscal year 2013, the undiscounted cash flows were in excess of the net book value of the amortizable intangible assets, indicating no impairment.  In addition, the Company performed a qualitative impairment assessment of the indefinite-lived IPR&D intangible asset and determined that it was not more-than-likely-than-not that the fair value of the

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

indefinite-lived IPR&D intangible asset was lower than its carrying value.  Therefore the Company did not proceed to a quantitative impairment analysis of the indefinite-lived intangible asset.  While these delays related to the IPR&D project did not indicate that an impairment is required at this time, additional future delays, additional increases in overall cost estimates, program cancellation or other significant events or circumstances affecting the IPR&D project could result in the indefinite-lived IPR&D intangible asset or the amortizable intangible assets being partially or fully impaired. Due to these IPR&D project delays, the Company expects to assess the indefinite-lived IPR&D intangible asset for impairment at the end of the third quarter of fiscal year 2013 and on a quarterly basis until completion of the development of the technology and will continue to monitor any events or circumstances that could indicate the amortizable intangible assets are impaired. As of June 30, 2013, the net book value of the Pliant indefinite-lived IPR&D intangible asset was $36.2 million and the net book value of the related Pliant amortizable intangible assets was $96.8 million, and a potential complete impairment of both would result in a charge of up to $133.0 million.

The annual expected amortization expense of intangible assets as of June 30, 2013, excluding acquired IPR&D intangible assets, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining six months)	$	21,156	$	11,334
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,333
Total intangible assets subject to amortization	$	117,404	$	55,954

On July 2, 2013, the Company entered into a definitive agreement to acquire SMART Storage Systems, a developer of enterprise solid state drives. Under the terms of the agreement, the Company will pay approximately $307 million in cash and certain equity-based incentive awards to acquire SMART Storage Systems. The transaction, which has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and is expected to close in August 2013.

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Financing Arrangements

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	June 30, 2013			December 30, 2012
1% Notes due 2013	$	—		$	928,061
Less: Unamortized bond discount	—			(21,353		)
Net carrying amount of 1% Notes due 2013	—			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(190,374		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	809,626			789,913
Total convertible debt	809,626			1,696,621
Less: Convertible short-term debt	—			(906,708		)
Convertible long-term debt	$	809,626		$	789,913

1% Convertible Senior Notes Due 2013. On May 15, 2013, the maturity date for the 1% Convertible Senior Notes due May 15, 2013 (“1% Notes due 2013”), the Company settled the 1% Notes due 2013 through an all-cash transaction for principal and accrued interest of $928.1 million and $4.6 million, respectively. As of the date of the redemption, the Company had no further obligations related to the 1% Notes due 2013. In connection with the maturity of the 1% Notes due 2013, the associated convertible bond hedge transaction also terminated, with no shares purchased under the convertible bond hedge agreement. As of June 30, 2013, there were warrants outstanding to purchase up to 11.3 million shares of the Company’s common stock which mature on 20 different dates from August 23, 2013 through September 20, 2013 and are exercisable at each respective maturity date at an exercise price of $95.03 per share. At each maturity date, the Company may, at its option, elect to settle the warrants on a net share basis.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	1,162	$	2,321	$	3,481	$	4,640
Amortization of bond issuance costs	318		696		1,014		1,392
Amortization of bond discount	6,964		13,276		21,022		26,301
Total interest cost recognized	$	8,444	$	16,293	$	25,517	$	32,333

The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for each of the three and six months endedJune 30, 2013 and July 1, 2012.

1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (“1.5% Notes due 2017”) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below, based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from the sale of the 1.5% Notes due 2017 were $981.0 million.

The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. As of June 30, 2013, the carrying value of the equity component of $294.0 million was unchanged from the date of issuance.

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	3,750	$	3,750	$	7,500	$	7,500
Amortization of bond issuance costs	666		666		1,333		1,333
Amortization of bond discount	9,802		9,080		19,321		17,941
Total interest cost recognized	$	14,218	$	13,496	$	28,154	$	26,774

The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each of the three and six months endedJune 30, 2013 and July 1, 2012. The remaining unamortized bond discount of $190.4 million as of June 30, 2013 will be amortized over the remaining life of the 1.5% Notes due 2017, which is approximately 4.1 years.

Concurrent with the issuance of the 1.5% Notes due 2017, the Company sold warrants to acquire up to approximately 19.1 million shares of its common stock at an exercise price of $73.33 per share. The warrants mature on 40 different dates from November 13, 2017 through January 10, 2018 and are exercisable at the maturity date. At each maturity date, the Company may, at its option, elect to settle the warrants on a net share basis. In addition, concurrent with the issuance of the 1.5% Notes due 2017, the Company entered into a convertible bond hedge transaction in which counterparties agreed to sell to the Company up to approximately 19.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 1.5% Notes due 2017. As of June 30, 2013, the Company had not purchased any shares under this convertible bond hedge agreement.

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Share Repurchase Program

The Company’s Board of Directors has authorized up to $1.25 billion for share repurchases, of which$646.1 million remained available for share repurchases as of June 30, 2013. Under this program, shares repurchased are recorded as a reduction to capital in excess of par value and retained earnings in the Company’s Condensed Consolidated Balance Sheets. From inception of this share repurchase program through June 30, 2013, the Company had repurchased 12.56 million shares for $603.9 million, of which 6.83 million shares for an aggregate purchase price of $369.9 million were repurchased during the six months endedJune 30, 2013. As part of its share repurchase program, the Company may from time-to-time enter into structured share repurchase arrangements with financial institutions. During the six months endedJune 30, 2013, the Company did not enter into any structured share repurchase transactions.

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Share-based Compensation

Share-based Benefit Plans

Share-based Plans. The Company has a share-based compensation program that provides its Board of Directors with broad discretion in creating equity incentives for employees, officers, non-employee board members and non-employee service providers. This program includes incentive and non-statutory stock option awards, stock appreciation right awards, restricted stock awards, and performance-based cash bonus awards for Section 16 executive officers. These awards are granted under various programs, all of which are stockholder approved. Stock option awards generally vest as follows: 25% of the shares vest on the first anniversary of the vesting commencement date and the remaining 75% vest proportionately each quarter over the next 12 quarters of continued service. Restricted stock unit awards generally vest in equal annual installments over a 4-year period, subject to continued service. Under the Company’s current non-employee director compensation policy, stock option awards granted to non-employee board members are immediately exercisable upon grant but vest in one installment on the earlier of (i) the first anniversary of the grant date or (ii) the day immediately preceding the Company’s next annual meeting of stockholders following the grant date and are subject to the Company’s right of repurchase for any shares that have been exercised but have not yet vested. Restricted stock unit awards granted to non-employee board members vest in one installment on the earlier of (i) the first anniversary of the grant date or (ii) the day immediately preceding the Company’s next annual meeting of stockholders following the grant date. Additionally, the Company has an Employee Stock Purchase Plan (“ESPP”) that allows employees to purchase shares of common stock at 85% of the fair market value at the subscription date or the date of purchase, whichever is lower.

2013 Incentive Plan. On June 12, 2013, the Company’s stockholders approved the 2013 Incentive Plan (“2013 Plan”). Shares of the Company’s common stock may be issued under the 2013 Plan pursuant to two separate equity incentive programs: (i) the discretionary grant program under which stock options and stock appreciation rights may be granted to officers and other employees, non-employee board members and independent consultants, and (ii)  the stock issuance and cash bonus program under which eligible persons may, at the discretion of the plan administrator, be issued shares of the Company’s common stock pursuant to restricted stock awards, restricted stock units or other share-based awards which vest upon the completion of a designated service period or the attainment of pre-established performance milestones, be awarded cash bonus opportunities which are earned through the attainment of pre-established performance milestones, or be issued shares of the Company’s common stock through direct purchase or as a bonus for services rendered to the Company. A total of 20,000,000 shares of the Company’s common stock have initially been reserved for issuance under the 2013 Plan. The 2013 Plan share reserve may be increased by up to 10,000,000 shares of common stock to the extent that outstanding share-based awards under the 1995 Stock Option Plan, the 1995 Non-Employee Directors Stock Option Plan, and the 2005 Incentive Plan expire, terminate or lapse, of which 31,626 shares of common stock as of June 30, 2013 had been added to the 2013 Plan share reserve. All options granted under the 2013 Plan are granted with an exercise price equal to the fair market value of the common stock on the date of grant and will expire seven years from the date of grant.

2005 Incentive Plan. The 2005 Incentive Plan terminated on June 12, 2013, and no further share-based awards were made under this plan after that date. However, share-based awards that were outstanding under this plan on June 12, 2013 continue to be governed by their existing terms. Options granted may be exercised for shares of the Company’s common stock at any time prior to the expiration of the seven-year option term or any earlier termination of those options in connection with the optionee’s cessation of service with the Company.

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Valuation Assumptions

Option Plan Shares. The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.32	0.40	0.38	0.43
Risk-free interest rate	0.72%	0.53%	0.68%	0.61%
Expected term	4.3 years	3.9 years	4.4 years	4.3 years
Estimated annual forfeiture rate	8.51%	8.59%	8.51%	8.59%
Weighted average fair value at grant date	$16.22	$11.34	$16.44	$16.72

Employee Stock Purchase Plan Shares. The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.33	0.38	0.33	0.38
Risk-free interest rate	0.13%	0.15%	0.13%	0.15%
Expected term	½ year	½ year	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24	$12.54	$12.24

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation Plan Activities

Stock Options and SARs. A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of June 30, 2013 and changes during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	1,010		52.14
Exercised	(4,954	)	34.17			98,469
Forfeited	(300	)	43.20
Expired	(2,316	)	60.78
Options and SARs outstanding at June 30, 2013	8,866		40.38		4.2	183,720
Options and SARs vested and expected to vest after June 30, 2013, net of forfeitures	8,440		40.00		4.1	178,132
Options and SARs exercisable at June 30, 2013	4,748		35.12		3.1	123,343

At June 30, 2013, the total compensation cost related to stock options granted to employees under the Company’s share-based compensation plans but not yet recognized was approximately $79.3 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.4years. As of June 30, 2013, the Company had fully expensed all of its SARs awards.

Restricted Stock Units. Restricted stock units (“RSUs”) are settled in shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. The cost of these awards is determined using the fair value of the Company’s common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite vesting period.

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	2,131		52.25
Vested	(851	)	42.18		44,068
Forfeited	(180	)	45.97
Non-vested share units at June 30, 2013	4,177		48.15		201,113

As of June 30, 2013, the Company had approximately $149.9 million of unrecognized compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized over a weighted average estimated remaining life of threeyears.

Employee Stock Purchase Plan. At June 30, 2013, there was approximately $0.9 million of total unrecognized compensation cost related to the Company’s ESPP that is expected to be recognized over a period of onemonth.

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation Expense. The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	2,447		$	1,923		$	4,164		$	3,460
Research and development	12,704			10,623			24,344			20,650
Sales and marketing	4,701			3,634			8,572			7,263
General and administrative	4,809			4,073			9,315			7,960
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488
Share-based compensation expense by type of award:
Stock options and SARs	$	8,054		$	9,426		$	16,323		$	18,642
RSUs	14,788			8,608			26,758			16,502
ESPP	1,819			2,219			3,314			4,189
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488

Share-based compensation expense of $2.6 million and $1.8 million related to manufacturing personnel was capitalized into inventory as of June 30, 2013 and December 30, 2012, respectively.

The total grant date fair value of options and RSUs vested during the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Fair value of options vested	$	7,282	$	8,214	$	21,850	$	22,974
Fair value of RSUs vested	6,082		4,283		35,903		23,584
Total fair value of options and RSUs vested	$	13,364	$	12,497	$	57,753	$	46,558

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Provision for Income Taxes

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Provision for income taxes	$	121,668		$	6,017		$	189,333		$	58,180
Effective tax rate	31.7		%	31.7		%	30.7		%	31.4		%

The provision for income taxes for the three and six months endedJune 30, 2013 differs from the U.S. statutory tax rate of 35% primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development (“R&D”) credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to the Company’s Irish, Chinese, Israeli and Japanese entities. Earnings in these countries, where tax rates are lower than the U.S. notional rate, contributed to the majority of the difference between the rate of the Company’s tax provision and the U.S. statutory tax rate. The lower effective tax rate for the six months endedJune 30, 2013, compared to the same period in fiscal year 2012, was attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit for fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of June 30, 2013, the Company believes that most of its deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $171.0 million and $179.5 million as of June 30, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $79.8 million at June 30, 2013. Income tax expense for the three and six months endedJune 30, 2013 and July 1, 2012 included interest and penalties of $0.9 million, $1.6 million, $0.7 million and $1.5 million, respectively.

The Company is subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service (“IRS”) completed its field audit of the Company’s federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report.  The most significant proposed adjustments are comprised of related party transactions between SanDisk Corporation and its foreign subsidiaries.  The Company is contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached.

The Company strongly believes the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that the Company’s previously reported income tax provisions for the years in question are appropriate.  The Company believes that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner that is not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of the Company’s federal income tax returns for fiscal years 2009 through 2011. The Company does not expect a resolution of this audit to be reached during the next twelve months. In addition, the Company is currently under audit by various state and international tax authorities. The Company cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm the Company’s financial position, results of operations or liquidity.

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Numerator for basic net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for basic net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Basic net income per share	$	1.08	$	0.05	$	1.77	$	0.53
Numerator for diluted net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for diluted net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	2,733		2,294		3,083		3,447
Effect of dilutive 1.5% Notes due 2017	1,563		—		467		—
Shares used in computing diluted net income per share	245,815		244,570		245,569		246,026
Diluted net income per share	$	1.06	$	0.05	$	1.74	$	0.52
Anti-dilutive shares excluded from net income per share calculation	32,515		74,276		34,670		71,043

Basic earnings per share exclude any dilutive effects of stock options, SARs, RSUs, warrants and convertible debt. Diluted earnings per share include the dilutive effects of stock options, SARs, RSUs, ESPP and the 1.5% Notes due 2017. Certain common stock issuable under stock options, SARs, warrants and the 1.5% Notes due 2017 have been omitted from the current year diluted net income per share calculation because their inclusion is considered anti-dilutive. Certain common stock issuable under stock options, SARs, warrants, the 1% Notes due 2013 and the 1.5% Notes due 2017 have been omitted from the prior year diluted net income per share calculation because their inclusion is considered anti-dilutive.

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Commitments, Contingencies and Guarantees

Flash Ventures

Flash Ventures, the Company’s business ventures with Toshiba Corporation (“Toshiba”), consists of three separate legal entities: Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. The Company has a 49.9%ownership interest in each of these entities and Toshiba owns 50.1% of each of these entities. Through these ventures, the Company and Toshiba have collaborated in the development and manufacture of NAND flash memory products which are manufactured by Toshiba at its wafer fabrication facility located in Yokkaichi, Japan, using semiconductor manufacturing equipment owned or leased by Flash Ventures. The Flash Ventures purchase wafers from Toshiba at cost and then resell those wafers to the Company and Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in each Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers. In addition, the Company is committed to fund 49.9% of Flash Ventures’ costs to the extent that Flash Ventures’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.

Flash Partners. Flash Partners Ltd. (“Flash Partners”) was formed in fiscal year 2004. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 3”) located in Yokkaichi, Japan. As of June 30, 2013, the Company had notes receivable from Flash Partners of $156.5 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The Company also has guarantee obligations to Flash Partners; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Partners of $202.8 million and $232.5 million, respectively, denominated in Japanese yen, offset by $28.7 million and $59.3 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three and six months endedJune 30, 2013 and July 1, 2012, the Company recorded a basis adjustment of $0.3 million, $0.6 million, $0.8 million and $2.1 million, respectively, to its equity in earnings from Flash Partners related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Partners. Flash Partner’s share of the Fab 3 fabrication facility is fully equipped.

Flash Alliance. Flash Alliance Ltd. (“Flash Alliance”) was formed in fiscal year 2006. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 4”) located in Yokkaichi, Japan. As of June 30, 2013, the Company had notes receivable from Flash Alliance of $343.2 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The Company also has guarantee obligations to Flash Alliance; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Alliance of $302.3 million and $342.0 million, respectively, denominated in Japanese yen, offset by $8.2 million and $53.7 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three and six months endedJune 30, 2013 and July 1, 2012, the Company recorded a basis adjustment of $2.1 million, $5.0 million, $3.8 million and $7.8 million, respectively, to its equity earnings from Flash Alliance related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Alliance. Flash Alliance’s share of the Fab 4 fabrication facility is fully equipped.

Flash Forward. Flash Forward Ltd. (“Flash Forward”) was formed in fiscal year 2010. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 5”) located in Yokkaichi, Japan. Fab 5 is to be built in two phases. As of June 30, 2013, over half of the Phase 1 building has been equipped with wafer capacity or equipment required to enable technology transition of the Flash Ventures’ wafer capacity. No commitment has yet been made for further Phase 1 wafer capacity expansion beyond productivity improvements; however, the Company periodically reviews the opportunity for further Phase 1 capacity expansion. The Company and Toshiba each retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate level of equipment funding. To date, the Company has invested in 50% of the Flash Forward equipment. The Company and Toshiba have announced that the construction of the Phase 2 shell of the Fab 5 wafer fabrication facility will begin in August 2013 with expected completion in mid-2014. The Phase 2 shell is intended to be used primarily for technology transition of the existing Flash Ventures wafer capacity to 1Y and 1Z technology nodes and for a Bit-cost scaleable 3-Dimensional NAND (“BiCS”) pilot line.

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2013, the Company had notes receivable from Flash Forward of $141.3 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward with the note proceeds. The Company also has guarantee obligations to Flash Forward; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Forward of $58.7 million and $65.7 million, respectively, denominated in Japanese yen, offset by ($12.5) million and ($3.7) million, respectively, of cumulative translation adjustments recorded in AOCI.

Toshiba Foundry.  In the first quarter of fiscal year 2013, the Company concluded its foundry arrangement with Toshiba.

Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled. These outstanding purchase commitments are included as part of the total “Noncancelable production purchase commitments” in the “Contractual Obligations” table.

Off-Balance Sheet Liabilities

Flash Ventures. The Flash Ventures sell and lease back from a consortium of financial institutions (“lessors”) a portion of their tools and have entered into equipment master lease agreements totaling 262.6 billion Japanese yen, or approximately $2.65 billion based upon the exchange rate at June 30, 2013. As of June 30, 2013, the total amount outstanding from these master leases was 121.3 billion Japanese yen, or approximately $1.22 billion based upon the exchange rate at June 30, 2013, of which the amount of the Company’s guarantee obligation of the Flash Ventures’ master lease agreements, which reflects future payments and any lease adjustments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

The master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, the master lease agreements contain an acceleration clause for certain events of default related to the Company as guarantor, including, among other things, the Company’s failure to maintain a minimum stockholders’ equity of at least $1.51 billion, and for one master lease agreement, which matures on July 31, 2013, the Company’s failure to maintain a minimum corporate rating of BB- from Standard & Poors (“S&P”) or Moody’s Corporation (“Moody’s”), or a minimum corporate rating of BB+ from Rating & Investment Information, Inc. (“R&I”). As of June 30, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of June 30, 2013, the Company’s R&I credit rating was BBB, two notches above the required minimum corporate rating threshold from R&I; and the Company’s S&P credit rating was BB, one notch above the required minimum corporate rating threshold from S&P. If both S&P and R&I were to downgrade the Company’s credit rating below the minimum corporate rating threshold, the Company’s stockholders’ equity falls below $1.51 billion, or other events of default occur, Flash Ventures would become non-compliant under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by the Company, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a non-compliance event were to occur and if the Company failed to reach a resolution, the Company could be required to pay a portion or the entire outstanding lease obligations covered by its guarantees under such Flash Ventures master lease agreements.

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at June 30, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.2	$	12,174	2014
January 2011	Refinanced	1.9		18,822		2014
November 2011	Refinanced	5.6		56,209		2014
March 2012	Refinanced	3.5		35,885		2015
		12.2		123,090
Flash Alliance
June 2008	Original	4.0		40,659		2013
March 2012	Original	7.6		76,367		2017
July 2012	Refinanced	14.3		144,107		2017
		25.9		261,133
Flash Forward
November 2011	Original	12.3		124,205		2016
March 2012	Original	7.5		75,680		2017
July 2012	Original	2.8		28,262		2017
		22.6		228,147
Total guarantee obligations		¥	60.7	$	612,370

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of June 30, 2013 in U.S. dollars based upon the yen/dollar exchange rate at June 30, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	134,938	$	51,826	$	186,764
Year 2	137,240		35,962		173,202
Year 3	90,591		11,544		102,135
Year 4	58,465		63,714		122,179
Year 5	8,691		19,399		28,090
Total guarantee obligations	$	429,925	$	182,445	$	612,370

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Guarantees

Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged patent infringement. The scope of such indemnity varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. The Company may periodically engage in litigation as a result of these indemnification obligations. The Company’s insurance policies exclude coverage for third-party claims for patent infringement. Although the liability is not remote, the nature of the patent infringement indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its suppliers and customers. Historically, the Company has not made any significant indemnification payments under any such agreements. As of June 30, 2013, no amounts had been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

As permitted under Delaware law and the Company’s certificate of incorporation and bylaws, the Company has agreements, or has assumed agreements in connection with its acquisitions, whereby it indemnifies certain of its officers and employees, and each of its directors for certain events or occurrences while the officer, employee or director is, or was, serving at the Company’s or the acquired company’s request in such capacity. The term of the indemnification period is for the officer’s, employee’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited; however, the Company has a Director and Officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of June 30, 2013 or December 30, 2012, as these liabilities are not reasonably estimable even though liabilities under these agreements are not remote.

The Company and Toshiba have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company and Toshiba have also entered into a Patent Indemnification Agreement under which, in many cases, the Company will share in the expenses associated with the defense and cost of settlement associated with such claims. This agreement provides limited protection for the Company against third-party claims that NAND flash memory products manufactured and sold by Flash Ventures infringe third-party patents. The Company has not made any indemnification payments under any such agreements. As of June 30, 2013, no amounts have been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contractual Obligations and Off-Balance Sheet Arrangements

The following tables summarize the Company’s contractual cash obligations, commitments and off-balance sheet arrangements at June 30, 2013, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Contractual Obligations. Contractual cash obligations and commitments as of June 30, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 6 months in Fiscal 2013)		2 – 3 Years (Fiscal 2014 and 2015)		4 – 5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	15,744	(4)	$	3,379	$	9,712	$	2,371	$	282
Flash Partners (1)	459,073		(4)(5)	92,683		247,061		108,555		10,774
Flash Alliance (1)	1,469,113		(4)(5)	175,833		885,333		317,414		90,533
Flash Forward (1)	587,723		(4)(5)	151,266		262,247		142,993		31,217
Toshiba research and development	57,405		(4)	27,405		30,000		—		—
Capital equipment purchase commitments	47,345			46,167		1,070		108		—
1.5% Convertible senior notes principal and interest (2)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	51,601			44,587		7,014		—		—
Noncancelable production purchase commitments (3)	255,705		(4)	255,705		—		—		—
Total contractual cash obligations	$	4,011,209		$	804,525	$	1,472,437	$	1,601,441	$	132,806

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽³⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁴⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at June 30, 2013.

⁽⁵⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

The Company has excluded $197.2 million of unrecognized tax benefits (which includes penalties and interest) from the contractual obligation table above due to the uncertainty with respect to the timing of associated future cash flows at June 30, 2013. The Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Off-Balance Sheet Arrangements. Off-balance sheet arrangements are as follows (in thousands):

	June 30, 2013
Guarantee of Flash Ventures equipment leases (1)	$	612,370

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2014 through fiscal year 2018. Future minimum lease payments are presented below (in thousands):

	June 30, 2013
Fiscal year:
2013 (remaining six months)	$	3,640
2014	5,960
2015	4,857
2016	1,837
2017	680
2018	282
	17,256
Sublease income to be received in the future under noncancelable subleases	(1,512		)
Net operating leases	$	15,744

Net rent expense was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Rent expense, net	$	1,330	$	1,685	$	3,173	$	2,798

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Related Parties and Strategic Investments

Flash Ventures with Toshiba. The Company owns 49.9% of each entity within Flash Ventures and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 11, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are variable interest entities. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling $455.4 million, $934.3 million, $746.1 million and $1.43 billion in the three and six months endedJune 30, 2013 and July 1, 2012, respectively. The Company received loan repayments from Flash Ventures of $19.8 million, $73.4 million, $148.0 million and $211.8 million in the three and six months endedJune 30, 2013 and July 1, 2012, respectively. At June 30, 2013 and December 30, 2012, the Company had accounts payable balances due to Flash Ventures of $167.0 million and $214.5 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	June 30, 2013		December 30, 2012
Notes receivable	$	641	$	820
Equity investments	564		640
Operating lease guarantees	612		926
Prepayments	15		26
Maximum loss exposure	$	1,832	$	2,412

Solid State Storage Solutions, Inc. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions, Inc. (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a variable interest entity. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Condensed Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012.

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Litigation

From time to time, we are involved in various litigation, including those described below, among others. The litigation proceedings in which we are involved from time to time may include matters such as intellectual property, antitrust, commercial, labor, class action, and insurance disputes. The semiconductor industry is characterized by significant litigation seeking to enforce patent and other intellectual property rights. The Company has enforced and likely will continue to enforce its own intellectual property rights through litigation and related proceedings.

In each case listed below where the Company is the defendant, the Company intends to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that losses related to the litigation described below have occurred beyond the amounts, if any, which have been accrued. However, legal discovery and litigation is highly unpredictable and future legal developments may cause current estimates to change in future periods.

Patent Infringement Litigation With Round Rock Research LLC. On October 27, 2011, in response to infringement allegations by Round Rock Research LLC (“Round Rock”), the Company filed a lawsuit against Round Rock in the U.S. District Court for the Northern District of California. The lawsuit seeks a declaratory judgment that twelve Round Rock patents are invalid and/or not infringed by flash memory products sold by the Company. Round Rock has since withdrawn its allegations of infringement as to three of the patents. SanDisk has filed motions for summary judgment of invalidity directed at two additional Round Rock patents, and Round Rock has filed a motion for summary judgment as to certain affirmative defenses asserted by SanDisk to the counterclaims in this action. These motions are currently pending. Discovery is underway and expert discovery has not yet commenced in the case. Trial is currently scheduled to begin on August 11, 2014.

On May 3, 2012, Round Rock filed an action in the U.S. District Court for the District of Delaware alleging that the Company infringed eleven patents, and subsequently filed an amended complaint alleging that SanDisk’s infringement was willful. The parties agreed to dismiss one patent from this Delaware lawsuit that was also being litigated in the California case described above. Discovery is underway. Trial is currently scheduled to begin on September 29, 2014.

Ritz Camera Federal Antitrust Class Action. On June 25, 2010, Ritz Camera & Image, LLC (“Ritz”) filed a complaint in the U.S. District Court for the Northern District of California (the “District Court”), alleging that the Company violated federal antitrust law by conspiring to monopolize and monopolizing the market for flash memory products. The lawsuit captioned Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, purports to be on behalf of direct purchasers of flash memory products sold by the Company and joint ventures controlled by the Company from June 25, 2006 through the present. The complaint alleges that the Company created and maintained a monopoly by fraudulently obtaining patents and using them to restrain competition and by allegedly converting other patents for its competitive use. On February 24, 2011, the District Court issued an Order granting in part and denying in part the Company’s motion to dismiss which resulted in Dr. Harari being dismissed as a defendant. On September 19, 2011, the Company filed a petition for permission to file an interlocutory appeal in the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) for the portion of the District Court’s Order denying the Company’s motion to dismiss based on Ritz’s lack of standing to pursue Walker Process antitrust claims. On October 27, 2011, the District Court administratively closed the case pending the Federal Circuit’s ruling on the Company’s petition. On November 20, 2012, the Federal Circuit affirmed the District Court’s order denying SanDisk’s motion to dismiss. On December 2, 2012, the Federal Circuit issued its mandate returning the case to the District Court. Discovery is now open in the District Court. On February 20, 2013, Ritz filed a motion requesting that Albert Giuliano, the Chapter 7 Trustee of the Ritz bankruptcy estate, be substituted as the plaintiff in this case, which the District Court granted on July 5, 2013.

Samsung Federal Antitrust Action Against Panasonic and SD-3C. On July 15, 2010, Samsung Electronics Co., Ltd. (“Samsung”) filed an action in the U.S. District Court for the Northern District of California (the “District Court”) alleging various claims against Panasonic Corporation and Panasonic Corporation of North America (collectively, “Panasonic”) and SD-3C, LLC (“SD-3C”) under federal antitrust law pursuant to Sections 1 and 2 of the Sherman Act, and under California antitrust and unfair competition laws relating to the licensing practices and operations of SD-3C. The complaint seeks an injunction against collection of Secure Digital (“SD”) card royalties, treble damages, restitution, pre- and post-judgment interest, costs, and attorneys’ fees, as well as a declaration that Panasonic and SD-3C engaged in patent misuse and that the patents subject to such alleged misuse should be held unenforceable. The Company is not named as a defendant in this case, but it established SD-3C along with Panasonic and Toshiba, and the complaint includes various factual allegations concerning the Company. As a member of SD-3C, the Company may be responsible for a portion of any monetary award. Other requested relief, including an injunction or declaration of patent misuse, could result in a loss of revenue to the Company. Defendants

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

filed a motion to dismiss on September 24, 2010, and Samsung filed a First Amended Complaint (“FAC”) on October 14, 2010. On August 25, 2011, the District Court dismissed the patent misuse claim with prejudice, but gave Samsung leave to amend its other claims. On January 3, 2012, the District Court granted defendants’ motion to dismiss Samsung’s complaint without leave to amend. Samsung has appealed, dated January 25, 2012. The briefing on appeal is complete but a hearing date has not yet been set.

Federal Antitrust Class Action Against SanDisk, et al. On March 15, 2011, a putative class action captioned Oliver v. SD-3C LLC, et al was filed in the U.S. District Court for the Northern District of California (the “District Court”) on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims against the Company, SD-3C, Panasonic, Toshiba, and Toshiba America Electronic Components, Inc. under federal antitrust law pursuant to Section 1 of the Sherman Act, California antirust and unfair competition laws, and common law. The complaint seeks an injunction of the challenged conduct, dissolution of “the cooperation agreements, joint ventures and/or cross-licenses alleged herein,” treble damages, restitution, disgorgement, pre- and post-judgment interest, costs, and attorneys’ fees. Plaintiffs allege that the Company (along with the other members of SD-3C) conspired to artificially inflate the royalty costs associated with manufacturing SD cards in violation of federal and California antitrust and unfair competition laws, which in turn allegedly caused plaintiffs to pay higher prices for SD cards. The allegations are similar to, and incorporate by reference the complaint in the Samsung Electronics Co., Ltd. v. Panasonic Corporation; Panasonic Corporation of North America; and SD-3C LLC described above. On May 21, 2012, the District Court granted Defendants’ motion to dismiss the complaint with prejudice. Plaintiffs have appealed. Briefing on the appeal was completed on June 21, 2013. No date for oral argument has been set.

Insurance Litigation. On November 30, 2012, the Company filed a complaint in the U.S. District Court for the Northern District of California against Zurich American Insurance Company (“Zurich”) for breach of an insurance contract issued by Zurich to the Company (the “Policy”). The action relates to Zurich’s denial of the Company’s claim under the Policy for coverage of losses suffered in connection with a power outage that occurred in December 2010 at the Fab 3 and Fab 4 facilities in Yokkaichi, Japan. The Company is seeking damages in an amount to be proven at trial, but in excess of approximately $60 million, less any applicable deductible, as well as costs and other associated remedies. Zurich filed its answer to the Company’s complaint on December 21, 2012. Trial is currently scheduled to begin on July 14, 2014.

34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this report, which are not historical facts, are forward-looking statements within the meaning of the federal securities laws. These statements may contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or other wording indicating future results or expectations. Forward-looking statements are subject to significant risks and uncertainties. Our actual results may differ materially from the results discussed in these forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, those discussed under “Risk Factors” in Part II, Item 1A, and elsewhere in this report. Our business, financial condition or results of operations could be materially harmed by any of these or other factors. We undertake no obligation to revise or update any forward-looking statements to reflect any event or circumstance that arises after the date of this report. References in this report to “SanDisk^®,” “we,” “our,” and “us” refer collectively to SanDisk Corporation, a Delaware corporation, and its subsidiaries.

Overview

We are a global leader in flash memory storage solutions. Our goal is to provide simple, reliable and affordable storage solutions for consumer and enterprise use in a wide variety of formats and devices. We sell our products globally to commercial and retail customers.

We design, develop, market and manufacture data storage solutions in a variety of form factors using our flash memory, controller and firmware technologies. Our flash-based products enable businesses and consumers to efficiently and effectively capture, share, use and preserve digital content. Our solutions include solid state drives, or SSDs, removable cards, embedded products, universal serial bus, or USB, drives, digital media players, wafers and components. Our SSD products are used in client computing platforms and enterprise data centers to provide high-speed, high-capacity storage solutions that can be used in lieu of, or in conjunction with, hard disk drives. Our removable cards are used in a wide range of consumer electronics devices such as mobile phones, tablets, digital cameras, gaming devices and PCs. Our embedded flash products are used in mobile phones, tablets, thin-and-light laptops, eReaders, global positioning system, or GPS, devices, gaming systems, imaging devices and computing platforms.

We strive to continuously reduce the cost of NAND flash memory in order to enable us to profitably grow our business, supply a diverse set of customers and channels, and continue to grow our markets. A key component of our ability to reduce the cost of NAND flash memory is our ability to continue to transition our NAND flash memory process technology to smaller nodes. We currently expect to be able to continue to scale our current NAND flash memory architecture, also known as planar NAND, through a few additional generations, but beyond that there is no certainty that further technology scaling can be achieved cost-effectively with the planar NAND flash memory architecture. We continue to invest in future generations of NAND flash memory, and we are also pursuing alternative technologies, such as Bit-cost scaleable 3-Dimensional NAND, or BiCS, and 3-Dimensional resistive RAM, or 3D ReRAM, technologies, both of which we believe may be viable alternatives to NAND flash memory when NAND flash memory can no longer cost-effectively scale at a sufficient rate, or at all. However, even when NAND flash memory can no longer scale further, we expect NAND flash memory and potential alternative technologies to coexist for an extended period of time. Currently, we are focused on transitioning our products to 19‑nanometer and 1Y‑nanometer technologies and improving manufacturing efficiencies. 1Y‑nanometer and subsequent technology nodes will have increased manufacturing equipment requirements, which will impact the cost reduction benefits obtainable through these technologies.

Through our investments in our ventures with Toshiba Corporation, or Toshiba, and our in-house assembly and test facility, we have invested heavily in a vertically integrated business model. We purchase the vast majority of our NAND flash memory supply requirements through Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd., collectively referred to as Flash Ventures, our significant flash venture relationships with Toshiba, which produce and provide us with leading-edge, low-cost memory wafers. Our manufacturing operations are concentrated in two locations, with Flash Ventures located in Yokkaichi, Japan, and our in-house assembly and test operations located in Shanghai, China. While we do not unilaterally control the operations of Flash Ventures, we believe that our vertically integrated business model helps us to reduce the costs of producing our products, increases our ability to control the quality of our products and speeds delivery to our customers.

Beginning in the first quarter of fiscal year 2013, we report only total revenues, which include product revenues and license and royalty revenues. In addition, during the first quarter of fiscal year 2013, we have recast our sales channels to be Retail and Commercial. Retail channel sales are made directly to retail customers and indirectly through distributors to retail customers. The Commercial channel includes original equipment manufacturer, or OEM, business-to-business, and direct enterprise customers as well as licensees. We have adjusted all prior year comparative amounts and explanations within

35

Management’s Discussion and Analysis of Financial Condition and Results of Operations to reflect these changes in classification to be consistent for all periods presented.

Industry and Company Trends

We operate in an industry characterized by rapid technology transitions, price declines and evolving end-user markets for NAND flash memory. Historically, removable flash memory cards for imaging devices and USB drives provided the majority of our revenues. With the emergence of the smartphone and tablet markets, our sales of embedded NAND flash memory and cards for mobile phones, tablets, and other mobile devices have increased and now represent the largest percentage of our revenues, and we continue to see growth in smartphone and tablet adoption as well as the average capacity of our embedded and removable products used in these mobile devices. In addition, we continue to see new smartphones featuring card slots to expand device storage beyond the embedded capacity. We believe these trends will lead to continued revenue growth for our mobile products; however, we believe that demand for NAND flash memory in the mobile market will grow at a slower rate than in the past. Over the next several years, we believe the largest growth areas for NAND flash memory will be SSD solutions in the client computing and enterprise data center markets. We expect the retail market for NAND flash memory in imaging products and USB drives to be approximately constant or declining over the next several years. We continue to focus on adapting our business to the changing end-markets for NAND flash memory and aligning our resources accordingly.

We expect that industry bit supply growth for fiscal year 2013 will be significantly lower than in fiscal year 2012, and that our bit supply growth for fiscal year 2013 will be less than the industry’s growth rate. We believe the reduced rate of industry bit supply growth is contributing to a healthy supply/demand balance and therefore a shallower rate of price decline, and will continue to do so for the remainder of fiscal year 2013 and into fiscal year 2014. Our revenue for fiscal year 2013 will be influenced primarily by our bit supply growth, industry pricing trends and the mix of our product sales.

Convertible Notes

In the second quarter of fiscal year 2013, we settled our 1% Notes due 2013 in cash for $928.1 million principal plus $4.6 million of accrued interest. In addition, the associated convertible bond hedge transaction was terminated, with no shares purchased. The associated warrants will either be settled on a net share basis or expire unexercised based upon the closing stock price on their respective expiration dates.

Other Transactions

On July 2, 2013, we entered into a definitive agreement to acquire SMART Storage Systems, a developer of enterprise SSDs. Under the terms of the agreement, we will pay approximately $307 million in cash and certain equity-based incentive awards to acquire SMART Storage Systems. The transaction, which has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and is expected to close in August 2013.

36

Results of Operations

	Three months ended										Six months ended
	June 30, 2013			% of Revenues		July 1, 2012			% of Revenues		June 30, 2013			% of Revenues		July 1, 2012			% of Revenues
	(In millions, except percentages)
Revenues	$	1,476.3		100.0	%	$	1,032.3		100.0	%	$	2,817.0		100.0	%	$	2,237.8		100.0	%
Cost of revenues	789.6			53.5	%	742.3			71.9	%	1,589.0			56.4	%	1,517.6			67.8	%
Amortization of acquisition-related intangible assets	9.9			0.7	%	9.2			0.9	%	19.7			0.7	%	22.9			1.0	%
Total cost of revenues	799.5			54.2	%	751.5			72.8	%	1,608.7			57.1	%	1,540.5			68.8	%
Gross profit	676.8			45.8	%	280.8			27.2	%	1,208.3			42.9	%	697.3			31.2	%
Operating expenses
Research and development	172.1			11.7	%	152.4			14.8	%	343.2			12.2	%	293.4			13.1	%
Sales and marketing	63.6			4.2	%	52.3			5.1	%	122.7			4.4	%	101.3			4.5	%
General and administrative	46.9			3.2	%	37.7			3.6	%	92.0			3.3	%	70.3			3.2	%
Amortization and write-off of acquisition-related intangible assets	1.7			0.1	%	2.2			0.2	%	4.1			0.1	%	4.3			0.2	%
Total operating expenses	284.3			19.2	%	244.6			23.7	%	562.0			20.0	%	469.3			21.0	%
Operating income	392.5			26.6	%	36.2			3.5	%	646.3			22.9	%	228.0			10.2	%
Other income (expense), net	(9.1		)	(0.6	%)	(17.2		)	(1.7	%)	(29.0		)	(1.0	%)	(42.5		)	(1.9	%)
Income before income taxes	383.4			26.0	%	19.0			1.8	%	617.3			21.9	%	185.5			8.3	%
Provision for income taxes	121.6			8.3	%	6.0			0.5	%	189.3			6.7	%	58.1			2.6	%
Net income	$	261.8		17.7	%	$	13.0		1.3	%	$	428.0		15.2	%	$	127.4		5.7	%

Revenues by Channel

	Three months ended										Six months ended
	June 30, 2013		% of Revenues		July 1, 2012		% of Revenues		Percent Change		June 30, 2013		% of Revenues		July 1, 2012		% of Revenues		Percent Change
	(In millions, except percentages)
Commercial	$	960.6	65.1	%	$	611.4	59.2	%	57.1	%	$	1,789.3	63.5	%	$	1,434.8	64.1	%	24.7	%
Retail	515.7		34.9	%	420.9		40.8	%	22.5	%	1,027.7		36.5	%	803.0		35.9	%	28.0	%
Total revenues	$	1,476.3	100.0	%	$	1,032.3	100.0	%	43.0	%	$	2,817.0	100.0	%	$	2,237.8	100.0	%	25.9	%

The increase in our revenues for the three months ended June 30, 2013, compared to the three months ended July 1, 2012, was due primarily to an increase in gigabytes sold of 35% and an increase in average selling price per gigabyte of 6%. The increase in our average selling price per gigabyte in the second quarter of fiscal year 2013, compared to the second quarter of fiscal year 2012, was largely influenced by product price increases due to a healthy supply/demand balance in the NAND industry and an increased mix of SSDs and embedded products. Commercial revenues in the three months ended June 30, 2013, compared to the three months ended July 1, 2012, reflect significantly increased sales of embedded products for mobile devices and SSDs, partially offset by a decrease in revenue from cards for the mobile market. Retail product revenues in the three months ended June 30, 2013, compared to the three months ended July 1, 2012, increased due primarily to higher sales of cards for mobile devices, USB drives and SSDs.

The increase in our revenues for the six months ended June 30, 2013, compared to the six months ended July 1, 2012, was due primarily to an increase in gigabytes sold of 35%, partially offset by a decline in average selling price per gigabyte of 6%. Commercial revenues in the six months ended June 30, 2013, compared to the six months ended July 1, 2012, reflect significantly increased sales of SSDs and embedded products for mobile devices, partially offset by a decrease in revenue from cards for the mobile market, wafers and components and gaming cards. Retail product revenues in the six months ended June 30, 2013, compared to the six months ended July 1, 2012, increased due primarily to higher sales of cards for mobile devices, USB drives and SSDs.

37

Our ten largest customers represented approximately 49% and 48% of our total revenues in the three and six months ended June 30, 2013, respectively, compared to 37% and 38% in the three and six months ended July 1, 2012, respectively. One customer represented 16% of our total revenues in the three months ended June 30, 2013. Two customers represented 18% and 11% of our total revenues in the six months ended June 30, 2013. One customer represented 10% of our total revenues in each of the three and six months ended July 1, 2012.

Geographical Revenues

	Three months ended										Six months ended
	June 30, 2013		% of Revenues		July 1, 2012		% of Revenues		Percent Change		June 30, 2013		% of Revenues		July 1, 2012		% of Revenues		Percent Change
	(In millions, except percentages)
United States	$	190.0	12.9	%	$	159.0	15.4	%	19.5	%	$	403.5	14.3	%	$	329.6	14.7	%	22.4	%
Asia-Pacific	1,038.5		70.3	%	659.8		64.0	%	57.4	%	1,948.4		69.2	%	1,491.3		66.6	%	30.7	%
Europe, Middle East and Africa	176.6		12.0	%	161.4		15.6	%	9.4	%	350.2		12.4	%	308.2		13.8	%	13.6	%
Other foreign countries	71.2		4.8	%	52.1		5.0	%	36.7	%	114.9		4.1	%	108.7		4.9	%	5.7	%
Total revenues	$	1,476.3	100.0	%	$	1,032.3	100.0	%	43.0	%	$	2,817.0	100.0	%	$	2,237.8	100.0	%	25.9	%

For the three months ended June 30, 2013, compared to the three months ended July 1, 2012, our U.S. revenues increased primarily as a result of increased retail sales of mobile cards, SSDs and USB drives. The increase in Asia-Pacific revenues was due primarily to increased commercial sales of SSDs and mobile embedded products and increased retail sales of cards and USB drives, partially offset by a decrease in sales of OEM mobile cards. The increase in revenues in Europe, Middle East and Africa was due primarily to increased retail sales of mobile cards, USB drives and SSDs, partially offset by a decline in commercial sales of embedded products. The increase in revenues in Other foreign countries was due primarily to increased retail sales of USB drives and mobile cards. Our revenues are designated based on the geographic location where the product is delivered, or in the case of license and royalty revenue, the location of the headquarters of the licensee, and therefore may not be indicative of the actual demand in those regions.

For the six months ended June 30, 2013, compared to the six months ended July 1, 2012, our U.S. revenues increased primarily as a result of increased retail sales of mobile cards and SSDs. The increase in Asia-Pacific revenues was due primarily to increased commercial sales of mobile embedded products and retail sales of cards and USB drives, partially offset by a decrease in sales of OEM mobile cards and wafers and components. The increase in revenues in Europe, Middle East and Africa was due primarily to increased retail sales of mobile cards, USB drives and SSDs, partially offset by a decline in commercial sales of embedded products.

Gross Profit and Margin

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Gross profit	$	676.8		$	280.8		141.0	%	$	1,208.3		$	697.3		73.3	%
Gross margin	45.8		%	27.2		%			42.9		%	31.2		%

The increase in gross margin for the three months ended June 30, 2013, compared to the three months ended July 1, 2012, was due primarily to an increase in average selling price per gigabyte of 6% and a reduction in cost per gigabyte of (21%). Costs per gigabyte improved over the prior year primarily due to wafer production transitioning from 24‑nanometer to 19‑nanometer products and the weakening of the Japanese yen to the U.S. dollar for wafer purchases denominated in Japanese yen, partially offset by an increase in non-flash memory costs. Non-flash memory costs increased as a result of an increased sales mix of SSDs and multi-chip package products, which have higher non-flash memory costs than most of our other products.

The increase in gross margin for the six months ended June 30, 2013, compared to the six months ended July 1, 2012, was due primarily to reductions in cost per gigabyte of (23%) exceeding average selling price reductions of (6%). Costs per

38

gigabyte improved over the prior year primarily due to wafer production transitioning from 24‑nanometer to 19‑nanometer and the weakening of the Japanese yen to the U.S. dollar for wafer purchases denominated in Japanese yen, partially offset by an increase in non-flash memory costs. Non-flash memory costs increased as a result of an increased sales mix of SSDs and multi-chip package products, which have higher non-flash memory costs than most of our other products.

Research and Development

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Research and development	$	172.1		$	152.4		12.9	%	$	343.2		$	293.4		17.0	%
Percent of revenues	11.7		%	14.8		%			12.2		%	13.1		%

The increase in our research and development expense for the three months ended June 30, 2013, compared to the three months ended July 1, 2012, was due primarily to higher employee-related costs of $26 million related to increased headcount and incentive compensation expense, partially offset by lower third-party engineering costs of ($7) million.

The increase in our research and development expense for the six months ended June 30, 2013, compared to the six months ended July 1, 2012, was due primarily to higher employee-related costs of $48 million related to increased headcount and incentive compensation expense.

Incentive compensation expense was higher in the three and six months ended June 30, 2013, compared to the three and six months ended July 1, 2012, due to improved financial performance.

Sales and Marketing

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Sales and marketing	$	63.6		$	52.3		21.6	%	$	122.7		$	101.3		21.1	%
Percent of revenues	4.2		%	5.1		%			4.4		%	4.5		%

The increase in our sales and marketing expense for the three months ended June 30, 2013, compared to the three months ended July 1, 2012, was due primarily to higher employee-related costs of $11 million related to increased incentive compensation expense.

The increase in our sales and marketing expense for the six months ended June 30, 2013, compared to the six months ended July 1, 2012, was due primarily to higher employee-related costs of $20 million related to increased incentive compensation expense.

Incentive compensation expense was higher in the three and six months ended June 30, 2013, compared to the three and six months ended July 1, 2012, due to improved financial performance.

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General and Administrative

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
General and administrative	$	46.9		$	37.7		24.4	%	$	92.0		$	70.3		30.9	%
Percent of revenues	3.2		%	3.6		%			3.3		%	3.2		%

The increase in our general and administrative expense for the three months ended June 30, 2013, compared to the three months ended July 1, 2012, was due primarily to higher employee-related costs of $5 million related to increased incentive compensation expense and an increase in bad debt expense of $2 million due to an overall revenue increase.

The increase in our general and administrative expense for the six months ended June 30, 2013, compared to the six months ended July 1, 2012, was due primarily to higher employee-related costs of $7 million related to increased incentive compensation expense, one-time insurance recoveries of legal fees of ($5) million in the first quarter of fiscal year 2012, higher facility and IT costs of $4 million and an increase in bad debt expense of $3 million.

Incentive compensation expense was higher in the three and six months ended June 30, 2013, compared to the three and six months ended July 1, 2012, due to improved financial performance.

Amortization and Write-off of Acquisition-Related Intangible Assets

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Amortization and write-off of acquisition-related intangible assets	$	1.7		$	2.2		(22.7	%)	$	4.1		$	4.3		(4.7	%)
Percent of revenues	0.1		%	0.2		%			0.1		%	0.2		%

Amortization of acquisition-related intangible assets in the three and six months ended June 30, 2013, compared to the three and six months ended July 1, 2012, reflected lower amortization of intangible assets from our Pliant Technology, Inc. acquisition, as two intangibles became fully amortized during the second quarter of fiscal year 2013, and from our Matrix Semiconductor, Inc. acquisition, which became fully amortized during the first quarter of fiscal year 2012.

Other Income (Expense), net

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Interest income	$	12.8		$	15.0		(14.7	%)	$	25.7		$	30.0		(14.3	%)
Interest expense	(22.7		)	(29.8		)	(23.8	%)	(53.7		)	(59.1		)	(9.1	%)
Other income (expense), net	0.8			(2.4		)	(133.3	%)	(1.0		)	(13.4		)	(92.5	%)
Total other income (expense), net	$	(9.1	)	$	(17.2	)	(47.1	%)	$	(29.0	)	$	(42.5	)	(31.8	%)

“Total other income (expense), net” for the three months ended June 30, 2013 reflected a lower net expense, compared to the three months ended July 1, 2012, due primarily to lower interest expense as a result of the maturation of our 1% Notes due 2013 in the second quarter of fiscal year 2013.

“Total other income (expense), net” for the six months ended June 30, 2013 reflected a lower net expense, compared to the six months ended July 1, 2012, due primarily to a charge incurred by Flash Ventures and losses on non-designated foreign exchange contracts included in “Other income (expense)” in the first quarter of fiscal year 2012 that did not recur in fiscal year 2013, and lower interest expense as a result of the maturation of our 1% Notes due 2013 in the second quarter of fiscal year 2013.

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Provision for Income Taxes

	Three months ended								Six months ended
	June 30, 2013			July 1, 2012			Percent Change		June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Provision for income taxes	$	121.6		$	6.0		1,926.7	%	$	189.3		$	58.1		225.8	%
Effective tax rate	31.7		%	31.7		%			30.7		%	31.4		%

The provision for income taxes for the three and six months ended June 30, 2013 differs from the U.S. statutory tax rate of 35% primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development, or R&D, credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to our Irish, Chinese, Israeli and Japanese entities. Earnings in these countries, where tax rates are lower than the U.S. notional rate, contributed to the majority of the difference between the rate of our tax provision and the U.S. statutory tax rate. The lower effective tax rate for the six months ended June 30, 2013, compared to the same period in fiscal year 2012, was attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit for fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of June 30, 2013, we believe that most of our deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $171.0 million and $179.5 million as of June 30, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact our effective tax rate in the future were approximately $79.8 million at June 30, 2013. Income tax expense for the three and six months ended June 30, 2013 and July 1, 2012 included interest and penalties of $0.9 million, $1.6 million, $0.7 million and $1.5 million, respectively.

We are subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service, or IRS, completed its field audit of our federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report. The most significant proposed adjustments are comprised of related party transactions between our U.S. parent company and our foreign subsidiaries. We are contesting these adjustments through the IRS Appeals Officeand cannot predict when a resolution will be reached.

We strongly believe the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that our previously reported income tax provisions for the years in question are appropriate. We believe that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner that is not consistent with management’s expectations, we could be required to adjust our provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of our federal income tax returns for fiscal years 2009 through 2011. We do not expect a resolution of this audit to be reached during the next twelve months. In addition, we are currently under audit by various state and international tax authorities. We cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm our financial position, results of operations or liquidity.

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Non-GAAP Financial Measures

Reconciliation of Net Income.

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
	(In millions except per share and share amounts)
Net income	$	261.8		$	13.0		$	428.0		$	127.4
Share-based compensation	24.7			20.2			46.4			39.3
Amortization and write-off of acquisition-related intangible assets	11.6			11.4			23.8			27.2
Convertible debt interest	16.7			22.4			40.3			44.2
Income tax adjustments	(15.8		)	(15.9		)	(32.6		)	(30.7		)
Non-GAAP net income	$	299.0		$	51.1		$	505.9		$	207.4
Diluted net income per share	$	1.06		$	0.05		$	1.74		$	0.52
Share-based compensation	0.10			0.08			0.19			0.16
Amortization and write-off of acquisition-related intangible assets	0.05			0.05			0.10			0.11
Convertible debt interest	0.06			0.09			0.16			0.18
Income tax adjustments	(0.06		)	(0.06		)	(0.13		)	(0.13		)
Non-GAAP diluted net income per share	$	1.21		$	0.21		$	2.06		$	0.84

We believe these non-GAAP measures provide investors the ability to better assess and understand operating performance, especially when comparing results with previous periods or forecasting performance for future periods, primarily because management typically monitors the business excluding these items. We also use these non-GAAP measures to establish operational goals and for measuring performance for compensation purposes. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, and not as a replacement for, data presented in accordance with GAAP.

We believe that the presentation of non-GAAP measures, including non-GAAP net income and non-GAAP diluted net income per share, provides important supplemental information to management and investors about financial and business trends relating to our operating results. We believe that the use of these non-GAAP financial measures also provides consistency and comparability with our past financial reports.

We have historically used these non-GAAP measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described below provides an additional measure of our core operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. Externally, we believe that these non-GAAP measures continue to be useful to investors in their assessment of our operating performance and their valuation of our company.

Internally, these non-GAAP measures are significant measures used by us for purposes of:

•evaluating our core operating performance;

•establishing internal budgets;

•setting and determining variable compensation levels;

•calculating return on investment for development programs and growth initiatives;

•comparing performance with internal forecasts and targeted business models;

•strategic planning; and

•benchmarking performance externally against our competitors.

We exclude the following items from our non-GAAP measures:

Share-based Compensation Expense.  These expenses consist primarily of expenses for share-based compensation, such as stock options, restricted stock units and our employee stock purchase plan. Although share-based compensation is an important aspect of the compensation of our employees and executives, we exclude share-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses. Further, share-based compensation expenses are based on

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valuations with many underlying assumptions not in our control that vary over time and may include modifications that may not occur on a predictable cycle, neither of which are necessarily indicative of our ongoing business performance. In addition, the share-based compensation expenses recorded are often unrelated to the actual compensation an employee realizes. We believe that it is useful to exclude share-based compensation expense for investors to better understand the long-term performance of our core operations and to facilitate comparison of our results to our prior periods and to our peer companies.

Amortization and Write-off of Acquisition-related Intangible Assets.  We incur amortization, and, occasionally, write-offs of intangible assets in connection with acquisitions.  Since we do not acquire businesses on a predictable cycle, we exclude these items in order to provide investors and others with a consistent basis for comparison across accounting periods.

Convertible Debt Interest. We incur non-cash economic interest expense relating to the implied value of the equity conversion component of the convertible debt. The value of the equity conversion component is treated as a debt discount and amortized to interest expense over the life of the notes using the effective interest rate method. We also incur interest expense equal to the change in fair value of the liability component of the convertible debt when we repurchase a portion of the convertible debt. We exclude these non-cash interest expenses that do not represent cash interest payments made to our note holders.

Income Tax Adjustments. This amount is used to present each of the amounts described above on an after-tax basis, considering jurisdictional tax rates, consistent with the presentation of non-GAAP net income.

From time-to-time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.

Limitations of Relying on Non-GAAP Financial Measures. We have incurred and will incur in the future, many of the costs that we exclude from the non-GAAP measures, including share-based compensation expense, impairment of goodwill and acquisition-related intangible assets, amortization and write-off of acquisition-related intangible assets and other acquisition-related costs, non-cash economic interest expense associated with our convertible debt and income tax adjustments. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies.

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Liquidity and Capital Resources

Cash Flows. Our cash flows were as follows:

	Six months ended
	June 30, 2013			July 1, 2012			Percent Change
	(In millions, except percentages)
Net cash provided by operating activities	$	864.5		$	86.3		901.7	%
Net cash provided by (used in) investing activities	307.0			(72.1		)	525.8	%
Net cash used in financing activities	(1,119.5		)	(111.2		)	(906.7	%)
Effect of changes in foreign currency exchange rates on cash	6.7			—			**
Net increase (decrease) in cash and cash equivalents	$	58.7		$	(97.0	)	160.5	%

————

**    Amount not meaningful

Operating Activities. Cash provided by operating activities is generated by net income adjusted for certain non-cash items and changes in assets and liabilities.The increase in cash provided by operations in the first half of fiscal year 2013, compared to the first half of fiscal year 2012, resulted primarily from an increase in net income and a decrease in cash usage from other liabilities. Cash flow from other liabilities was a source of cash in the first half of fiscal year 2013, compared to a cash usage in the first half of fiscal year 2012, primarily due to significantly lower tax and incentive compensation payments in the first half of fiscal year 2013 compared to the first half of fiscal year 2012 and higher accruals for incentive compensation and taxes in the first half of fiscal year 2013 compared to the first half of fiscal year 2012. Cash flow from accounts receivable decreased primarily due to higher sales in the first half of fiscal year 2013 compared to the first half of fiscal year 2012. Cash flow from inventory resulted in an inflow of cash compared to the prior year due to a decrease in inventory balances resulting from higher sales and reduced growth in memory supply. Cash flow from other assets decreased compared to the prior year primarily due to higher non-trade receivable balances from Toshiba associated with Flash Venture activity. Cash flow from accounts payable increased due to the timing of payments as compared to the prior year.

Investing Activities. Net cash provided by investing activities in the first half of fiscal year 2013 was primarily related to the net proceeds of short and long-term marketable securities of $357 million and repayments of notes receivables from Flash Ventures of $73 million, offset by acquisition of property and equipment of ($120) million. In the first half of fiscal year 2012, net cash used in investing activities was primarily related to acquisition of property and equipment of ($240) million and net cash used for acquisitions of other companies of ($69) million, offset by net proceeds from short and long-term marketable securities of $219 million.

Financing Activities. Net cash used by financing activities for the first half of fiscal year 2013 was primarily related to the repayment of our 1% Notes due 2013 of ($928) million and our share repurchase program of ($370) million, partially offset by cash received from employee stock programs of $163 million. Net cash used by financing activities for the first half of fiscal year 2012 was primarily related to our share repurchase program of ($154) million, partially offset by cash received from employee stock programs of $51 million.

Liquid Assets. At June 30, 2013, we had cash, cash equivalents and short-term marketable securities of $2.59 billion. We had $2.77 billion of long-term marketable securities, which we believe are also liquid assets, but are classified as long-term marketable securities due to the remaining effective maturity of the investment being greater than one year.

Short-Term Liquidity. As of June 30, 2013, our working capital balance was $3.19 billion. During fiscal year 2013, we expect our total capital investment to be approximately $1.1 billion, inclusive of our portion of capital investments in Flash Ventures. We expect our net cash usage for capital investments in Flash Ventures and non-fab property and equipment to be approximately ($350) million. Our current estimate of capital investments for the Flash Ventures is primarily comprised of investments for technology transition and productivity improvements. In the first half of fiscal year 2013, we received cash from notes receivable repayments from Flash Ventures of $73 million and our cash usage for non-fab property and equipment investments was ($120) million.

Depending on the forecasted demand for our products, we may decide to make additional investments, which could be substantial, in wafer fabrication capacity and assembly and test manufacturing equipment. We may also engage in merger or acquisition transactions, make equity investments in other companies or purchase or license technologies. These activities may require us to raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory amounts,

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could prevent us from funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, taking advantage of future opportunities, engaging in acquisitions of or investments in companies, growing our business, or responding to competitive pressures or unanticipated industry changes, any of which could harm our business.

Our short-term liquidity is impacted in part by our ability to maintain compliance with covenants in the outstanding Flash Ventures master lease agreements. The Flash Ventures master lease agreements contain customary covenants for Japanese lease facilities as well as an acceleration clause for certain events of default related to us as guarantor, including, among other things, our failure to maintain a minimum shareholder equity of at least $1.51 billion, and for one master lease agreement, which matures on July 31, 2013, our failure to maintain a minimum corporate rating of BB- from Standard & Poors, or S&P, or Moody’s Corporation, or Moody’s, or a minimum corporate rating of BB+ from Rating & Investment Information, Inc., or R&I. As of June 30, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of June 30, 2013, our R&I credit rating was BBB, two notches above the required minimum corporate rating threshold for R&I; and our S&P credit rating was BB, one notch above the required minimum corporate rating threshold for S&P.

If our shareholders’ equity falls below $1.51 billion, or both S&P and R&I were to downgrade our credit rating below the minimum corporate rating threshold, or other events of default occur, Flash Ventures would become non-compliant with certain covenants under certain master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by us, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a resolution was unsuccessful, we could be required to pay a portion or up to the entire $612 million outstanding lease obligations covered by our guarantees under such Flash Ventures master lease agreements, based upon the exchange rate at June 30, 2013, which would negatively impact our short-term liquidity.

As of June 30, 2013, the amount of cash and cash equivalents and short and long-term marketable securities held by foreign subsidiaries was $795 million. We provide for U.S. income taxes on the earnings of foreign subsidiaries unless the earnings are considered indefinitely invested outside of the U.S. As of December 30, 2012, no provision had been made for U.S. income taxes or foreign withholding taxes on $583 million of undistributed earnings of foreign subsidiaries since we intend to indefinitely reinvest these earnings outside the U.S. We determined that the calculation of the amount of unrecognized deferred tax liability related to these cumulative unremitted earnings was not practicable. If these earnings were distributed to the U.S., we would be subject to additional U.S. income taxes and foreign withholding taxes reduced by available foreign tax credits.

Our Board of Directors has authorized up to $1.25 billion for stock repurchases, of which $646 million remained available for stock repurchases as of June 30, 2013. As of June 30, 2013, we had cumulatively repurchased 12.6 million shares for $604 million, of which 6.8 million shares for $370 million were repurchased in the first half of fiscal year 2013 at an average price of $54.16. Under this program, share purchases may be made, from time-to-time, in both the open market and privately negotiated transactions, and may include the use of derivative contracts, structured stock repurchase agreements and Rule 10b5-1 trading plans. The stock repurchase program does not obligate us to purchase any particular amount of shares.

On July 2, 2013, we entered into a definitive agreement to acquire SMART Storage Systems, a developer of enterprise SSDs. Under the terms of the agreement, we will pay approximately $307 million in cash and certain equity-based incentive awards to acquire SMART Storage Systems. The transaction, which has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and is expected to close in August 2013.

Long-Term Requirements. Depending on the forecasted demand for our products, we may decide to make additional investments, which could be substantial, in wafer fabrication capacity and assembly and test manufacturing equipment. We may also engage in merger or acquisition transactions, make equity investments in other companies or purchase or license technologies. These activities may require us to raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory amounts, could prevent us from funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, taking advantage of future opportunities, engaging in investments in or acquisitions of companies, growing our business, responding to competitive pressures or unanticipated industry changes, any of which could harm our business.

Financing Arrangements. At June 30, 2013, we had $1.0 billion aggregate principal amount of 1.5% Notes due 2017 outstanding. See Note 6, “Financing Arrangements,” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q for more detail.

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Concurrent with the issuance of the 1% Notes due 2013, we sold warrants to acquire shares of our common stock at an exercise price of $95.03 per share. The warrants expire on 20 different dates from August 23, 2013 through September 20, 2013. At expiration, we may, at our option, elect to settle the warrants on a net share basis. As of June 30, 2013, no warrants had been exercised.

Concurrent with the issuance of the 1.5% Notes due 2017, we sold warrants to acquire up to approximately 19.1 million shares of our common stock at an exercise price of $73.33 per share. The warrants mature on 40 different dates from November 13, 2017 through January 10, 2018 and are exercisable at the maturity date. At each maturity date, we may, at our option, elect to settle the warrants on a net share basis. As of June 30, 2013, the warrants had not been exercised and remain outstanding. In addition, concurrent with the issuance of the 1.5% Notes due 2017, we entered into a convertible bond hedge transaction in which counterparties agreed to sell to us up to approximately 19.1 million shares of our common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a conversion price of $52.37 per share. The convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares, based on the number of shares issuable upon conversion of the 1.5% Notes due 2017, on the expiration date would result in us receiving net shares equivalent to the number of shares issuable by us upon conversion of the 1.5% Notes due 2017. As of June 30, 2013, we had not purchased any shares under this convertible bond hedge agreement.

Ventures with Toshiba. We are a 49.9% owner in each of the Flash Ventures, our business ventures with Toshiba to develop and manufacture NAND flash memory products. These NAND flash memory products are manufactured by Toshiba at Toshiba’s Yokkaichi, Japan operations using the semiconductor manufacturing equipment owned or leased by the Flash Ventures. This equipment is funded or will be funded by investments in or loans to the Flash Ventures from us and Toshiba as well as through operating leases received by Flash Ventures from third-party banks and guaranteed by us and Toshiba. The Flash Ventures purchase wafers from Toshiba at cost and then resell those wafers to us and Toshiba at cost plus a markup. We are contractually obligated to purchase half of the Flash Ventures’ NAND wafer supply or pay for 50% of the fixed costs of the Flash Ventures. We are not able to estimate our total wafer purchase obligations beyond our rolling three month purchase commitment because the price is determined by reference to the future cost to produce the semiconductor wafers. See Note 12, “Related Parties and Strategic Investments,” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

From time-to-time, we and Toshiba mutually approve the purchase of equipment for the Flash Ventures in order to convert to new process technologies or add wafer capacity.  Flash Partners Ltd., or Flash Partners, and Flash Alliance Ltd., or Flash Alliance, have been previously equipped to full wafer capacity.  Flash Forward Ltd, or Flash Forward, occupies Fab 5 which is being built in two phases. As of June 30, 2013, over half of the Phase 1 building has been equipped with wafer capacity or equipment required to enable technology transition of the Flash Ventures’ wafer capacity. The last new Flash Ventures wafer capacity was added in January 2012 in Phase 1 of Fab 5. As of June 30, 2013, SanDisk has made no commitment to invest in further Phase 1 wafer capacity expansion beyond productivity improvements; however, we periodically review the opportunity for further capacity expansion. We and Toshiba each retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate level of equipment funding. To date, we have invested in 50% of the Flash Forward equipment. We and Toshiba have announced that the construction of the Phase 2 shell of the Fab 5 wafer fabrication facility will begin in August 2013 with expected completion in mid-2014. The Phase 2 shell is intended to be used primarily for technology transition of the existing Flash Ventures wafer capacity to 1Y and 1Z technology nodes and for a BiCS pilot line.

The cost of the wafers we purchase from Flash Ventures is recorded in inventory and ultimately cost of revenues. Flash Ventures are variable interest entities; however, we are not the primary beneficiary of these ventures because we do not have a controlling financial interest in each venture. Accordingly, we account for our investments under the equity method and do not consolidate.

For semiconductor manufacturing equipment that is leased by Flash Ventures, we and Toshiba jointly guarantee, on an unsecured and several basis, 50% of the outstanding Flash Ventures’ lease obligations under original master lease agreements entered into by Flash Ventures. These master lease obligations are denominated in Japanese yen and are noncancelable. Our total master lease obligation guarantees as of June 30, 2013 were 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

In the first quarter of fiscal year 2011, we made a $62 million prepayment for Flash Forward Ltd., or Flash Forward, building-related costs. As of June 30, 2013, approximately $15 million of this remained, which was classified as Other current assets.

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Contractual Obligations and Off-Balance Sheet Arrangements

Our contractual obligations and off-balance sheet arrangements at June 30, 2013, and the effect those contractual obligations are expected to have on our liquidity and cash flow over the next five years are presented in textual and tabular format in Note 11, “Commitments, Contingencies and Guarantees,” of the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

Impact of Currency Exchange Rates

Exchange rate fluctuations could have a material adverse effect on our business, financial condition and results of operations. Our most significant foreign currency exposure is to the Japanese yen in which we purchase the vast majority of our NAND flash wafers. In addition, we also have significant costs denominated in the Chinese renminbi and the Israeli new shekel, and we have revenue denominated in the European euro, the British pound, the Japanese yen, the Chinese renminbi and the Canadian dollar. We do not enter into derivatives for speculative or trading purposes. We use foreign currency forward and cross currency swap contracts to mitigate transaction gains and losses generated by certain monetary assets and liabilities denominated in currencies other than the U.S. dollar. From time-to-time, we use foreign currency forward contracts and options to partially hedge our future Japanese yen costs for NAND flash wafers. Our derivative instruments are recorded at fair value in assets or liabilities with final gains or losses recorded in other income (expense) or as a component of accumulated other comprehensive income, or AOCI, and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized. These foreign currency exchange exposures may change over time as our business and business practices evolve, and they could harm our financial results and cash flows. See Note 3, “Derivatives and Hedging Activities,” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

Because we purchase the vast majority of our flash memory wafers from Flash Ventures, our flash memory costs, which represent the largest portion of our cost of revenues, are based upon wafer purchases denominated in Japanese yen.  However, our cost of revenues in any given quarter generally reflect wafer purchases that were made in the previous quarter, and are impacted by hedging decisions we may make from time to time, including entering into forward contracts or other instruments to hedge our future Japanese yen purchase rate.  Based on wafer purchases made in the first half of 2013 and forward contracts entered into throughout 2013, changes in the Japanese yen to U.S. dollar exchange rate after June 2013 are not expected to have a material impact on our cost of revenues in the third quarter of 2013. We expect the average rate of the Japanese yen to the U.S. dollar for the wafer portion of our cost of revenues to be approximately 94 for the third quarter of fiscal 2013, in comparison to a rate of approximately 85 in our second quarter of fiscal 2013 cost of sales. In addition, we have locked in approximately 70% of the yen purchases that we expect will impact our fourth quarter cost of sales at a yen rate of approximately 97. Wafer purchases generally comprise 50 percent or more of our cost of sales. See Item 3, “Quantitative and Qualitative Disclosure About Market Risk - Foreign Currency Risk” for more information about our foreign currency forward and cross currency swap contracts.

For a discussion of foreign operating risks and foreign currency risks, see Part II, Item 1A, “Risk Factors.”

Critical Accounting Policies

Our discussion and analysis of our financial condition and operating results is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. We base our estimates on historical experience and on other assumptions that we believe are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

There were no significant changes to our critical accounting policies during the three and six months ended June 30, 2013. For information about critical accounting policies, see the discussion of critical accounting policies in our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on February 19, 2013.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. As of June 30, 2013, a hypothetical 50 basis point increase in interest rates would result in an approximate $30.2 million decline (less than 0.67%) of the fair value of our available-for-sale debt securities.

Foreign Currency Risk. The majority of our revenues are transacted in the U.S. dollar, with some revenues transacted in the European euro, the British pound, the Japanese yen, the Chinese renminbi and the Canadian dollar. Our flash memory costs, which represent the largest portion of our cost of revenues, are denominated in Japanese yen. We also have some cost of revenues denominated in the Chinese renminbi. The majority of our operating expenses are denominated in the U.S. dollar; however, we have expenses denominated in Japanese yen, the Chinese renminbi, the Israeli new shekel and numerous other currencies. On the balance sheet, we have numerous foreign currency denominated monetary assets and liabilities, with the largest monetary exposure being our balances with Flash Ventures, which are denominated in Japanese yen.

We enter into foreign currency forward and cross currency swap contracts to hedge the gains or losses generated by the remeasurement of our significant foreign currency denominated monetary assets and liabilities. The fair value of these contracts is reflected as other assets or other liabilities and the change in fair value of these balance sheet hedge contracts is recorded into earnings as a component of other income (expense) to largely offset the change in fair value of the foreign currency denominated monetary assets and liabilities which is also recorded in other income (expense).

We use foreign currency forward contracts to partially hedge future Japanese yen flash memory costs. These contracts are designated as cash flow hedges and are carried on our balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income and subsequently recognized in cost of revenues in the same period the hedged cost of revenues is recognized.

At June 30, 2013, we had both foreign currency forward contracts and cross currency swap contracts in place that amounted to a net purchase in U.S. dollar equivalents of $6.1 million in foreign currencies to hedge our foreign currency denominated monetary net liability position over the next twelve months. The notional amount and unrealized gain or loss of our outstanding cross currency swap and foreign currency forward contracts that are non-designated (balance sheet hedges) as of June 30, 2013 are shown in the table below. In addition, this table shows the change in fair value of these balance sheet hedges assuming a hypothetical adverse foreign currency exchange rate movement of 10 percent. These changes in fair values would be largely offset in other income (expense) by corresponding changes in the fair values of the foreign currency denominated monetary assets and liabilities.

	Notional Amount			Unrealized Gain (Loss) as of June 30, 2013			Change in Fair Value Due to 10% Adverse Rate Movement
	(In millions)
Balance sheet hedges
Cross currency swap contracts sold	$	(29.3	)	$	5.5		$	2.7
Forward contracts sold	(72.5		)	(0.3		)	(5.1		)
Forward contracts purchased	107.9			(0.4		)	(9.6		)
Total net outstanding contracts	$	6.1		$	4.8		$	(12.0	)

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At June 30, 2013, we had foreign currency forward contracts in place that amounted to a net purchase in U.S. dollar equivalent of approximately $247 million to partially hedge our expected future wafer purchases in Japanese yen. The maturities of these contracts were 12 months or less. The notional amount and fair value of our outstanding forward contracts that are designated as cash flow hedges as of June 30, 2013 is shown in the table below. In addition, this table shows the change in fair value of these cash flow hedges assuming a hypothetical adverse foreign currency exchange rate movement of 10 percent.

	Notional Amount		Fair Value as of June 30, 2013			Change in Fair Value Due to 10% Adverse Rate Movement
	(In millions)
Cash flow hedges
Forward contracts purchased	$	247.2	$	(7.4	)	$	(22.4	)

Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our foreign currency exposures, and there can be no assurances that our mitigating activities related to the exposures that we hedge will adequately protect us against risks associated with foreign currency fluctuations.

Market Risk. With the U.S. long-term sovereign credit rating below the highest available rating and the risk of additional future downgrades or related downgrades by recognized credit rating agencies, the investment choices for our cash and marketable securities portfolio could be reduced, which could negatively impact our non-operating results. We do not have direct ownership of European sovereign debt in our investment portfolio. Sales to Europe accounted for approximately 12% of our total revenues in the three and six months endedJune 30, 2013, respectively, and any significant uncertainties in the European financial markets could impact our revenues and financial condition in Europe or elsewhere.

All of the potential changes noted above are based on sensitivity analysis performed on our financial position at June 30, 2013. Actual results may differ materially.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2013. Based on their evaluation as of June 30, 2013, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see Note 13, “Litigation,” in the Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

Item 1A. Risk Factors

The following description of the risk factors associated with our business includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013.

Our operating results may fluctuate significantly, which may harm our financial condition and our stock price. Our quarterly and annual operating results have fluctuated significantly in the past and we expect that they will continue to fluctuate in the future.  Our results of operations are subject to fluctuations and other risks, including, among others:

• competitive pricing pressures, resulting in lower average selling prices and lower revenues;

• inability to reduce manufacturing costs to keep pace with reductions in average selling prices, resulting in lower or negative product gross margins;

• excess, insufficient or mismatched captive memory output or capacity, resulting in lower average selling prices, financial charges and impairments, lost revenue and growth opportunities, lower gross margins or other consequences;

• timing, volume and cost of wafer production from Flash Ventures as impacted by fab start-up delays and costs, technology transitions, lower than expected yields or production interruptions;

• inability to penetrate new or growing markets for flash memory, including the SSD markets, failure of existing or new markets for flash memory to grow or develop, or failure to maintain or improve our position in any of these markets;

• potential delays in product development or lack of customer acceptance of our solutions, particularly OEM products such as our embedded flash storage solutions and SSD solutions;

• fluctuations in customer concentration and the loss of, or reduction in orders from, one or more of our major customers that account for a significant portion of our revenues;

• inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable yields, new technologies such as 1Y‑nanometer or subsequent process technologies, X3 NAND memory architecture, BiCS technology, 3D ReRAM, or other advanced alternative technologies;

• fluctuations or declines in our license and royalty revenues due to license agreement renewals on less favorable terms, non-renewals, declines in sales of the products or use of technology underlying the license and royalty revenues by our licensees, or if licensees or we fail to perform on contractual obligations;

• lengthy, costly and unpredictable design, qualification and sales processes for a limited number of customers in the enterprise SSD market;

• increased costs and lower gross margins due to potentially higher warranty claims from our more complex SSD solutions and firmware;

• excess inventory or lost sales resulting from unpredictable or changing demand for our products;

• failure to manage the risks associated with our ventures and strategic partnerships with Toshiba;

• insufficient non-flash memory materials or capacity from our suppliers and contract manufacturers to meet demand or increases in the cost of non-flash memory materials or capacity;

• fluctuations in our product gross margins due to changes in product mix or customer mix, as well as variations in the technologies or form factors of our products;

• disruptions in our supply chain, whether due to natural disasters, emergencies such as power outages, fires or chemical spills, or employee strikes or other job actions;

• inability to enhance current products, develop new products or transition products to new technologies on a timely basis or in advance of our competitors;

• increased memory component and other costs as a result of currency exchange rate fluctuations for the U.S. dollar, particularly with respect to the Japanese yen;

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• inability to obtain non-captive memory supply of the right product mix and quality in the time frame necessary to meet demand, or inability to realize an adequate margin on non-captive purchases;

• insufficient assembly and test or retail packaging and shipping capacity from our Shanghai, China facility or our contract manufacturers, or labor unrest, employee strikes or other disruptions at any of these facilities;

• errors or defects in our products caused by, among other things, errors or defects in the memory or controller components, including memory and non-memory components we procure from third-party suppliers;

• inability to realize the potential financial or strategic benefits of business acquisitions or strategic investments;

• the financial strength and market position of our customers; and

• the other factors described in this “Risk Factors” section and elsewhere in this report.

Competitive pricing pressures may result in lower average selling prices for our products, and if such price declines are not offset by a corresponding increase in demand for our products, our revenues may decline. The price of NAND flash memory is influenced by, among other factors, the balance between supply and demand, including the effects of new fab capacity, macroeconomic factors and business conditions, technology transitions, conversion of industry DRAM capacity to NAND, development of new technologies or other actions taken by us or our competitors to gain market share. In particular, the NAND flash memory industry has, from time-to-time, experienced periods of excess supply, resulting in price declines. Industry capacity is expected to continue to grow, and if capacity grows at a faster rate than market demand, the industry could again experience price declines. If we are not able to offset price declines with sufficient increases in unit sales or average memory capacity per unit or a shift in product mix towards products with higher average selling prices, our revenues and operating results may be harmed.

If we are unable to reduce our manufacturing costs to keep pace with reductions in average selling prices, our gross margins may be harmed. Because of the historical and expected future declines in the price of NAND flash memory, we need to reduce our manufacturing costs in order to maintain adequate gross margins. Our ability to reduce our cost per gigabyte of memory produced depends on technology transitions and the improvement of manufacturing efficiency, including manufacturing yields. If our technology transitions (for example, the production ramp of NAND technology on the 1Y‑nanometer process node) take longer or are more costly to complete than anticipated, our manufacturing costs may not remain competitive with other NAND flash memory producers, which would harm our gross margins and financial results. Furthermore, the inherent physical technology limitations of NAND flash technology may result in more costly technology transitions than we have experienced in the past, particularly with respect to required capital expenditures, which could further limit our ability to keep pace with reductions in average selling prices. Manufacturing yields are a function of both design and manufacturing process technology, and yields may also be impacted by equipment malfunctions, fabrication facility accidents or human error. Yield problems may not be identified during the production process or solved until an actual product is manufactured and tested, further increasing our costs. If we are unable to improve manufacturing yields or other manufacturing efficiencies, our gross margins and results of operations would be harmed.

Our reliance on and investments in captive manufacturing capacity limit our ability to respond to industry fluctuations in supply and demand. The semiconductor industry, and the NAND flash memory industry in particular, is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price declines, evolving standards, short product life cycles and wide fluctuations in product supply and demand. We are limited in our ability to react or adjust our cost structure in response to these cyclical fluctuations. We rely on our significant investments in Flash Ventures as a captive source of the vast majority of our NAND flash memory supply. Growth in our captive memory supply comes from investments in technology transitions and new capacity at Flash Ventures. These investment decisions require significant planning and lead-time before an increase in supply can be realized, and are further determined by factors such as the timing, rate and type of investment by us and Toshiba, our partner in Flash Ventures, agreement between us and Toshiba as to these matters, our evaluation of the potential return on investment of the addition of new capacity, particularly in light of the timing, cost and availability of next generation technology, our profitability, our estimation of market demand and our liquidity position. A failure to accurately forecast demand for our products or industry capacity could cause us to over-invest or under-invest in the expansion of captive memory capacity in Flash Ventures. Over-investment could result in excess supply, which could cause significant decreases in our product prices, significant excess, obsolete or lower of cost or market inventory write-downs or under-utilization charges, and the potential impairment of our investments in Flash Ventures. For example, in fiscal year 2008 and the first quarter of fiscal year 2009, we recorded charges for adverse purchase commitments associated with under-utilization of Flash Ventures’ capacity. On the other hand, if we or Toshiba under-invest in captive memory capacity or technology transitions, if we grow capacity more slowly than the rest of the industry, if our technology transitions do not occur on the timeline that we expect or we encounter unanticipated difficulties in implementing these transitions, or if we implement technology transitions more slowly than our competitors, we may not have enough captive supply to meet demand on a timely and cost effective basis and we may lose opportunities for revenue growth and market share as a result, which would harm our ability to grow revenues. In such cases, we may have only a limited ability to satisfy our supply needs from non-captive supply sources and may not be able to obtain the right mix of non-captive product that meets our requirements within an adequate lead

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time or at a cost that allows us to generate an adequate gross margin. Furthermore, if our memory supply is limited, we may make strategic decisions with respect to the allocation of our supply among our products and customers that may preserve our long-term goals and customer relationships but result in short-term declines in our gross margin or less favorable gross margins. Our customers also may not allow us to change the memory in the products that they have already qualified, which can further limit our ability to satisfy our supply needs from other sources for products that require long and extensive qualification cycles, such as enterprise SSDs. Our inability to obtain sufficient cost-effective non-captive memory that meets our requirements may cause us to lose sales, market share and profits, which would harm our operating results. In addition, we are contractually obligated to pay for 50% of the fixed costs of Flash Ventures regardless of whether we purchase any wafers from Flash Ventures. Furthermore, purchase orders placed under Flash Ventures and the foundry arrangement with Toshiba for up to three months are binding and cannot be canceled. Therefore, once our purchase decisions have been made, our production costs are fixed, and we may be unable to reduce costs to match any subsequent declines in pricing or demand, which would harm our gross margins. Our limited ability to react to fluctuations in supply and demand makes us particularly susceptible to variations from our forecasts and expectations, and even in times of excess demand, our operating results may be harmed.

The future growth of our business depends on the development and performance of new and growing, as well as existing, markets and products for flash memory, including the SSD markets, and on our ability to maintain or improve our position in these markets. Historically, removable flash memory cards and USB drives, both sold primarily through the retail channel, provided the majority of our revenues. As growth in these retail products slowed, we increased sales of embedded NAND flash memory for devices such as mobile phones, tablets, and other mobile devices, which now represent the largest percentage of our revenues. Our future growth is dependent on the development of new markets, new applications and new products for NAND flash memory, and on the continued use of NAND flash memory in existing markets and on our ability to maintain or improve our position in such markets. There can be no assurance that the use of NAND flash memory in existing markets and products will continue or grow fast enough, or at all, that we will be able to maintain or improve our position in existing markets, or that new markets will adopt NAND flash technologies in general or our products in particular, to enable us to grow.

Over the next several years, we believe that the largest growth areas for NAND flash will be SSD solutions in client computing and enterprise data center applications, whereas the mobile market for NAND flash is expected to grow at a slower rate than in the past, and the retail market for NAND flash is expected to be approximately constant or declining. We will continue to make significant investments in the development of hardware and software solutions for SSD markets in order to successfully penetrate and gain market share in SSD solutions. Our ability to succeed in the SSD solutions market is subject to various risks and uncertainties, including, among other things:

• we may be unable to successfully develop or qualify SSD solutions that meet our customers’ requirements, and even if we do, we cannot guarantee that customers will adopt our SSD solutions;

• designing and qualifying products in the SSD solutions market will require greater investments and customization than our traditional products, which may result in higher costs;

• due to longer customer product cycles and end-of-life product support requirements in SSD solutions, we may be unable to transition customers to our leading edge products, which would prevent us from achieving the full cost advantage of new technology transitions;

• we may be unable to reap the expected benefits of our recently completed and pending acquisitions, many of which relate to the SSD solutions space;

• SSD solutions require more software than our traditional products, therefore we must continue to develop software expertise;

• SSD solutions require more complex controllers than our traditional products, and we may be unable to develop or source controllers that meet the performance requirements of SSDs;

• SSD solutions incorporate unique non-flash memory parts, and if there is lower than expected demand, we may be unable to incorporate these unique parts in other non-SSD products;

• SSD solutions require longer production cycle times due to, among other things, more complex assembly and testing to produce a finished product, as well as customer requirements for consigned inventory and increased use of hubs for order fulfillment, which could lead to higher levels and cost of inventory;

• SSD solutions require different go-to-market strategies compared to our historical consumer and mobile products, which could increase our operating expenses, and we may be unable to build an effective sales and marketing operation to sell our SSD solutions.

If we are unable to successfully develop, qualify and sell SSD solutions, we could lose sales and corresponding profit opportunities, which would harm our operating results.

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Our revenues depend in large part on our ability to achieve design wins with OEM customers and the success of products sold by our OEM customers. Our primary OEM products include cards for mobile devices, embedded memory products, and SSDs for the notebook and server markets. Our OEM revenue is primarily dependent upon our products meeting OEM specifications and the achievement of design wins in an OEM’s products such as mobile phones, tablets, computers and enterprise servers. Even if our products meet OEM specifications, our sales to these customers are dependent upon the OEMs choosing our products over those of our competitors, on the OEMs’ ability to create, market and sell their products successfully, and our ability to supply our products in sufficient quantity and in a timely manner. For example, in the first half of fiscal year 2012, our OEM sales declined because our next generations of mobile embedded products were in various stages of development and qualification, and because mobile OEM customers reduced their rate of card bundling and bundled lower capacity cards. If our OEM customers are not successful in selling their current or future products in sufficient volume or in a timely manner, should they decide not to use our products, should they further reduce their card bundling or bundle lower capacity cards, or should we not be able to produce our products in sufficient quantity or quality, our revenues, operating results and financial condition could be harmed.

Sales to a small number of customers represent a significant portion of our revenues, and if we were to lose one or more of our major customers or licensees, or experience any material reduction in orders from any of our customers, our revenues and operating results could suffer. Our ten largest customers represented approximately 49% and 48% of our total revenues in the three and six months ended June 30, 2013, respectively. One customer represented 16% of our total revenues in the three months ended June 30, 2013 and two customers represented 18% and 11% of our total revenues in the six months ended June 30, 2013. The composition of our major customer base has changed over time, including shifts between OEM and retail-based customers, and there have been changes in the market share concentration among our customers. We expect fluctuations in our customer and licensee base and the mix of our revenue by customer and licensee to continue as our markets and strategies evolve, which could make our revenues less predictable from period-to-period. Our sales are generally made from standard purchase orders and short-term commitments rather than long-term contracts. Accordingly, our customers, including our major customers, may generally terminate or reduce their purchases from us at any time with limited notice or penalty. If we were to lose one or more of our major customers or licensees, or experience any material reduction in orders from any of our customers or in sales of licensed products by our licensees, our revenues and operating results could suffer.

Our SSD products are more complex and rely on more sophisticated firmware than our other products, which may result in increased costs and lower gross margins due to more frequent product updates. Our SSD solutions are more complex than our traditional products due to, among other things, an increased dependence on more sophisticated firmware and customization of our products for specific OEM customers. Changes in our OEM customers’ specifications for these products could require us to update the firmware for our SSD products, which would result in increased costs for processing these updates. Furthermore, our failure to update our products to comply with the new specifications may result in reduced demand from our customers for a particular SSD solution, notwithstanding the long design, qualification and test cycles we have undertaken as part of our sales process for that solution, which may harm our results of operations.

Our enterprise SSD business is characterized by sales to a limited number of customers with long design, qualification and sales processes. The enterprise SSD market is comprised of a relatively limited number of customers, with long design, qualification and test cycles prior to sales. OEM customers in the enterprise SSD market typically also require us to customize our products, which could further lengthen the sales process. We spend substantial time, money and other resources in our sales process without any assurance that our efforts will produce any customer orders. These lengthy and uncertain processes also make it difficult for us to forecast demand and timing of customer orders. Moreover, we start manufacturing our products and placing orders for materials and components based on non-binding forecasts that our OEM customers provide to us, further increasing our exposure when actual sales vary from the OEM customer’s forecasts. The difficulty in forecasting demand and the customized nature of our products for certain OEMs make it difficult to anticipate our inventory requirements, which may cause us to over-purchase materials and components or over-produce finished goods, resulting in inventory write-offs, or under-produce finished goods, harming our ability to meet customer requirements and generate sales. Furthermore, due to longer customer product cycles, we may not be able to transition customers to our leading edge products, which would prevent us from benefitting from the technology transitions that enable cost reductions, which may harm our gross margins. We are continuing the process of transitioning our enterprise solutions products from non-captive memory to captive memory, and delays in the qualification of captive memory for these products may cause unexpected declines in our revenue or margins from these products.

Difficulty in forecasting demand for our products may result in excess inventory or lost sales, either of which could harm our financial results. The majority of our products are sold directly or indirectly into consumer markets, which are difficult to accurately forecast. Also, a significant portion of our quarterly sales are from orders received and fulfilled in that quarter. Additionally, we depend upon timely reporting from our customers as to their inventory levels and sales of our products in order to forecast demand for our products. The failure to accurately forecast demand for our products may result in lost sales or

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excess inventory and associated reserves or write-downs, any of which could harm our business, financial condition and operating results.

The long lead times for some of our purchasing or other arrangements further restrict our ability to respond to variations from our forecasts. Some of our silicon purchasing arrangements provide that the first three months of our rolling six-month projected supply requirements are fixed and we may make only limited percentage changes in the second three months of the period covered by our supply requirement projections. Our products also contain non-silicon components that have long lead-times requiring us to place orders several months in advance of anticipated demand. In addition, purchasing decisions for manufacturing tools in Flash Ventures as well as tools in our captive assembly and test manufacturing facility near Shanghai, China often need to be made several months in advance in order to ensure that the tools can be integrated into the manufacturing process when increased capacity is needed. These purchasing arrangements increase the risk of excess inventory or loss of sales in the event our forecasts vary substantially from actual demand.

We rely substantially on our ventures and strategic partnerships with Toshiba, which subjects us to risks and uncertainties that could harm our business, financial condition and operating results. The vast majority of our NAND flash memory is supplied by Flash Ventures. In addition, we partner with Toshiba on the development of NAND flash technology and we have entered into strategic partnerships with Toshiba relating to research and development for the next technology transitions of NAND flash and alternative technologies beyond NAND flash technologies. These ventures and strategic partnerships are subject to various risks that could harm the value of our investments, our revenues and costs, our future rate of spending or our future growth opportunities, including, among others:

• under the terms of our venture agreements with Toshiba, which govern the operations of Flash Ventures, we have limited power to unilaterally direct most of the activities that most significantly impact Flash Ventures’ financial performance, including technology transitions, capital investment and other manufacturing and operational activities at Flash Ventures; the process of reaching agreement with Toshiba may be time consuming and may result in decisions that could harm our future results of operations, financial condition or competitiveness;

• the terms of our arrangements with Toshiba include provisions such as exclusivity, transfer restrictions, and limited termination rights, which limit our flexibility; and

• we may not always agree with Toshiba on the NAND research and development roadmap or the technology path beyond NAND flash memory, we or Toshiba may have different priorities with respect to investment in Flash Ventures or future technologies, and divergent technology paths and investment priorities may impact our results of operations.

Our license and royalty revenues may fluctuate or decline significantly in the future due to license agreement renewals, declines in sales of the products or use of technology underlying the license and royalty revenues by our licensees, or if licensees fail to perform on a portion or all of their contractual obligations. If our existing licensees do not renew their licenses upon expiration, renew them on less favorable terms, exercise their option to terminate the license or fail to exercise their option to extend the licenses, or we are not successful in signing new licensees in the future, our license revenue, profitability, and cash provided by operating activities would be harmed. As our older patents expire, and the coverage of our newer patents may be different, it may be more difficult to negotiate or renew favorable license agreement terms or a license agreement at all. For example, in the first quarter of fiscal year 2010, our license and royalty revenues decreased sequentially primarily due to a new license agreement with Samsung that was effective in the third quarter of fiscal year 2009, and contains a lower effective royalty rate compared to the previous license agreement. To the extent that we are unable to renew license agreements under similar terms, or at all, our financial results would be harmed by the reduced license and royalty revenue and we may incur significant patent litigation costs to enforce our patents against these licensees. Our agreements may require us in certain instances to recognize license revenue related to a particular licensee all in one period instead of over time which could create additional volatility in our licensing revenues. A portion of our license and royalty revenue is based on sales of product categories as well as underlying technology, and fluctuations in the sales of those products or technology adoption rates would also result in fluctuations in the license and royalty revenue due to us under our agreements. If our licensees or we fail to perform on contractual obligations, we may incur costs to enforce or defend the terms of our licenses and there can be no assurance that our enforcement, defense or collection efforts will be effective. If we license new IP from third-parties or existing licensees, we may be required to pay license fees, royalty payments or offset existing license revenues. In addition, we may be subject to disputes, claims or other disagreements on the timing, amount or collection of royalties or license payments under our existing license agreements.

Future alternative non-volatile storage technologies or other disruptive technologies could make NAND flash memory obsolete or less attractive, and we may not have access to those new technologies on a cost-effective basis, or at all, or new technologies could reduce the demand for flash memory in a variety of applications or devices, any of which could harm our operating results and financial condition. We have a three-pronged approach towards our investments and efforts in next generation technology scaling and migration: (1) NAND scaling; (2) BiCS technology; and (3) 3D ReRAM technology. The

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pace at which NAND flash technology is transitioning to new generations is slowing down due to inherent technology limitations. We currently expect to be able to continue to scale our NAND flash technology through two additional generations, but beyond that there is no certainty that further technology scaling can be achieved cost effectively with the current NAND flash technology and architecture. In the first quarter of fiscal year 2011, we began investing in BiCS and other technologies. In BiCS technology, the memory cells are packed along the vertical axis as opposed to the horizontal axis as in the current NAND flash technologies. We believe BiCS technology, if successful, could enable further memory cost reductions beyond the existing NAND roadmap, until 3D ReRAM technology is developed and fully ramped into high-volume production. We continue to invest in future alternative technologies, particularly our 3D ReRAM technology, which we believe may be a viable alternative to NAND flash technology, when NAND flash technology can no longer scale at a sufficient rate, or at all. However, even when NAND flash technology can no longer be further scaled, we expect NAND flash technology and potential alternative technologies to coexist for an extended period of time. The success of our overall technology strategy is also dependent in part upon the development by third-party suppliers of advanced semiconductor materials and process technologies, such as extreme ultraviolet, or EUV. Our technology development of NAND, BiCS and 3D ReRAM is done in conjunction with Toshiba, and the success of our development could be influenced by whether we are able to agree with Toshiba on a technology path or the timing and amount of investment. There can be no assurance that we will be successful in developing BiCS, 3D ReRAM or other technologies, or that we will be able to achieve the yields, quality or capacities to be cost competitive with existing or other alternative technologies. Furthermore, we cannot guarantee that BiCS, 3D ReRAM or other technologies we develop will be sufficient alternatives for NAND flash memory, will match or exceed all of the performance characteristics of NAND flash technology, will be developed at a rate that matches market needs, will result in cost reductions that will enable us to be competitive, or will be well-suited, in a timely manner or at all, for all of the applications in the end markets that NAND flash memory currently addresses or may address in the future. Additionally, BiCS, 3D ReRAM or other technologies may require different capital equipment or manufacturing processes than existing NAND which could impact the cost reduction benefits obtainable through these technologies.

Many companies, including some of our competitors, are attempting to develop alternative non-volatile technologies such as magnetoresistive RAM, or MRAM, ReRAM, Memristor, vertical or stacked NAND, phase-change and charge-trap flash technologies and other technologies. Successful broad-based commercialization of one or more of these technologies could reduce the future revenue and profitability of NAND flash technology and could supplant the potential alternative BiCS or 3D ReRAM technologies that we are developing. In addition, we generate license and royalty revenues from NAND flash technology, and if NAND flash technology is replaced by a technology where our IP is less relevant, our license and royalty revenues would decrease. Also, we may not have access to or we may have to pay royalties to access alternative technologies that we do not develop internally. If our competitors successfully develop new or alternative technologies, and we are unable to scale our technology on an equivalent basis, or if our competitors’ new or alternative technologies satisfy application-specific requirements that our technologies are not able to, we may not be able to compete effectively, and our operating results and financial condition would suffer.

Alternative technologies or storage solutions such as cloud storage, enabled by high bandwidth wireless or internet-based storage, could reduce the need for physical flash storage within electronic devices or reduce the rate by which average capacity increases in such devices, which could materially harm our operating results.

We require an adequate level of product gross margins to continue to invest in our business, and our product gross margins may vary significantly depending on a number of factors. Our ability to generate sufficient product gross margins and profitability to invest in our business is influenced by supply and demand balance in the flash memory industry, our ability to reduce our cost per gigabyte at an equal or higher rate than the price decline per gigabyte, our ability to develop new products and technologies, the rate of growth of our target markets, the competitive position of our products, the mix of our products, the continued acceptance of our products by our customers and our management of production capacity. Other factors that could result in volatility in our product gross margins include fluctuations in customer mix, as well as variations in the technologies or form factors of our products. For example, we experienced negative product gross margins for fiscal year 2008 and the first quarter of fiscal year 2009 due to sustained aggressive industry price declines as well as inventory charges primarily due to lower of cost or market write downs. If we fail to maintain adequate product gross margins and profitability, our business and financial condition would be harmed and we may have to reduce, curtail or terminate certain business activities, including funding technology development and capacity expansion. Furthermore, as we diversify the products that we sell, changes in our product mix could result in volatility in our product gross margins, since we have significant variation in our product gross margins across product lines, and some of the products that we sell have product gross margins that are significantly below our overall average.

Any disruption or shortage in our supply chain could reduce our revenues, earnings and gross margins. All of our flash memory products require silicon supply for the memory and controller components. The vast majority of our flash memory is currently supplied by Flash Ventures and to a much lesser extent by third-party silicon suppliers. Any disruption or shortage in

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supply of flash memory from our captive or non-captive sources, including disruptions due to disasters, work stoppages, supply chain interruptions and other factors, would harm our operating results.

The concentration of Flash Ventures in Yokkaichi, Japan, magnifies the risks of supply disruption. The Yokkaichi location and Japan in general are subject to earthquakes, typhoons and other natural disasters. Moreover, Toshiba’s employees who produce Flash Ventures’ products are covered by collective bargaining agreements and any strike or other job action by those employees could interrupt our wafer supply from Flash Ventures. A disruption in our captive wafer supply, including but not limited to disruptions from natural disasters, emergencies such as power outages, fires or chemical spills, or employee strikes or other job actions could cause us not to have sufficient supply to meet demand, resulting in lost sales and market share, as well as significant costs, including wafer loss. For example, the March 11, 2011 earthquake and tsunami in Japan caused a brief equipment shutdown at Flash Ventures, which resulted in some wafer loss as well as delayed or canceled deliveries of certain tools and materials from suppliers impacted by the earthquake. In addition, Flash Ventures has, from time to time, experienced power outages and power fluctuations, which have resulted in a loss of wafers and increased costs associated with bringing the facility back online.

Currently, wafers for our internally-designed controllers are manufactured by third-party foundries. In addition, we purchase packaged controllers from third-party sources, and some of our products require other non-flash memory components and materials for which we do not have captive supply, such as the DRAM included in the multi-chip package, or MCP, storage solutions that we supply for use in mobile devices. A disruption in the manufacturing operations of our controller wafer vendors, third-party controller vendors or suppliers of other non-flash memory components, such as DRAM, could result in delivery delays, harm our ability to make timely shipments of our products and harm our operating results until we could qualify an alternate source of supply for these components, which could take several quarters to complete.

Our business depends significantly upon sales through retailers and distributors, and if our retailers and distributors are not successful, we could experience reduced sales, substantial product returns or increased price protection claims, any of which would harm our business, financial condition and operating results. A significant portion of our sales is made through retailers (for our retail channel) and distributors (for both our retail and commercial channels). Except in limited circumstances, we do not have exclusive relationships with our retailers or distributors and, therefore, must rely on them to effectively sell our products. In addition, sales through retailers and distributors typically include commercial terms such as the right to return unsold inventory and protection against price declines. As a result, we do not recognize revenue until after the product has been sold through to the end user, in the case of sales to retailers, or to our distributors’ customers, in the case of sales to distributors. If our retailers and distributors are not successful in selling our products, not only would our revenues decrease, but we could also experience lower gross margins due to substantial product returns or price protection claims. Furthermore, certain of our retailers and distributors are experiencing financial difficulty, and continued negative business or economic conditions could exacerbate liquidity issues for them. Negative changes in the credit-worthiness or the ability to access credit, or the bankruptcy or shutdown of any of our significant retail or distribution partners would harm our revenue and our ability to collect outstanding receivable balances. We also provide inventory on a consigned basis to certain of our retailers, and a bankruptcy or shutdown of these customers could preclude us from taking possession of our consigned inventory, which could result in inventory charges.

In transitioning to new technologies and products, we may not achieve OEM design wins, our OEM customers may delay transition to new technologies, our competitors may transition more quickly than we do, or we may experience product delays, cost overruns or performance issues that could harm our business. The transition to new generations of products, such as products containing 19‑nanometer, 1Y‑nanometer or subsequent process technologies and/or X3 NAND memory architecture, is highly complex and requires new controllers, new test procedures and modifications to numerous aspects of our manufacturing processes, resulting in the need for extensive qualification of the new products by our OEM customers and us. In addition, our competitors may transition to these new technologies more quickly or more effectively than we are able to, which could harm our ability to compete effectively. If we fail to achieve OEM design wins with new technologies such as 19‑nanometer, 1Y‑nanometer or the use of X3 in certain products, if our OEM customers choose to transition to these new technologies more slowly than our roadmap plans, if the demand for the products that we developed is lower than expected, if the supporting technologies to implement these new technologies are not available, or if our competitors transition to these new technologies, including X3, more quickly or more effectively than we are able to, we may be unable to achieve the cost structure required to support our profit objectives or may be unable to grow or maintain our OEM market position. Furthermore, there can be no assurance that technology transitions will occur on schedule or at the yields or costs that we anticipate, that the tools and equipment required for the technology transitions will be available on a cost-effective basis or at all, or that products based on the new technologies will meet customer specifications. The vast majority of products require controllers or firmware, and any delays in developing or sourcing controllers or firmware, or incompatibility or quality issues relating to the controllers or firmware in our products, could harm our revenues and gross margins, as well as business

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relationships with our customers. Any material delay in a development or qualification schedule could delay deliveries and harm our operating results.

We develop new applications, technologies and standards, which may not be widely adopted by consumers or enterprises, or, if adopted, may reduce demand for our older products. We devote significant resources to the development of new applications, technologies and standards. New applications may require significant upfront investment with no assurance of long-term commercial success or profitability. As we introduce new standards or technologies, it can take time for these new standards or technologies to be adopted, for consumers to accept and transition to these new standards or technologies and for significant sales to be generated, if at all. Failure of consumers or enterprises to adopt our new applications, standards or technologies could harm our results of operations as we fail to reap the benefits of our investments. Competitors or other market participants could seek to develop new standards for flash memory products that, if accepted by device manufacturers or consumers, could reduce demand for our products, negatively impact our license and royalty revenues, or increase license and royalty expense. If new standards are broadly accepted and we do not adopt these new standards in our products, our revenues and results of operations may be harmed.

We face competition from numerous manufacturers and marketers of products using flash memory and if we cannot compete effectively, our operating results and financial condition will suffer. We face competition from NAND flash memory manufacturers and from companies that buy NAND flash memory and incorporate it into their end products. We face different competitive pressures in different markets, and we compete to varying degrees on the basis of, among other things, price, quality and timely delivery of products, product performance, availability and differentiation, and the development of industry standards and formats. The success of our competitors may harm our future revenues or margins and may result in the loss of our key customers.

• NAND Manufacturers. We compete with NAND flash memory manufacturers, including Hynix Semiconductor, Inc., Intel Corporation, or Intel, Micron Technology, Inc., or Micron, Samsung Electronics Co., Ltd., or Samsung, and Toshiba. These competitors are large companies that may have greater and more advanced wafer manufacturing capacity, substantially greater financial, technical, marketing and other resources, better recognized brand names and more diversified and lower cost businesses than we do, which may allow them to produce flash memory chips in high volumes at low costs and to sell these flash memory chips themselves or to our competitors at a low cost. In addition, many of our competitors have more diversified semiconductor manufacturing capabilities and can internally produce integrated solutions or hybrid products that may include a combination of NAND flash, DRAM, custom ASICs or other integrated products, while our captive manufacturing capability is solely dedicated to NAND flash. These diversified capabilities may also provide these competitors with a competitive advantage not only in product design and manufacturing due to the ability to leverage know-how in DRAM, custom ASICs or other technologies, but also in a greater ability to respond to industry fluctuations due to their ability to convert their DRAM and other semiconductor manufacturing capacity or equipment to NAND flash and vice-versa. Furthermore, some of these competitors manufacture and sell products that are complementary to flash memory products, and may be able to leverage their competencies and customer relationships to gain a competitive advantage. Current and future memory manufacturer competitors could produce alternative flash or other memory technologies that could compete against our NAND flash technology or our alternative technologies, which may reduce demand or accelerate price declines for our products. Furthermore, the future rate of scaling of the NAND flash technology design that we employ may slow down significantly, which would slow down cost reductions that are fundamental to the adoption of NAND flash technology in new applications. If our scaling of NAND flash technology slows down relative to our competitors, our business and operating results would be harmed and our investments in captive fabrication facilities could be impaired.

• Flash Memory Card and USB Drive Manufacturers and Resellers. We compete with manufacturers and resellers of flash memory card and USB drives, which purchase or have a captive supply of flash memory components and assemble memory cards. We also sell flash memory in the form of white label cards, wafers or components to certain OEMs who sell flash products that may ultimately compete with our branded products in the retail or commercial channels. The sales volumes and pricing to these OEMs can be highly variable and these OEMs may be more inclined to switch to an alternative supplier based on short-term price fluctuations or the timing of product availability, which could harm our branded market share and reduce our sales and profits.

• Client Storage Solution Manufacturers. In the market for client computing SSDs, we face competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from third-party client SSD solution providers such as Kingston Technology Co., Inc., OCZ Technology Group, Inc., and Philips Lite-On Digital Solutions Corporation, and from hard drive manufacturers such as Seagate Technology PLC, or Seagate, and Western Digital Corporation, or WDC. In this market, we compete with these industry players largely on the basis of performance capabilities, price and product reliability. Many of the large NAND flash producers have established relationships

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with computer manufacturers, or are computer manufacturers themselves, which gives them a competitive advantage in qualifying and integrating their client storage solutions in this market as well as the ability to leverage competencies that have been developed through these relationships in the past. Hard drive manufacturers may also have a competitive advantage in their ability to leverage their existing relationships and brand recognition with customers, as well as their ability to leverage existing technology in creating hybrid drive products. Our failure to compete effectively against these industry players could harm our business and results of operations.

• Enterprise Storage Solution Manufacturers. In the market for enterprise data center SSDs, we face competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from enterprise SSD solution providers such as Fusion-io, LSI Corporation, SMART Worldwide Holdings, Inc. and STEC, Inc., and from hard drive manufacturers such as Seagate and WDC. Many of these competitors have significantly more experience with the software components that are required for successful enterprise SSD solutions, and our failure to continue to develop software expertise could harm our ability to effectively compete in this market. In addition, enterprise data center SSDs is an emerging market, and many established and start-up companies are contributing to the development of this market. Our competitors in this market may be able to leverage existing resources and competencies or acquire or develop other strategic relationships with established or start-up companies before we are able to, which could give them a competitive advantage, and if we are unable to independently develop comparable capabilities, we may be unable to effectively compete.

Our ability to generate revenue or adequate margins for certain products may be limited by our ability to secure, at competitive prices or at all, components or materials required to produce those products. Our products require certain non-flash memory components and materials for which we do not have captive supply. Our ability to generate revenue or adequate margins could be impacted by an inability to source those components or materials in a cost-effective manner, or at all. For example, we supply MCP storage solutions for use in mobile devices. These MCP solutions include both NAND flash memory and DRAM; however, since we do not have a captive supply of DRAM, there could be periods in which we are unable to cost-effectively source the DRAM that we require or to source DRAM in the quantities or on the timeline that we require. In addition, costs of DRAM have increased in the past and continued increases in the future would harm our gross margins for our MCP solution products. If we are unable to source certain components or materials cost effectively, or at all, our revenue and margins may be harmed.

We may not be able to realize the potential financial or strategic benefits of business acquisitions or strategic investments, which could harm our ability to grow our business, develop new products or sell our products. We have in the past and may in the future enter into acquisitions of, or investments in, businesses in order to complement or expand our current businesses or enter into new markets. Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control and no assurance can be given that our previous or future acquisitions will be successful, will deliver the intended benefits, and will not materially harm our business, operating results or financial condition. Furthermore, negotiation and integration of acquisitions or strategic investments could divert management’s attention and other company resources.

Factors associated with past or future acquisitions or investments that could harm our growth prospects or results of operations include but are not limited to:

• difficulty in integrating the technology, products, operations or workforce of the acquired business into our business;

• difficulty in entering into new markets in which we have limited or no experience, such as software solutions, and where competitors have stronger positions;

• loss of, or the impairment of or failure to maintain and grow relationships with, key employees, vendors or customers of the acquired business;

• difficulty in operating in new and potentially disperse locations;

• disruption of our ongoing businesses or the ongoing business of the company we invest in or acquire;

• failure to realize the potential financial or strategic benefits of the transaction, including but not limited to any expected cost savings or synergies from the acquisition;

• difficulty integrating the accounting, management information, human resources and other administrative systems of the acquired business;

• disruption of or delays in ongoing research and development efforts and release of new products to market;

• diversion of capital and other resources;

• assumption of liabilities;

• issuance of equity securities that may be dilutive to our existing stockholders;

• diversion of resources and unanticipated expenses resulting from litigation arising from potential or actual business acquisitions or investments;

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• failure of the due diligence processes to identify significant issues with product quality, technology and development, or legal and financial issues, among other things;

• incurring non-recurring charges, increased contingent liabilities, adverse tax consequences, depreciation or deferred compensation charges, amortization or impairment of intangible assets or impairment of goodwill, which could harm our results of operations; and

• potential delay in customer purchasing decisions due to uncertainty about the direction of our product offerings or those of the acquired business.

For example, in each of the first and second quarters of fiscal year 2013, due to an increase in overall cost estimates and delays in the development timeline related to an in-process research and development, or IPR&D, project from the acquisition of Pliant Technology, Inc., or Pliant, we performed impairment tests on the related amortizable intangible assets and indefinite-lived IPR&D intangible asset. In addition, due to continued project delays, including subsequent to the end of the second quarter of fiscal year 2013, which resulted in the same impairment indicators identified in the first quarter of fiscal year 2013, we again tested the recoverability of the amortizable intangible assets and noted that as of the end of the second quarter of fiscal year 2013, the undiscounted cash flows were in excess of the net book value of the amortizable intangible assets, indicating no impairment. The delays we experienced in the IPR&D project in both the second and third quarters of fiscal year 2013 were included in the impairment assessment we performed for the second quarter of fiscal year 2013. While these delays related to the IPR&D project did not indicate that an impairment is required at this time, additional future delays, additional increases in overall cost estimates, program cancellation or other significant events or circumstances affecting the IPR&D project could lead us to determine that the indefinite-lived IPR&D intangible asset or the amortizable intangible assets are partially or fully impaired.  Due to these IPR&D project delays, we expect to assess the indefinite-lived IPR&D intangible asset for impairment at the end of the third quarter of fiscal year 2013 and on a quarterly basis until completion of the development of the technology and will continue to monitor any events or circumstances that could indicate the amortizable intangible assets are impaired. As of June 30, 2013, the net book value of the Pliant indefinite-lived IPR&D intangible asset was $36.2 million and the net book value of the related Pliant amortizable intangible assets was $96.8 million, and a potential complete impairment of both would result in a charge of up to $133.0 million.

In July 2013, we announced that we had entered into a definitive agreement to acquire SMART Storage Systems, or SMART Storage, a developer of enterprise SSDs, an acquisition that we currently expect to close in August 2013. In addition to the risks described above, additional factors associated with the acquisition of SMART Storage that could harm our ability to realize the potential financial or strategic benefits of the acquisition and thereby harm our growth prospects or results of operations include but are not limited to:

• failure of SMART Storage’s products or technologies to perform as expected or to meet customer qualification requirements;

• failure of the enterprise SSD space to grow as expected;

• delays in the timing and successful integration of SMART Storage, including the transition of the SMART Storage business from third-party sources of NAND flash memory and other components to our captive supply of these materials, which could harm our ability to achieve the expected benefits from the acquisition in a timely manner or at all;

• difficulty in maintaining SMART Storage’s supplier or vendor arrangements, upon some of which SMART Storage is significantly reliant, which could harm our ability to maintain the business after it is acquired and before it is fully integrated into our operations;

• failure to retain SMART Storage's key employees, particularly for the continued development of SMART Storage's technology; and

• difficulty in integrating SMART Storage’s technology into other product lines, which could diminish our expected benefits of the acquisition.

Our financial performance and the value of our investments depend significantly on worldwide economic conditions, which have deteriorated in many countries and regions, and may not recover in the foreseeable future. Demand for our products is harmed by negative macroeconomic factors affecting consumer and enterprise spending. Continuing high unemployment rates, low levels of consumer liquidity, risk of default on sovereign debt and volatility in credit and equity markets have weakened consumer confidence and decreased consumer and enterprise spending in many regions around the world. These and other economic factors may reduce demand for our products and harm our business, financial condition and operating results. In addition, we maintain investments, including our cash, cash equivalents and marketable securities, of various holdings, types and maturities and, given the global nature of our business, our investment portfolio includes both domestic and international investments. Credit ratings and pricing of these investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk or other factors, and declines in the credit ratings or pricing of our

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investments could result in a decline in the value and liquidity of our investments, including our cash, cash equivalents and marketable securities, and result in a significant impairment of our assets.

The Flash Ventures’ master equipment lease obligations contain covenants, which if breached, would harm our business, operating results, cash flows and liquidity. Flash Ventures’ master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, some of the master lease agreements contain an acceleration clause for certain events of default related to us as guarantor, including, among other things, our failure to maintain a minimum stockholders’ equity of at least $1.51 billion, and for one master lease agreement, which matures on July 31, 2013, our failure to maintain a minimum corporate rating of either BB- from S&P or Moody’s Corporation, or Moody’s, or a minimum corporate rating of BB+ from Rating & Investment Information, Inc., or R&I. As of June 30, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of June 30, 2013, our R&I credit rating was BBB, two notches above the required minimum corporate rating threshold for R&I; and our S&P credit rating was BB, one notch above the required minimum corporate rating threshold for S&P.

If our stockholders’ equity were to fall below $1.51 billion or both S&P and R&I were to downgrade our credit rating below the minimum corporate rating threshold, Flash Ventures would become non-compliant with certain covenants under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by us, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration. If an event of default occurs and if we fail to reach a resolution, we may be required to pay a portion or the entire outstanding lease obligations up to approximately $612 million, based upon the exchange rate at June 30, 2013, covered by our guarantee under Flash Ventures’ master lease agreements, which would significantly reduce our cash position and may force us to seek additional financing, which may not be available.

We depend on our captive assembly and test manufacturing facility in China and our business could be harmed if this facility does not perform as planned. Our reliance on our captive assembly and test manufacturing facility near Shanghai, China has increased significantly and we now utilize this factory to satisfy a majority of our assembly and test requirements, to produce products with leading-edge technologies such as multi-stack die packages and to provide order fulfillment. In addition, our Shanghai, China facility is responsible for packaging and shipping our retail products within Asia, Latin America, Canada and Europe. Any delays in adding new equipment capacity, interruptions in production or the ability to ship product, or issues with manufacturing yields at our captive facility could harm our operating results and financial condition. In addition, investment decisions in adding new assembly and test capacity require significant planning and lead-time, and a failure to accurately forecast demand for our products could cause us to over-invest or under-invest in the expansion of captive assembly and test capacity in our facility, which would lead to excess capacity and under-utilization charges, in the event of over-investment, or insufficient assembly and test capacity resulting in a loss of sales and revenue opportunities, in the event of under-investment. Furthermore, if we were to experience labor unrest, or strikes, or if wages were to significantly increase, our ability to produce and ship products could be impaired and we could experience higher labor costs, which could harm our operating results, financial condition and liquidity.

We rely on our suppliers, some of which are the sole source of supply for our non-memory components, and capacity limitations of these suppliers expose our supply chain to unanticipated disruptions or potential additional costs. We do not have long-term supply agreements with many of our suppliers, certain of which are sole sources of supply for our non-memory components. From time-to-time, certain materials may become difficult or more expensive to obtain, including due to capacity constraints of these suppliers, which could impact our ability to meet demand and could harm our profitability. Our business, financial condition and operating results could be significantly harmed by delays or reductions in shipments if we are unable to obtain sufficient quantities of these components or develop alternative sources of supply in a timely manner, on competitive terms, or at all.

We depend on our third-party subcontractors and our business could be harmed if our subcontractors do not perform as planned. We rely on third-party subcontractors for a portion of our wafer testing, chip assembly, product assembly, product testing and order fulfillment. From time-to-time, our subcontractors have experienced difficulty meeting our requirements. If we are unable to increase the amount of capacity allocated to us from our current subcontractors or qualify and engage additional subcontractors, we may not be able to meet demand for our products. We do not have long-term contracts with some of our existing subcontractors, nor do we have exclusive relationships with any of our subcontractors and, therefore, cannot guarantee that they will devote sufficient resources to manufacturing our products. We are not able to directly control product delivery schedules or quality assurance. Furthermore, we manufacture on a turnkey basis with some of our subcontractors. In these arrangements, we do not have visibility and control of their inventories of purchased parts necessary to build our products or of the progress of our products through their assembly line. Any significant problems that occur at our subcontractors, or

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their failure to perform at the level we expect, could lead to product shortages or quality assurance problems, either of which would harm our operating results.

Our products may contain errors or defects, which could result in the rejection of our products, product recalls, damage to our reputation, lost revenues, diverted development resources, increased service costs, warranty and indemnification claims and litigation. Our products are complex, must meet stringent user requirements and may contain errors or defects, and the majority of our products provide a warranty period. Errors or defects in our products may be caused by, among other things, errors or defects in the memory or controller components or firmware, including memory and components that we procure from non-captive sources. In addition, the substantial majority of our flash memory is supplied by Flash Ventures, and if the wafers from Flash Ventures contain errors or defects, our overall supply could be harmed. These factors could result in the rejection of our products, damage to our reputation, lost revenues, diverted development resources, increased customer service and support costs, indemnification of our customers’ product recall and other costs, warranty claims and litigation. Generally, our OEM customers have more stringent requirements than other customers and our concentration of revenue from OEMs, especially OEMs who purchase our enterprise and client SSD products, could result in increased expenditures for product testing, or increase our service costs and potentially lead to increased warranty or indemnification claims. Furthermore, the costs of errors or defects in our embedded products may be greater than those of stand-alone, removable products due to the effect that such errors or defects may have on other components of the device in which they are embedded. We record an allowance for warranty and similar costs in connection with sales of our products, but actual warranty and similar costs may be significantly higher than our recorded estimate and harm our operating results and financial condition.

Our new products have, from time-to-time, been introduced with design and production errors at a rate higher than the error rate in our established products. We must estimate warranty and similar costs for new products without historical information and actual costs may significantly exceed our recorded estimates. Underestimation of our warranty and similar costs would harm our operating results and financial condition.

Certain of our products contain encryption or security algorithms to protect third-party content and user-generated data stored on our products. To the extent our products are hacked or the encryption schemes are compromised or breached, this could harm our business by hurting our reputation, requiring us to employ additional resources to fix the errors or defects and expose us to litigation and indemnification claims. This could potentially impact future collaboration with content providers or lead to product returns or claims against us due to actual or perceived vulnerabilities.

We are exposed to foreign currency exchange rate fluctuations that could harm our business, operating results and financial condition. A significant portion of our business is conducted in currencies other than the U.S. dollar, which exposes us to adverse changes in foreign currency exchange rates. An increase in the value of the U.S. dollar could increase the real cost to our customers of our products in those markets outside the U.S. where we sell in dollars, and a weakened U.S. dollar could increase local operating expenses and the cost of raw materials to the extent purchased in foreign currencies. These exposures may change over time as our business and business practices evolve, and they could harm our financial results and cash flows.

Our most significant exposure is related to our purchases of NAND flash memory from Flash Ventures, which are denominated in Japanese yen. Appreciation in the value of the Japanese yen relative to the U.S. dollar would increase our cost of NAND flash wafers, negatively impacting our gross margins and operating results. In addition, our investments in Flash Ventures are denominated in Japanese yen and strengthening of the Japanese yen would increase the cost to us of future funding and increase the value of our yen-denominated investments, increasing our exposure to asset impairments. Macroeconomic weakness in the U.S. or other parts of the world could lead to strengthening of the Japanese yen, which would harm our gross margins, operating results, and the cost of future Flash Venture funding and increase the risk of asset impairment. We also have foreign currency exposures related to certain non-U.S. dollar-denominated revenue and operating expenses in Europe and Asia. Additionally, we have exposures to emerging market currencies, which can be extremely volatile. We also have significant monetary assets and liabilities that are denominated in non-functional currencies.

We enter into foreign exchange forward and cross currency swap contracts to reduce the impact of foreign currency fluctuations on certain foreign currency assets and liabilities. In addition, we hedge certain anticipated foreign currency cash flows with foreign exchange forward and option contracts, primarily for Japanese yen-denominated inventory purchases. We generally have not hedged our future equity investments, distributions and loans denominated in Japanese yen related to Flash Ventures.

Our attempts to hedge against currency risks may not be successful, which could harm our operating results. In addition, if we do not successfully manage our hedging program in accordance with accounting guidelines, we may be subject to adverse accounting treatment, which could harm our operating results. There can be no assurance that this hedging program will be

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economically beneficial to us for numerous reasons, including that hedging may reduce volatility, but prevent us from benefiting from a favorable market trend. Further, the ability to enter into foreign exchange contracts with financial institutions is based upon our available credit from such institutions and compliance with covenants and other restrictions. Operating losses, third-party downgrades of our credit rating or instability in the worldwide financial markets, including the downgrade of the credit rating of the U.S. government, could impact our ability to effectively manage our foreign currency exchange rate risk, which could harm our business, operating results and financial condition.

Our global operations and operations at Flash Ventures and third-party subcontractors are subject to risks for which we may not be adequately insured. Our global operations are subject to many risks, including but not limited to errors and omissions, infrastructure disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. No assurance can be given that we will not incur losses beyond the limits of, or outside the scope of, the coverage of our insurance policies. From time-to-time, various types of insurance have not been available on commercially acceptable terms or, in some cases, at all. There can be no assurance that in the future we will be able to maintain existing insurance coverage or that premiums will not increase substantially. We maintain limited insurance coverage and, in some cases, no coverage at all, for natural disasters and environmental damages, as these types of insurance are sometimes not available or available only at a prohibitive cost. For example, our test and assembly facility in Shanghai, China, on which we significantly rely, may not be adequately insured against all potential losses. Accordingly, we may be subject to uninsured or under-insured losses. We depend upon Toshiba to obtain and maintain sufficient property, business interruption and other insurance for Flash Ventures. If Toshiba fails to do so, we could suffer significant unreimbursable losses, and such failure could also cause Flash Ventures to breach various financing covenants. In addition, we insure against property loss and business interruption resulting from the risks incurred at our third-party subcontractors; however, we have limited control as to how those sub-contractors run their operations and manage their risks, and as a result, we may not be adequately insured.

We and our suppliers rely upon certain rare earth materials that are necessary for the manufacturing of our products, and our business could be harmed if we or our suppliers experience shortages or delays of these rare earth materials. Rare earth materials are critical to the manufacture of some of our products. We and/or our suppliers acquire these materials from a number of countries, including the People’s Republic of China. We cannot predict whether the government of China or any other nation will impose regulations, quotas or embargoes upon the materials incorporated into our products that would restrict the worldwide supply of these materials or increase their cost. If China or any other major supplier were to restrict the supply available to us or our suppliers or increase the cost of the materials used in our products, we could experience a shortage in supply and an increase in production costs, which would harm our operating results.

If our security measures or security measures of our suppliers, vendors and partners are breached and unauthorized access to our or their information technology systems is obtained, we may lose proprietary data.Our security measures and the security measures of our suppliers, vendors and partners may be breached and our or their information technology systems accessed as a result of third-party action, including computer hackers, employee error, malfeasance or otherwise, and result in unauthorized access to our customers’ data or our data, including IP and other confidential business information. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, we may be unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, we have limited or no control over the implementation of preventative measures of our suppliers, vendors and partners. Any security breach could result in disclosure of our trade secrets or confidential customer, supplier or employee data, which could result in legal liability, harm to our reputation and other harm to our business.

We may need to raise additional financing, which could be difficult to obtain, and which, if not obtained in satisfactory amounts, may prevent us from funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, taking advantage of future opportunities, engaging in acquisitions of or investments in companies, growing our business or responding to competitive pressures or unanticipated industry changes, any of which could harm our business. We currently believe that we have sufficient cash resources to fund our operations as well as our anticipated investments in Flash Ventures for at least the next twelve months; however, we may decide to raise additional funds to maintain the strength of our balance sheet or fund our operations through equity, public or private debt, or lease financings. However, we cannot be certain that we will be able to obtain additional financing on favorable terms, or at all. If we issue additional equity securities, our stockholders will experience dilution and the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. If we raise funds through debt or lease financing, we will have to pay interest and may be subject to restrictive covenants, which could harm our business. If we cannot raise funds on acceptable terms, if and when needed, our credit rating may be downgraded, and we may not be able to develop or enhance our technology or products, fulfill our obligations to Flash Ventures, increase our wafer supply, take advantage of future opportunities, engage in acquisitions of or

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investments in companies, grow our business or respond to competitive pressures or unanticipated industry changes, any of which could harm our business.

We may be unable to protect our IP rights, which would harm our business, financial condition and operating results. We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our IP rights. In the past, we have been involved in significant and expensive disputes regarding our IP rights and those of others, including claims that we may be infringing patents, trademarks and other IP rights of third-parties. We expect that we will be involved in similar disputes in the future.

There can be no assurance that:

• any of our existing patents will continue to be held valid, if challenged;

• patents will be issued for any of our pending applications;

• any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;

• our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage; or

• any of our products or technologies do not infringe on the patents of other companies.

In addition, our competitors may be able to design their products around our patents and other proprietary rights. We also have patent cross-license agreements with several of our leading competitors. Under these agreements, we have enabled competitors to manufacture and sell products that incorporate technology covered by our patents. While we obtain license and royalty revenue or other consideration for these licenses, if we continue to license our patents to our competitors, competition may increase and may harm our business, financial condition and operating results.

There are flash memory producers, flash memory card manufacturers and other companies that utilize flash memory who we believe may infringe our IP. Enforcement of our rights often requires litigation. If we bring a patent infringement action and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable. If we do not prevail in the defense of patent infringement claims, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products in one or more geographic locations, expend significant resources to develop non-infringing technology, discontinue the use of specific processes or obtain licenses to the technology infringed. If we are enjoined from selling our products, or if we are required to develop new technologies or pay significant monetary damages or are required to make substantial royalty payments, our business and results of operations would be harmed.

We and certain of our officers are at times involved in litigation, including litigation regarding our IP rights or that of third parties, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, which could materially harm our business. We are often involved in litigation, including cases involving our IP rights and those of others. We are the plaintiff in some of these actions and the defendant in others. Some of the actions seek injunctions against the sale of our products and/or substantial monetary damages, which if granted or awarded, could materially harm our business, financial condition and operating results.

Litigation is subject to inherent risks and uncertainties that may cause actual results to differ materially from our expectations. Factors that could cause litigation results to differ include, but are not limited to, the discovery of previously unknown facts, changes in the law or in the interpretation of laws, and uncertainties associated with the judicial decision-making process. If we receive an adverse judgment in any litigation, we could be required to pay substantial damages and/or cease the manufacture, use and sale of products. Litigation, including IP litigation, can be complex, can extend for a protracted period of time, can be very expensive, and the expense can be unpredictable. Litigation initiated by us could also result in counter-claims against us, which could increase the costs associated with the litigation and result in our payment of damages or other judgments against us. In addition, litigation may divert the efforts and attention of some of our key personnel.

We may be obligated to indemnify our current or former directors or employees, or former directors or employees of companies that we have acquired, in connection with litigation or regulatory investigations. These liabilities could be substantial and may include, among other things, the costs of defending lawsuits against these individuals; the cost of defending shareholder derivative suits; the cost of governmental, law enforcement or regulatory investigations; civil or criminal fines and penalties; legal and other expenses; and expenses associated with the remedial measures, if any, which may be imposed.

Moreover, from time-to-time, we agree to indemnify certain of our suppliers and customers for alleged patent infringement. The scope of such indemnity varies but generally includes indemnification for direct and consequential damages and expenses,

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including attorneys’ fees. We may be engaged in litigation as a result of these indemnification obligations. Third-party claims for patent infringement are excluded from coverage under our insurance policies. A future obligation to indemnify our customers or suppliers may harm our business, financial condition and operating results. For additional information concerning legal proceedings, see Part II, Item 1, “Legal Proceedings.”

We may be unable to license, or license at a reasonable cost, IP from third parties as needed, which could expose us to liability for damages, increase our costs or limit or prohibit us from selling products. If we incorporate third-party technology into our products or if we are found to infringe the IP of others, we could be required to license IP from third-parties. We may also need to license some of our IP to others in order to enable us to obtain important cross-licenses to third-party patents. We cannot be certain that licenses will be offered when we need them, that the terms offered will be acceptable, or that these licenses will help our business. If we do obtain licenses from third parties, we may be required to pay license fees, royalty payments, or offset license revenues. In addition, if we are unable to obtain a license that is necessary to manufacture or sell our products, we could be required to redesign or stop shipping our products to one or more geographic locations, suspend the manufacture of products or stop our product suppliers from using processes that may infringe the rights of third parties. We may not be successful in redesigning our products, or the necessary licenses may not be available under reasonable terms, which would harm our business and financial results.

Changes in the seasonality of our business may result in our inability to accurately forecast our product purchase requirements. Sales of our products in the consumer electronics market are subject to seasonality. Sales have typically increased significantly in the fourth quarter of each fiscal year, sometimes followed by significant declines in the first quarter of the following fiscal year. However, the global economic environment may impact typical seasonal trends, making it more difficult for us to forecast our business. Changes in the product or channel mix of our business can also impact seasonal patterns, adding to complexity in forecasting demand. If our forecasts are inaccurate, we may lose market share or procure excess inventory or inappropriately increase or decrease our operating expenses, any of which could harm our business, financial condition and operating results. Changes in seasonality may also lead to greater volatility in our stock price and the need for significant working capital investments in receivables and inventory, including the need to build inventory levels in advance of our projected high volume selling seasons.

We are vulnerable to numerous risks related to our international operations, including political instability, and we must comply with numerous laws and regulations, many of which are complex. Currently, a large portion of our revenues are derived from our international operations, and all of our products and many of our components are produced overseas in China, Japan and Taiwan. Our revenue and future growth is also significantly dependent on international markets, and we may face difficulties entering or maintaining sales in some international markets. We are, therefore, affected by the political, economic, labor, environmental, public health and military conditions in these countries. For example, China does not currently have a comprehensive and highly developed legal system, particularly with respect to the protection of IP rights, which results in the prevalence of counterfeit goods in China, among other things, as well as piracy and degradation of our IP protection. Our efforts to prevent counterfeit products from entering the market may not be successful, and the sale of counterfeit products could harm our operating results and financial condition. In addition, customs regulations in China are complex and subject to frequent changes and, in the event of a customs compliance issue, our ability to import to, and export from, our factory in Shanghai, China could be adversely affected, which could harm our operating results and financial condition.

Our international business activities could also be limited or disrupted by any of the following factors:

• the need to comply with foreign government regulation;

• the need to comply with U.S. regulations on international business, including the Foreign Corrupt Practices Act and rules regarding conflict minerals;

• changes in diplomatic and trade relationships or government intervention, which may impact our ability to sell to certain customers;

• reduced sales to our customers or interruption to our manufacturing processes in the Pacific Rim that may arise from regional issues in Asia, including natural disasters or labor strikes;

• imposition of regulatory requirements, tariffs, import and export restrictions and other barriers and restrictions;

• a higher degree of commodity pricing than in the U.S.;

• changes in, or the particular application of, government regulations;

• import or export restrictions that could affect some of our products, including those with encryption technology;

• duties and/or fees related to customs entries for our products, which are all manufactured offshore;

• longer payment cycles and greater difficulty in accounts receivable collection;

• adverse tax rules and regulations;

• weak protection of our IP rights;

• delays in product shipments due to local customs restrictions; and

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• delays in research and development that may arise from political unrest at our development centers in Israel or other countries.

Our common stock and convertible notes prices have been, and may continue to be, volatile, which could result in investors losing all or part of their investments.The market prices of our common stock and convertible notes have fluctuated significantly in the past and may continue to fluctuate in the future. We believe that such fluctuations will continue as a result of many factors, such as financing plans, future announcements concerning us, our competitors or our principal customers regarding financial results or expectations, technological innovations, industry supply and demand dynamics, new product introductions, governmental regulations, the commencement or results of litigation or changes in earnings estimates by analysts. In addition, in recent years the stock market has experienced significant price and volume fluctuations and the market prices of the securities of high-technology and semiconductor companies have been especially volatile, often for reasons outside the control of the particular companies. These fluctuations as well as general economic, political and market conditions may harm the market price of our common stock as well as the prices of our outstanding convertible notes.

Our success depends on our key personnel, including our senior management, and the loss of key personnel or the transition of key personnel could disrupt our business. Our success greatly depends on the continued contributions of our senior management and other key research and development, sales, marketing and operations personnel. We do not have employment agreements with any of our executive officers and they are free to terminate their employment with us at any time. Our success will depend on our ability to recruit and retain additional highly-skilled personnel. We have relied on equity awards in the form of stock options and restricted stock units as one means for recruiting and retaining highly skilled talent and a reduction in our stock price may reduce the effectiveness of these equity awards in retaining employees. We also rely on cash incentive awards to motivate and retain employees. These cash incentive awards depend significantly on our financial and business performance, and variations in our financial and business performance from our expectations at the time we set the targets for such cash incentive awards could result in decreased or eliminated awards, reducing the effectiveness of these cash incentive awards in retaining employees.

Terrorist attacks, war, threats of war and government responses thereto may negatively impact our operations, revenues, costs and stock price. Terrorist attacks, U.S. military responses to these attacks, war, threats of war and any corresponding decline in consumer confidence could have a negative impact on consumer demand. Any of these events may disrupt our operations or those of our customers and suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. Any of these events could also increase volatility in the U.S. and world financial markets, which could harm our stock price and may limit the capital resources available to us and our customers or suppliers, or adversely affect consumer confidence. We have substantial operations in Israel including a development center in Northern Israel, near the border with Lebanon, and a research center in Omer, Israel, which is near the Gaza Strip, areas that have experienced significant violence and political unrest. Turmoil and unrest in Israel, the Middle East or other regions could cause delays in the development or production of our products and could harm our business and operating results.

Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate could harm our operations. Our supply chain operations, including those of our suppliers and subcontractors, are concentrated in the United States, Japan, Taiwan, China and Singapore. In the past, certain of these areas have been affected by natural disasters such as earthquakes, tsunamis, floods and typhoons, and some areas have been affected by epidemics. In addition, our headquarters, which house a significant concentration of our research and development and engineering staff, are located in the San Francisco Bay Area, an area that is prone to earthquakes. If a natural disaster or epidemic were to occur in one or more of these areas, we could incur a significant work or production stoppage. The impact of these potential events is magnified by the fact that we do not have insurance for most natural disasters or epidemics, including earthquakes and tsunamis. The impact of a natural disaster or epidemic could harm our business and operating results.

Disruptions in global transportation could impair our ability to deliver or receive product on a timely basis, or at all, causing harm to our financial results. Our raw materials, work-in-process and finished products are primarily distributed via air transport. If there are significant disruptions in air transport, we may not be able to deliver our products or receive raw materials. Any natural disaster or other event that affects air transport in Asia could disrupt our ability to receive raw materials in, or ship finished product from, our Shanghai, China facility or our Asia-based contract manufacturers. As a result, our business and operating results may be harmed.

We rely on information systems to run our business and any prolonged down time could harm our business operations and/or financial results. We rely on an enterprise resource planning system, as well as multiple other systems, databases, and data centers to operate and manage our business. Any information system problems, programming errors or unanticipated system or

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data center interruptions could impact our continued ability to successfully operate our business and could harm our financial results or our ability to accurately report our financial results on a timely basis.

Anti-takeover provisions in our charter documents, stockholder rights plan and Delaware law could discourage or delay a change in control and negatively impact our stockholders. We have taken a number of actions that could have the effect of discouraging a takeover attempt. For example, we have a stockholders’ rights plan that would cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder, who attempts to acquire us on terms not approved by our board of directors. This could discourage an acquisition of us. In addition, our certificate of incorporation grants our board of directors the authority to fix the rights, preferences and privileges of and issue up to 4,000,000 shares of preferred stock without stockholder action (2,000,000 shares of preferred stock have already been reserved under our stockholder rights plan). Issuing preferred stock could have the effect of making it more difficult and less attractive for a third party to acquire a majority of our outstanding voting stock. Preferred stock may also have other rights, including economic rights senior to our common stock that could harm the market value of our common stock. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. This section provides that a corporation may not engage in any business combination with any interested stockholder, defined broadly as a beneficial owner of 15% or more of that corporation’s voting stock, during the three-year period following the time that a stockholder became an interested stockholder, without certain conditions being satisfied. This provision could delay or discourage a change of control of SanDisk.

Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability. We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Our tax liabilities are affected by the amounts we charge for inventory, services, licenses, funding and other items in intercompany transactions. We are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with our intercompany charges or other matters and assess additional taxes. For example, we were under a federal income tax audit by the U.S. Internal Revenue Service, or IRS, for fiscal years 2005 through 2008 and received the Revenue Agent’s report in February 2012. The most significant proposed adjustments are comprised of related party transactions between our U.S. parent company and our foreign subsidiaries. We are contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached. Furthermore, we are currently under a federal income tax audit by the IRS for fiscal years 2009 through 2011, and we do not expect a resolution of this audit to be reached during the next twelve months. While we regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable outcome could occur. An unanticipated unfavorable outcome in any specific period could harm our operating results for that period or future periods. The financial cost and management attention and time devoted to defending income tax positions may divert resources from our business operations, which could harm our business and profitability. IRS audits may also impact the timing and/or amount of our refund claims. In addition, our effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. In particular, the carrying value of deferred tax assets, which are predominantly in the U.S., is dependent on our ability to generate future taxable income in the U.S.

We may be subject to risks associated with laws, regulations and customer initiatives relating to the environment or other social responsibility issues. Production and marketing of products in certain states and countries may subject us to environmental and other regulations including, in some instances, the responsibility for environmentally safe disposal or recycling. Such laws and regulations have recently been passed in several jurisdictions in which we operate, including Japan and certain states within the U.S. In addition, climate change issues, energy usage and emissions controls may result in new environmental legislation and regulations, at the international, federal or state level, that may make it more difficult or expensive for us, our suppliers and our customers to conduct business. Any of these regulations could cause us to incur additional direct costs, as well as increased indirect costs related to our relationships with our customers and suppliers, and otherwise harm our operations and financial condition.

Government regulators or our customers may require us to comply with product or manufacturing standards that are more restrictive than current laws and regulations related to environmental matters, conflict minerals or other social responsibility initiatives. The implementation of these standards could affect the sourcing, cost and availability of materials used in the manufacture of our products. Non-compliance with these standards could cause us to lose sales to these customers and compliance with these standards could increase our costs, which may harm our operating results.

New conflict minerals regulations may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.In August 2012, the SEC adopted new rules establishing additional disclosure and reporting requirements regarding the use of specified minerals, or conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. These new rules will require us to determine, disclose and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or

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any adjoining country. These new rules could affect our ability to source certain materials used in our products at competitive prices and could impact the availability of certain minerals used in the manufacture of our products, including gold, tantalum, tin and tungsten. As there may be only a limited number of suppliers of “conflict free” minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Our customers, including OEM and other customers in our commercial channel, may require that our products be free of conflict minerals, and our revenues and margins may be harmed if we are unable to provide assurances to our customers that our products are “conflict free” or to procure conflict free minerals at a reasonable price, or at all, or are unable to pass through any increased costs associated with meeting these demands. Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. We expect that there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs related to possible changes to products, processes, or sources of supply as a consequence of such verification and disclosure requirements.

In the event we are unable to satisfy regulatory requirements relating to internal controls, or if our internal control over financial reporting is not effective, our business could suffer. In connection with our certification process under Section 404 of the Sarbanes-Oxley Act, we have identified in the past and will, from time-to-time in the future, identify deficiencies in our internal control over financial reporting. There can be no assurance that individually or in the aggregate these deficiencies would not be deemed to be a material weakness or significant deficiency. A material weakness or significant deficiency in internal control over financial reporting could have a materially adverse impact on our reported financial results and the market price of our stock could significantly decline. Additionally, adverse publicity related to the disclosure of a material weakness in internal controls could harm our reputation, business and stock price. Any internal control or procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving desired control objectives and cannot prevent human error, intentional misconduct or fraud.

We have significant financial obligations related to Flash Ventures, which could impact our ability to comply with our obligations under our 1.5% Convertible Senior Notes due 2017. We have entered into agreements to guarantee or provide financial support with respect to lease and certain other obligations of Flash Ventures in which we have a 49.9% ownership interest. As of June 30, 2013, we had guarantee obligations for Flash Ventures’ master lease agreements denominated in Japanese yen of approximately $612 million based on the exchange rate at June 30, 2013. In addition, we have significant commitments for the future fixed costs of Flash Ventures, and we will incur significant obligations with respect to Flash Forward as well as continued investment in Flash Partners and Flash Alliance. Due to these and our other commitments, we may not have sufficient funds to make payments under or repay the notes.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities. The table below summarizes information about our purchases of equity securities registered pursuant to Section 12 of the Exchange Act during the three months endedJune 30, 2013.

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
April 1, 2013 to April 28, 2013	677,567		$53.12	677,567	$	890,374,341
April 29, 2013 to May 26, 2013	3,796,714	55.05		3,796,714	681,365,236
May 27, 2013 to June 30, 2013	596,756	59.14		596,756	646,073,086
Total	5,071,037	55.27		5,071,037

————

(1) Our Board of Directors has authorized up to $1.25 billion for stock repurchases in the open market or otherwise. This purchase plan will expire on October 26, 2016.

(2) Does not include amounts paid for commissions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The information required by this item is set forth on the exhibit index which follows the signature page of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		SANDISK CORPORATION
		(Registrant)
Dated:	July 29, 2013	By:	/s/ Judy Bruner
			Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Exhibit Title	Form	File No.	Exhibit No.	Filing Date	Provided Herewith
3.1	Restated Certificate of Incorporation of the Registrant.	S-1	33-96298	3.2	8/29/95
3.2	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant dated December 9, 1999.	10-Q	000-26734	3.1	8/16/00
3.3	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant dated May 11, 2000.	S-3	333-85686	4.3	4/5/02
3.4	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant dated May 26, 2006.	8-K	000-26734	3.1	6/1/06
3.5	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant dated May 27, 2009.	8-K	000-26734	3.1	5/28/09
3.6	Certificate of Designations for the Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on April 24, 1997.	8-K/A	000-26734	3.5	5/16/97
3.7	Certificate of Amendment to the Certificate of Designations of Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on September 24, 2003.	8-A	000-26734	3.2	9/25/03
3.8	Amended and Restated Bylaws of the Registrant dated December 20, 2012.	8-K	000-26734	3.1	12/20/12
4.1	Rights Agreement, dated as of September 15, 2003, by and between the Registrant and Computershare Trust Company, Inc.	8-A	000-26734	4.2	9/25/03
4.2	Amendment No. 1 to Rights Agreement, dated as of November 6, 2006, by and between the Registrant and Computershare Trust Company, Inc.	8-A/A	000-26734	4.2	11/8/06
4.3	Indenture (including form of Notes) with respect to the Registrant’s 1.0% Convertible Senior Notes due 2013, dated as of May 15, 2006, by and between the Registrant and The Bank of New York.	8-K	000-26734	4.1	5/15/06
4.4	Indenture (including form of Notes) with respect to the Registrant’s 1.5% Convertible Senior Notes due 2017, dated as of August 25, 2010, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A.	8-K	000-26734	4.1	8/25/10
10.1	The Registrant’s 2013 Incentive Plan	DEF 14A	000-26734	Annex A	4/26/13
10.2	The Registrant’s Form of Notice of Grant of Stock Option					X
10.3	The Registrant’s Form of Global Stock Option Agreement					X
10.4	The Registrant’s Form of Global Restricted Stock Unit Issuance Agreement					X
10.5	The Registrant’s Form of Notice of Grant of Stock Option (Director Grants)					X
10.6	The Registrant’s Form of Stock Option Agreement (Director Grants)					X
10.7	The Registrant’s Form of Restricted Stock Unit Issuance Agreement (Director Grants)					X
10.8	The Registrant’s Non-Employee Director Compensation Policy	8-K	000-26734	99.2	6/18/13
12.1	Computation of ratio of earnings to fixed charges.					X
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*					X
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*					X
101.INS	XBRL Instance Document.**					X
101.SCH	XBRL Taxonomy Extension Schema Document.**					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.**					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.**					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.**					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.**					X

————

* Furnished herewith.

** Pursuant to Rule 406T of Regulation S-T, the XBRL files hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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EX-10.2

EXHIBIT 10.2

SANDISK CORPORATION

NOTICE OF GRANT OF STOCK OPTION

Notice is hereby given of the grant of a stock option (the “Option”) to purchase shares of the Common Stock of SanDisk Corporation (the “Corporation”). This Notice of Grant of Stock Option (“Notice”) is to be read in conjunction with the Grant Summary provided to you electronically, and the Grant Summary is made part of this Notice.

Exercise Schedule:Unless otherwise indicated by the Corporation in a separate written notice, twenty-five percent (25%) of the Option Shares shall generally vest and become exercisable upon Optionee’s completion of one (1) year of Service measured from the Vesting Commencement Date and the remaining seventy-five percent (75%) of the Option Shares shall generally vest and become exercisable in successive equal quarterly installments, over Optionee’s period of continued Service measured from the first anniversary of the Vesting Commencement Date. In most instances, the Vesting Commencement Date is the same as the Grant/Award Date shown in the Grant Summary. The Optionee will be provided with a separate written notice if the Vesting Commencement Date is different than the Grant/Award Date. In no event shall the Option vest or become exercisable for any additional Option Shares following Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with the Optionee. The number and class of Option Shares for which the Option shall become exercisable on any particular installment date shall be appropriately adjusted to reflect any change made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration.

Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the SanDisk Corporation 2013 Stock Incentive Plan, as amended (the “Plan”). Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Global Stock Option Agreement and any country-specific appendix thereto (the “Option Agreement”). The Option Agreement and any country-specific appendix thereto are posted at and are available for downloading at that site at [insert updated Sprocket link].

The official prospectus version 2013.1 for the Plan is also posted at [insert updated Sprocket link] and may be downloaded from that site.

Optionee should print out a copy of both Option Agreement (including any country-specific appendix) and Prospectus Version 2013.1 for his or her personal records. A hard copy of the Plan, the Option Agreement (including any county-specific appendix) and the Prospectus Version 2013.1 may also be obtained upon request made to the Corporate Secretary at the Corporation’s principal offices.

Employment at Will. Nothing in this Notice or in the Option Agreement (including any country-specific appendix) or the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Service at any time for any reason, with or without cause.

Definitions. All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, the Option Agreement or the Plan.

EX-10.3

EXHIBIT 10.3

SANDISK CORPORATION

2013 INCENTIVE PLAN

GLOBAL STOCK OPTION AGREEMENT

RECITALS

A.    The Board has adopted the Plan to promote the interests of the Corporation by providing eligible persons in the service of the Corporation (or any Parent or Subsidiary) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in such service.

B.    Optionee is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s grant of an option to Optionee.

C.    Except as otherwise set forth in the attached Appendix A, all capitalized terms in this Agreement shall have the meaning assigned to them in the Plan.

NOW, THEREFORE, it is hereby agreed as follows:

1.Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price.

2.Option Term. This option shall have a maximum term of seven (7) years measured from the Grant Date and shall accordingly expire at the close of business in California on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.

3.Limited Transferability. This option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionee’s death and may be exercised, during Optionee’s lifetime, only by Optionee.

4.Dates of Exercise. This option shall become exercisable for the Option Shares in one or more installments in accordance with the Exercise Schedule set forth in the Grant Notice. As this option becomes exercisable for such installments, those installments shall accumulate, and this option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6.

5.Cessation of Service. The option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(a)Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while this option is outstanding, then Optionee shall have a period of three (3) months (commencing with the first date following such cessation of Service) during which to exercise this option, but in no event shall this option be exercised at any time after the Expiration Date.

(b)Should Optionee die while this option is outstanding, then this option may be exercised by (i) the personal representative of Optionee’s estate or (ii) the person or persons to whom the option is transferred pursuant to Optionee’s will or the laws of inheritance following Optionee’s death, as the case may be. However, if Optionee is a U.S. or Canadian resident and dies while holding this option and has an effective beneficiary designation in effect for this option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this option following Optionee’s death provided this is not inconsistent with applicable local probate or inheritance laws. Any such right to exercise this option shall lapse, and this option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)‑month period following the date of Optionee’s death or (ii) the Expiration Date.

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(c)Should Optionee cease Service by reason of Permanent Disability while this option is outstanding, then Optionee shall have a period of twelve (12) months (commencing with the first day following such cessation of Service) during which to exercise this option. In no event shall this option be exercised at any time after the Expiration Date.

(d)During the limited period of post-Service exercisability, this option may not be exercised in the aggregate for more than the number of Option Shares for which this option is, at the time of Optionee’s cessation of Service, vested and exercisable pursuant to the Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Paragraph 6. This option shall not vest or become exercisable for any additional Option Shares, whether pursuant to the normal Exercise Schedule specified in the Grant Notice or the special vesting acceleration provisions of Paragraph 6, following Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the Expiration Date, this option shall terminate and cease to be outstanding for any exercisable Option Shares for which this option has not otherwise been exercised.

(e)Should Optionee’s Service be terminated for Misconduct or should Optionee otherwise engage in any Misconduct while this option is outstanding, then this option shall terminate immediately and cease to remain outstanding.

(f)For purposes of this Agreement, Optionee’s period of Service shall not include any period of notice of termination of employment, whether expressed or implied. Optionee’s date of cessation of Service shall mean the date upon which Optionee ceases active performance of Service for the Corporation (or any Parent or Subsidiary) following the provision of such notification of termination or resignation from Service (e.g., active Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Optionee is employed or the terms of Optionee’s contract of employment, if any) and shall be determined solely by this Agreement and without reference to any other agreement, written or oral, including Optionee’s contract of employment, if any. Furthermore, in the event of termination of Optionee’s employment or other Service (whether or not in breach of local labor laws), Optionee’s right to exercise this option after cessation of Service, if any, will be measured by the date of cessation of Optionee’s active Service and will not be extended by any notice period mandated under employment laws in the jurisdiction where Optionee is employed or terms of Optionee’s contract of employment, if any; the Plan Administratorshall have the exclusive discretion to determine when Optionee is no longer actively providing Services for purposes of this option.

6.Special Acceleration of Option.

(a)This option, to the extent outstanding at the time of a Change in Control but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the effective date of such Change in Control, become exercisable for all of the Option Shares at the time subject to this option and may be exercised for any or all of those Option Shares as fully vested shares of Common Stock. However, this option shall not become exercisable on such an accelerated basis, if and to the extent: (i) this option is to be assumed by the successor corporation (or parent thereof) or is otherwise to be continued in full force and effect pursuant to the terms of the Change in Control transaction or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Change in Control on any Option Shares for which this option is not otherwise at that time exercisable (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent payout of that spread in accordance with the same Exercise Schedule for those Option Shares as set forth in the Grant Notice.

(b)Immediately following the Change in Control, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction.

(c)If this option is assumed in connection with a Change in Control or otherwise continued in effect, then this option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of this option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control, provided such common stock is readily tradable on an established U.S. securities exchange or market.

(d)This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

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7.Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

8.Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares.

9.Manner of Exercising Option.

(a)In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions:

(i)Execute and deliver to the Corporation a Notice of Exercise for the Option Shares for which the option is exercised or comply with such other procedures as the Corporation may establish for notifying the Corporation of the exercise of this option for one or more Option Shares.

(ii)Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A)cash or check made payable to the Corporation; or

(B)through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (i) to a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in accordance with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of the Option Shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the Option Shares plus all applicable Tax-Related Items required to be withheld by the Corporation (or any Parent or Subsidiary) by reason of such exercise and (ii) to the Corporation to deliver the certificates for the Option Shares directly to such brokerage firm on such settlement date in order to complete the sale.

Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Notice of Exercise (or other notification procedure) delivered to the Corporation in connection with the option exercise.

(iii)Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

(iv)Make appropriate arrangements with the Employer for the satisfaction of all Tax-Related Items required to be withheld in connection with the option exercise.

(b)As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.

(c)In no event may this option be exercised for any fractional shares.

10.Tax-Related Items.

(a)Optionee acknowledges that, regardless of any action taken by the Corporation or, if different, the Employer, the ultimate liability for all Tax-Related Items is and remains Optionee’s responsibility and may exceed the amount actually withheld by the Corporation or the Employer. Optionee further acknowledges and agrees that the Corporation and or the Employer may, if it so determines, offset any employer tax liabilities deemed applicable to Optionee by reducing the Option Shares deliverable to Optionee under this option. Optionee further acknowledges that the Corporation and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this option, including, but not limited to, the grant, vesting or exercise of this option, the subsequent sale of Option Shares issued upon exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result. Further,

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if Optionee is subject to Tax-Related Items in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, Optionee acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(b)Prior to the relevant taxable or tax withholding event, as applicable, Optionee agrees to make adequate arrangements satisfactory to the Corporation and/or the Employer to satisfy all Tax-Related Items. In this regard, Optionee authorizes the Corporation and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(A)     withholding from Optionee’s wages or other cash compensation paid to Optionee by the Corporation and/or the Employer; or

(B)     withholding from proceeds of the sale of Option Shares acquired at exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Corporation (on Optionee’s behalf pursuant to this authorization) without further consent; or

(C)     withholding in Option Shares to be issued at exercise of the Option, provided, however, that if Optionee is a Section 16 officer of the Corporation under the 1934 Act, as amended,then the Compensation Committee shall establish the method of withholding from alternatives (A)-(B) herein and, if the Compensation Committee does not exercise its discretion prior to the Tax-Related Items withholding event, then Optionee shall be entitled to elect the method of withholding from the alternatives above.

(c)Depending on the withholding method, the Corporation may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case Optionee will receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Option Shares, for tax purposes, Optionee is deemed to have been issued the full number of Option Shares subject to the exercised option, notwithstanding that a number of the Option Shares are held back solely for the purpose of paying the Tax-Related Items.

(d)Finally, Optionee agrees to pay to the Corporation or the Employer, any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of Optionee’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Option Shares or the proceeds of the sale of the Option Shares, if Optionee fails to comply with his or her obligations in connection with the Tax-Related Items.

11.Nature of Grant. In accepting this option, Optionee acknowledges, understands and agrees that:

(a)the Plan is established voluntarily by the Corporation, is discretionary in nature and may be amended, suspended or terminated by the Corporation at any time, to the extent permitted by the Plan;

(b)the grant of this option is voluntary and occasional and does not create any contractual or other right to receive future options, or benefits in lieu of options, even if options have been granted in the past;

(c)all decisions with respect to future options, if any, will be at the sole discretion of the Corporation;

(d)the grant of this option and Optionee’s participation in the Plan shall not confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary), and/or the Employer to terminate Optionee’s Service at any time for any reason, with or without cause;

(e)Optionee’s participation in the Plan is voluntary;

(f)this option and any Option Shares acquired under the Plan are not intended to replace any pension rights or compensation;

(g)this option and any Option Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

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(h)the future value of the Option Shares underlying this option are unknown, indeterminable, and cannot be predicted with certainty;

(i)if the underlying Option Shares do not increase in value, this option will have no value;

(j)if Optionee exercises this option and acquires Option Shares, the value of such Option Shares may increase or decrease in value, even below the Exercise Price.

(k)no claim or entitlement to compensation or damages shall arise from forfeiture of this option resulting from Optionee’s termination or resignation from Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any), and in consideration of the grant of this option to which Optionee is otherwise not entitled, Optionee irrevocably agrees never to institute any claim against the Corporation, the Employer (or any Parent or Subsidiary), waives his or her ability, if any, to bring any such claim, and releases the Corporation (or any Parent or Subsidiary) and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Optionee shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and

(l)unless otherwise provided in the Plan or by the Corporation in its discretion, this option and the benefits evidenced by this Agreement do not create any entitlement to have this option or any such benefits transferred to, or assumed by, another Corporation nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Common Stock of the Corporation; and

(m) the following provisions apply only if Optionee is providing services outside the United States:

(A)    this option and the Option Shares subject to this option are not part of normal or expected compensation or salary for any purpose;

(B)    Optionee acknowledges and agrees that the Corporation, the Employer (or any Parent or Subsidiary) shall not be liable for any foreign exchange rate fluctuation between Optionee’s local currency and the United States Dollar that may affect the value of this option or of any amounts due to Optionee pursuant to the exercise of this option or the subsequent sale of any Option Shares issued upon exercise.

12.No Advice Regarding Grant. The Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding Optionee’s participation in the Plan or the sale of the Option Shares issued upon exercise of this option. Optionee is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

13.Compliance with Laws and Regulations.

(a)The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any U.S., state, local, or foreign stock exchange (or the Nasdaq Global Select Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance.

(b)The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals.

14.Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’s estate and any beneficiaries of this option designated by Optionee.

15.Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given

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or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

16.Construction. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

17.Governing Law and Venue. The interpretation, performance and enforcement of the Plan and this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Agreement is made and/or to be performed.

18.Excess Shares. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

19.Language. If Optionee has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.

20.Appendix B. Notwithstanding any provision in this Agreement, this option shall be subject to any special terms and provisions as set forth in Appendix B to this Agreement for Optionee’s country. Moreover, if Optionee relocates to one of the countries included in Appendix B, the special terms and conditions for such country will apply to Optionee, to the extent the Corporation determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Appendix B constitutes part of this Agreement.

21.Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible.

22.Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

23.Authorization to Release Necessary Personal Information.

(a)Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Data by and among, as applicable, the Employer, the Corporation (or any Parent or Subsidiary) for the exclusive purpose of implementing, administering and managing Optionee’s participation in the Plan.

(b)Optionee understands that the Corporation and the Employer may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor, for the exclusive purpose of implementing, administering and managing the Plan.

(c)Optionee understands that Data will be transferred to the Corporation’s designated broker or such other stock plan provider as may be selected by the Corporation in the future, which is assisting the Corporation with the implementation, administration and management of the Plan. Optionee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections from Optionee’s country. Optionee understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Optionee authorizes the Corporation, the Corporation’s designated broker and any other possible recipients which may assist the Corporation (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing,

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administering and managing his or her participation in the Plan. Optionee understands that Data will be held only as long as is necessary to implement, administer and manage Optionee’s participation in the Plan. Optionee understands that if he or she resides outside the United States he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Optionee understands that he or she is providing the consents herein on a purely voluntary basis. If Optionee does not consent, or if Optionee later seeks to revoke his or her consent, his or her employment status or Service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Optionee’s consent is that the Corporation would not be able to grant Optionee options or other equity awards or administer or maintain such awards. Therefore, Optionee understands that refusing or withdrawing his or her consent may affect Optionee’s ability to participate in the Plan. For more information on the consequences of Optionee’s refusal to consent or withdrawal of consent, Optionee understands that he or she may contact his or her local human resources representative.

24.Electronic Delivery and Acceptance. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

25.Imposition of Other Requirements. The Corporationreserves the right to impose other requirements on Optionee’s participation in the Plan, on this option and on any Option Shares issued upon exercise, to the extent the Corporationdetermines it is necessary or advisable for legal or administrative reasons, and to require Optionee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

26.Waiver. Optionee acknowledges that a waiver by the Corporation of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Optionee any other Participant of the Plan.

27.Entire Agreement. This Agreement (including any country specific provisions in Appendix B), the Grant Notice and the Plan, including any appendices or exhibits thereto, contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto. To the extent any provision of this Agreement is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on the Optionee and all persons claiming under or through the Optionee.

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APPENDIX A

The following definitions shall be in effect under the Agreement:

A.Agreement shall mean this Global Stock Option Agreement, which includes this Appendix A and also includes Appendix B.

B.Award shall mean the award of this option to purchase up to the number of Option Shares to the Optionee pursuant to the terms of the Agreement.

C.Board shall mean the Corporation’s Board of Directors.

D.Corporation shall mean SanDisk Corporation, a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan.

E.Data shall mean any information relating to the Participant who is or can be identified from the data alone or in conjunction with other information that is in, or likely to come into, the possession of data controller.

F.Employer shall mean the Corporation or any Parent or Subsidiary to which an Employee provides Services.

G.Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

H.Exercise Price shall mean the exercise price per Option Share as specified in the Grant Notice.

I.Exercise Schedule shall mean the schedule set forth in the Grant Notice pursuant to which the option is to become exercisable for the Option Shares in one or more installments over the Optionee’s period of Service.

J.Expiration Date shall mean the date on which the option expires as specified in the Grant Notice.

K.Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

L.Grant Notice shall mean the Notice of Grant of Stock Option incorporating the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby.

M.Notice of Exercise shall mean the notice of option exercise in the form prescribed by the Corporation.

N.Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

O.Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

P.Plan shall mean the Corporation’s 2013 Incentive Plan.

Q.Tax-Related Items shall mean income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax‑related items related to Optionee’s participation in the Plan and legally applicable to Optionee or deemed by the Corporation or the Employer in its discretion to be an appropriate charge to Optionee even if legally applicable to the Corporation or the Employer.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

APPENDIX B TO THE

GLOBAL STOCK OPTION AGREEMENT

Terms and Conditions

This Appendix B includes additional terms and conditions that govern the option granted to Optionee under the Plan if Optionee resides in one of the countries listed below. Certain capitalized terms used but not defined in this Appendix B have the meanings set forth in the Plan and the Agreement.

Notifications

This Appendix B also includes information regarding exchange controls and certain other issues of which Optionee should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of May 2013. Such laws are often complex and change frequently. As a result, the Corporation strongly recommends that Optionee not rely on the information in this Appendix B as the only source of information relating to the consequences of Optionee’s participation in the Plan because the information may be out of date at the time that Optionee exercises his or her option and Option Shares are issued to Optionee or Optionee sells the Option Shares acquired upon exercise of the option under the Plan.

It is Optionee’s sole responsibility to comply with any obligations set forth in the notifications in this Appendix B with respect to the option and his or her participation in the Plan. Optionee acknowledges and agrees that, unless otherwise stated in this Appendix B, the Corporation (or any Parent or Subsidiary) and the Employer have no responsibility with respect to any of the requirements or obligations Optionee may have with respect to any notifications which are set forth below.

In addition, the information contained herein is general in nature and may not apply to Optionee’s particular situation, and the Corporation is not in a position to assure Optionee of a particular result. Accordingly, Optionee is advised to seek appropriate professional advice as to how the relevant laws in Optionee’s country may apply to his or her situation.

Finally, if Optionee is a citizen or resident of a country other than the one in which Optionee is currently working, transfers employment after the Grant Date, or is considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to Optionee, and the Corporation shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to Optionee.

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AUSTRIA

Notifications

Exchange Control Information.If Optionee holds Option Shares acquired upon exercise outside of Austria, Optionee must submit a report to the Austrian National Bank. An exemption applies if the value of the Option Shares as of any given quarter does not exceed €30,000,000 or as of December 31 does not exceed €5,000,000. If the former threshold is exceeded, quarterly obligations are imposed, whereas if the latter threshold is exceeded, annual reports must be given. The annual reporting date is December 31 and the deadline for filing the annual report is March 31 of the following year.

When Optionee sells Option Shares issued upon exercise of the option, there may be exchange control obligations if the cash received is held outside Austria. If the transaction volume of all Optionee’s accounts abroad exceeds €3,000,000, the movements and balances of all accounts must be reported monthly, as of the last day of the month, on or before the fifteenth day of the following month on a prescribed form.

Consumer Protection Information.To the extent that the provisions of the Austrian Consumer Protection Act are applicable to the Agreement and the Plan, Optionee may be entitled to revoke his or her acceptance of the Agreement if the conditions listed below are met:

(i) If Optionee accepts the option outside of the business premises of the Corporation, Optionee may be entitled to revoke his or her acceptance of the Agreement, provided the revocation is made within one week after Optionee accepts the Agreement.

(ii) The revocation must be in written form to be valid. It is sufficient if Optionee returns the Agreement to the Corporation or the Corporation’s representative with language that can be understood as Optionee’s refusal to conclude or honor the Agreement, provided the revocation is sent within the period set forth above.

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BRAZIL

Notifications

Compliance with Law.By accepting the option, Optionee acknowledges his or her agreement to comply with applicable Brazilian laws and to pay any and all applicable Tax-Related Items associated with the exercise of the option, the receipt of any dividends, and the sale of Option Shares issued upon exercise of the option under the Plan.

Exchange Control Information. If Optionee is a resident or domiciled in Brazil, he or she will be required to submit an annual declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Option Shares issued upon exercise of the option under the Plan. Foreign individuals holding Brazilian visas are considered Brazilian residents for purposes of this reporting requirement and must declare at least the assets held abroad that were acquired subsequent to the date of admittance as a resident of Brazil.

CHINA

Terms and Conditions

Manner of Exercising Option.This provision supplements Paragraph 9 of the Agreement:

Due to exchange control laws in China, Optionee will be required to exercise his or her option using the cashless sell-all exercise method pursuant to which all Option Shares subject to the exercised option will be sold immediately upon exercise and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to Optionee in accordance with any applicable exchange control laws and regulations. Optionee acknowledges that the Corporation’s designated broker is under no obligation to arrange for the sale of the Option Shares at any particular price. Optionee acknowledges that he/she is not aware of any material nonpublic information with respect to the Corporation or any securities of the Corporation as of the date of the Agreement. The Corporation reserves the right to provide additional methods of exercise depending on the development of local law. This restriction will not apply to non-PRC citizens, unless required by the State Administration of Foreign Exchange (“SAFE”).

Cessation of Service.This provision supplements Paragraph 5 of the Agreement:

Notwithstanding anything to the contrary in Paragraph 5 of the Agreement, in the event of Optionee’s cessation of Service with the Corporation (or any Parent or Subsidiary), Optionee shall be permitted to exercise the option for the shorter of (a) the post-termination exercise period (if any) set forth in the Agreement and (b) six months (or such other period as may be required by SAFE) after the date of cessation of Optionee’s active Service. At the end of the post-termination exercise period specified by SAFE, any unexercised portion of the option shall immediately expire. This restriction will not apply to non-PRC citizens, unless required by SAFE.

Exchange Control Requirements. Optionee understands and agrees that, pursuant to local exchange control requirements, Optionee will be required to immediately repatriate the cash proceeds from the sale of Option Shares underlying the option. Optionee further understands that, under local law, such repatriation of his or her cash proceeds will need to be effectuated through a special exchange control account established by the Corporation (or any Parent or Subsidiary) or the Employer, and Optionee hereby consents and agrees that any proceeds from the sale of Option Shares will be transferred to such special account prior to being delivered to Optionee. The Corporation is under no obligation to secure any exchange conversion rate, and the Corporation may face delays in converting the proceeds to local currency due to exchange control restrictions in China. Optionee agrees to bear any currency fluctuation risk between the time the Option Shares are sold and the time the sale proceeds are distributed through any such special exchange account. Optionee further agrees to comply with any other requirements that may be imposed by the Corporation in the future in order to facilitate compliance with exchange control requirements in China. These requirements will not apply to non-PRC citizens, unless required by SAFE.

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DENMARK

Terms and Conditions

Danish Stock Option Act. By accepting the option, Optionee acknowledges that he or she has received a Danish translation of an Employer Statement, which is being provided to comply with the Danish Stock Option Act.

Notifications

Exchange Control and Tax Reporting Information.Optionee may hold Option Shares acquired under the Plan in a safety-deposit account (e.g., a brokerage account) with either a Danish bank or with an approved foreign broker or bank. If the Option Shares are held with a non-Danish broker or bank, Optionee is required to inform the Danish Tax Administration about the safety-deposit account. For this purpose, Optionee must file a Declaration V (Erklaering V) with the Danish Tax Administration. In the event that the applicable broker or bank with which the account is held does not also sign the Form V, Optionee acknowledges that he or she is solely responsible for providing certain details regarding the foreign brokerage or bank account and any Option Shares acquired at exercise and held in such account to the Danish Tax Administration as part of Optionee’s annual income tax return. By signing the Form V, Optionee authorizes the Danish Tax Administration to examine the account. A sample of the Declaration V can be found at the following website: www.skat.dk/getFile.aspx?Id=47392.

In addition, when Optionee opens a deposit account or a brokerage account other foreign bank for the purpose of holding cash outside of Denmark, the bank or brokerage account, as applicable, will be treated as a deposit account because cash can be held in the account. Therefore, Optionee must also file a Declaration K (Erklaering K) with the Danish Tax Administration. Both Optionee and the bank/broker must sign the Declaration K. By signing the Declaration K, the bank/broker undertakes an obligation, without further request each year, to forward information to the Danish Tax Administration concerning the content of the deposit account. By signing the Declaration K, Optionee authorizes the Danish Tax Administration to examine the account. A sample of Declaration K can be found at the following website: www.skat.dk/getFile.aspx?Id=42409&newwindow=true.

If Optionee uses the cashless sell-all method of exercise for the option, Optionee is not required to file a Form V because he or she will not hold any Option Shares. However, if Optionee opens a deposit account with a foreign broker or bank to hold the cash proceeds, he or she is required to file a Form K as described above.

EGYPT

Notifications

Exchange Control Information. If Optionee transfers funds into or out of Egypt in connection with the option, Optionee is required to transfer the funds through a registered bank in Egypt.

FRANCE

Term and Conditions

Language Consent. By accepting the option, Optionee confirms having read and understood the documents relating to this grant (the Plan, the Agreement and this Appendix B) which were provided in the English language. Optionee accepts the terms of those documents accordingly.

En acceptant l’attribution, vous confirmez ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan, le contrat et cette Annexe B) qui ont été communiqués en langue anglaise. Vous acceptez les termes en connaissance de cause.

Notifications

Foreign Account Reporting Information. If Optionee holds Option Shares outside of France or maintains a foreign bank account, he or she is required to report such to the French tax authorities when filing his or her annual tax return. Failure to comply could trigger significant penalties.

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GERMANY

Notifications

Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If Optionee uses a German bank to effect a cross-border payment in excess of €12,500 in connection with the sale of Option Shares acquired under the Plan, the bank will make the report for Optionee. In addition, Optionee must report any receivables or payables or debts in foreign currency exceeding an amount of €5,000,000 on a monthly basis.

HONG KONG

Terms and Conditions

Warning: The option and Option Shares acquired upon exercise of the option do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Corporation (or any Parent or Subsidiary). The Agreement, including this Appendix B, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. Nor have the documents been reviewed by any regulatory authority in Hong Kong. The option is intended only for the personal use of each eligible employee of the Employer, the Corporation (or any Parent or Subsidiary) and may not be distributed to any other person. If Optionee is in any doubt about any of the contents of the Agreement, including this Appendix B, or the Plan, Optionee should obtain independent professional advice.

Sale Restriction. Notwithstanding anything contrary in the Grant Notice, the Agreement or the Plan, in the event the option vests and Optionee or his or her heirs and representatives exercise the option such that Option Shares are issued to Optionee or his or her heirs and representatives within six months of the Grant Date, Optionee agrees that Optionee or his or her heirs and representatives will not dispose of any Option Shares acquired prior to the six-month anniversary of the Grant Date.

Notifications

Nature of Scheme.The Corporation specifically intends that the Plan will not be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance.

INDIA

Terms and Conditions

Manner of Exercising Option. This provision supplements Paragraph 9 of the Agreement:

Due to legal restrictions in India, Optionee may not exercise his or her option using a cashless sell-to-cover exercise, whereby Optionee directs a broker to sell some (but not all) of the Option Shares subject to the exercised option and deliver to the Corporation the amount of the sale proceeds to pay the Exercise Price and any Tax-Related Items. However, payment of the Exercise Price may be made by any of the other methods of payment set forth in the Agreement. The Corporation reserves the right to provide Optionee with this method of payment depending on the development of local law.

Notifications

Exchange Control Information.Optionee must repatriate the proceeds from the sale of Option Shares and any dividends received in relation to the Option Shares to India within 90 days of receipt. Optionee must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or the Employer requests proof of repatriation. It is Optionee’s responsibility to comply with applicable exchange control laws in India.

Foreign Account Reporting Information. Optionee is required to declare any foreign bank accounts and any foreign financial assets (including Option Shares acquired under the Plan) in his or her annual tax return. 

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IRELAND

Notifications

Director Notification Obligation. Directors, shadow directors¹ and secretaries of the Corporation’s Irish Subsidiary are subject to certain notification requirements under the Irish Companies Act. Directors, shadow directors and secretaries must notify the Irish Subsidiary in writing of their interest in the Corporation and the number and class of Option Shares or rights to which the interest relates within five business days of the issuance or disposal of Option Shares or within five business days of becoming aware of the event giving rise to the notification. This disclosure requirement also applies to any rights or Option Shares acquired by the director’s spouse or children (under the age of 18).

ISRAEL

Terms and Conditions

Trust Arrangement.Optionee understands and agrees that the option is offered subject to and in accordance with the terms of the Plan, Israeli Subplan (the “Subplan”) under the 102 Capital Gains Track (as defined in the Subplan), the Israeli Addendum to the Plan (the “Israeli Addendum”), the Trust Agreement among the trustee appointed by Sandisk Israel (Tefen) Ltd and Sandisk IL Ltd., and the Agreement. This includes the option exercise price per share and any other requirements set out in the Subplan. In the event of any inconsistencies between the Plan, the Sub-Plan, the Israeli Addendum and/or the Agreement, the Plan will govern, and if there are inconsistencies between the Sub-Plan, Israeli Addendum and/or the Agreement, the Sub-Plan and Israeli Addendum will govern the option granted to Optionee in Israel.

Written Acceptance.If Optionee resides in Israel, then Optionee must print, sign and deliver the signed copy of the Israel Beneficiary 102 Undertaking within 45 days to: [Insert Address]. If the Corporation does not receive the signed Israel Beneficiary 102 Undertaking within 45 days, the option shall terminate and will become null and void.

The following provisions apply to Optionees who transfer into Israel after the Grant Date.

Payment of Exercise Price.This provision supplements the Paragraph 9 of the Agreement:

Due to legal restrictions in Israel, Optionee will be required to exercise his or her option using the cashless sell-all exercise method whereby all Option Shares subject to the exercised option will be sold immediately upon exercise and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to Optionee in accordance with any applicable laws and regulations. Optionee will not be permitted to acquire and hold Option Shares after exercise. The Corporation reserves the right to provide additional methods of exercise to Optionee depending on the development of local law.

¹  A shadow director is an individual who is not on the board of directors of the Irish Subsidiary but who has sufficient control so that the board of directors of the Irish Subsidiary acts in accordance with the directions or instructions of the individual.

B - 6

SANDISK CORPORATION

2013 INCENTIVE PLAN

ISRAEL BENEFICIARY 102 UNDERTAKING

If Optionee/Participant has not already executed an Israel Beneficiary 102 Undertaking in connection with grants made under the Israeli Subplan to the 2013 Incentive Plan (the “Plan”), Optionee/Participant must print, sign and deliver the signed copy of this Israel Beneficiary 102 Undertaking within 45 days to [Insert Address]. If the Corporation does not receive the signed Israel Beneficiary 102 Undertaking within 45 days, the options/restricted stock units may not qualify for preferential tax treatment.

1. I hereby agree that any restricted stock units or options (collectively, the “Options”) granted to me by SanDisk Corporation (the “Corporation”) according to and under the terms and conditions of the Plan and the Israeli Subplan adopted by the Corporation as of June 12, 2013 (collectively, the “Plan”) are granted to me to qualify under the capital gain tax treatment in accordance and pursuant to Section 102(b)(2) of the Income Tax Ordinance [New Version] (the “Tax Ordinance”) after 132 amendment (“Section 102”) and the Income Tax Rules (Tax Relief upon the Allotment of Shares to Employees), 2003 (the “Rules”) unless I am otherwise notified subject to the Corporation’s absolute discretion to change such election on future grants and subject to the Tax Authorities’ approval.

2. I hereby declare and confirm that I am familiar with the provisions of the trust agreement signed between the Corporation and Tamir Fishman Trusts 2004 Ltd. (the “Trustee”) (the “Trust Agreement”), as well as the terms of the Plan, Section 102, the Rules, and the implications and consequences of the chosen tax arrangement with respect to the Options, and consent that all the terms and conditions set forth in Section 102 and the Rules, as shall be amended from time to time, shall apply to me and bind me.

3. Without derogating from the generality of the aforesaid, I agree that the Options and all the rights that I shall be entitled to with respect to the Options, including, without limitation, dividend, bonus shares and shares issued pursuant to adjustments made by the Corporation will be deposited in trust with the Trustee and be held in trust in accordance with Section 102, the Rules and the Trust Agreement.

4. Without derogating from the generality of the aforesaid, I acknowledge that during the “Holding Period” as determined by the Tax Ordinance I am prevented from selling the Options or the underlying shares, or releasing them from the Trustee, before the termination of the “Holding Period” and I understand the tax implications and consequences that may be applied as a result of breaching such obligation, as set by Section 102, which I am familiar with.

5. If I will cease to be an Israeli resident or if my employment will be terminated for any reason, the Options shall remain subject to section 102, the Rules and the Trust Agreement.

6. I hereby agree that any tax liability whatsoever arising from the grant, exercise of any options, vesting of any restricted stock units, the sale of shares, the release of shares from the Trustee or any other event or act with respect to the Options granted to me, shall be borne solely by me. I declare and consent that the Corporation and/or the Trustee shall make any tax payment due, out of the proceeds of any sale of shares, to any tax authority, according to Section 102, the Rules, the Trust Agreement or any other compulsory payments or applicable law.

7. I understand that this grant of Options under the capital gain track is conditioned upon the receipt, inter alia, of all required approvals from the tax authorities. Accordingly, to the extent that for whatever reason the Corporation shall not be granted an approval by the Israeli Tax Authorities under section 102, I shall bear and pay any and all taxes and any other compulsory payments applicable to the grant, exercise, sale or other disposition of Options or stocks; I hereby declare and consent for the Corporation and/or the Trustee to deduct any tax payment due, out of the proceeds of any sale of Shares, for any payment to the tax authorities, according to the Rules, or any other applicable compulsory payments.

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8. I confirm that the Corporation and/or the Trustee shall not be required to release any shares or any proceeds deriving from the sale of shares, to me, until all required tax payments according to section 102, the Rules and the Trust Agreement, including any other compulsory payments, or applicable law, have been fully assured.

Name of the Beneficiary I.D. Number Signature

B - 8

ITALY

Terms and Conditions

Manner of Exercising Option. This provision supplements the Paragraph 9 of the Agreement:

Due to legal restrictions in Italy, Optionee will be required to exercise his or her option using the cashless sell-all exercise method whereby all Option Shares subject to the exercised option will be sold immediately upon exercise and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to Optionee in accordance with any applicable laws and regulations. Optionee will not be permitted to acquire and hold Option Shares after exercise. The Corporation reserves the right to provide additional methods of exercise to Optionee depending on the development of local law.

Data Privacy.This provision replaces Paragraph 23 of the Agreement:

Optionee understands that the Corporation and the Employer are the Privacy Representative of the Corporation in Italy and may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Option Shares or directorships held in the Corporation (or any Parent or Subsidiary), details of all options or any other entitlement to Common Stock awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor, and that the Corporation and the Employer will process said data and other data lawfully received from third parties (“Personal Data”) for the exclusive purpose of managing and administering the Plan and complying with applicable laws, regulations and Community legislation. Optionee also understands that providing the Corporation with Personal Data is mandatory for compliance with laws and is necessary for the performance of the Plan and that Optionee’s denial to provide Personal Data would make it impossible for the Corporation to perform its contractual obligations and may affect Optionee’s ability to participate in the Plan. Optionee understands that Personal Data will not be publicized, but it may be accessible by the Employer as the Privacy Representative of the Corporation and within the Employer’s organization by its internal and external personnel in charge of processing, and by the Corporation’s designated broker or any other data processor appointed by the Corporation. The updated list of Processors and of the subjects to which Data are communicated will remain available upon request from the Employer. Furthermore, Personal Data may be transferred to banks, other financial institutions or brokers involved in the management and administration of the Plan. Optionee understands that Personal Data may also be transferred to the independent registered public accounting firm engaged by the Corporation, and also to the legitimate addressees under applicable laws. Optionee further understands that the Corporation (or any Parent or Subsidiary) will transfer Personal Data amongst themselves as necessary for the purpose of implementation, administration and management of Optionee’s participation in the Plan, and that the Corporation (or any Parent or Subsidiary) may each further transfer Personal Data to third parties assisting the Corporation in the implementation, administration and management of the Plan, including any requisite transfer of Personal Data to the Corporation’s designated broker or other third party with whom Optionee may elect to deposit any Option Shares acquired under the Plan or any proceeds from the sale of such Option Shares. Such recipients may receive, possess, use, retain and transfer Personal Data in electronic or other form, for the purposes of implementing, administering and managing Optionee’s participation in the Plan. Optionee understands that these recipients may be acting as Controllers, Processors or persons in charge of processing, as the case may be, according to applicable privacy laws, and that they may be located in or outside the European Economic Area, such as in the United States or elsewhere, in countries that do not provide an adequate level of data protection as intended under Italian privacy law.

Should the Corporation exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, it will delete Personal Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan.

Optionee understands that Personal Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Personal Data is collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

The processing activity, including the transfer of Personal Data abroad, including outside of the European Economic Area, as specified herein and pursuant to applicable laws and regulations, does not require Optionee’s consent thereto as the processing is necessary to performance of law and contractual obligations related to implementation, administration and management of the Plan. Optionee understands that, pursuant to section 7 of the Legislative Decree no. 196/2003, Optionee has the right at any moment to, including, but not limited to, obtain confirmation that Personal Data exists or not, access, verify its contents, origin and accuracy, delete, update, integrate, correct, blocked or stop, for legitimate reason, the Personal Data processing. To exercise privacy rights, Optionee should contact the Employer. Furthermore, Optionee is aware that Personal Data will not be used for

B - 9

direct marketing purposes. In addition, Personal Data provided can be reviewed and questions or complaints can be addressed by contacting Optionee’s human resources department.

Plan Document Acknowledgement. Optionee acknowledges that Optionee has read and specifically and expressly approves the Grant Notice and the following Paragraphs of the Agreement: Paragraph 1: Grant of Option; Paragraph 2: Option Term; Paragraph 3: Limited Transferability; Paragraph 4: Dates of Exercise; Paragraph 5: Cessation of Service; Paragraph 6: Special Acceleration of Option; Paragraph 7: Adjustment in Option Shares; Paragraph 8: Stockholder Rights; Paragraph 9: Manner of Exercising Option; Paragraph 10: Tax-Related Items; Paragraph 11: Nature of Grant; Paragraph 12: No Advice Regarding Grant; Paragraph 13: Compliance with Laws and Regulations; Paragraph 17: Governing Law and Venue; Paragraph 18: Excess Shares; Paragraph 19: Language; Paragraph 20: Appendix B; Paragraph 24: Electronic Delivery and Acceptance; Paragraph 25: Imposition of Other Requirements; and the Data Privacy provision of this Appendix B.

Notifications

Exchange Control Information. Optionee is required to report in his or her annual tax return: (a) any transfers of cash or Option Shares to or from Italy exceeding €10,000; (b) any foreign investments or investments held outside of Italy at the end of the calendar year exceeding €10,000 if such investments (vested options, cash, Option Shares) that may give rise to taxable income in Italy that combined with other foreign assets exceeds €10,000; and (c) the amount of the transfers to and from Italy which have had an impact during the calendar year on Optionee’s foreign investments or investments held outside of Italy. Optionee may be exempt from the requirement in (a) if the transfer or investment is made through an authorized broker resident in Italy, as the broker will generally comply with the reporting obligation on his or her behalf.

JAPAN

Notifications

Exchange Control Information. If Optionee pays more than ¥30,000,000 in a single transaction for the purchase of Option Shares when he or she exercises the option, Optionee must file a Payment Report with the Ministry of Finance through the Bank of Japan by the 20th day of the month following the month in which the payment was made. The precise reporting requirements vary depending on whether the relevant payment is made through a bank in Japan.

Foreign Account Reporting Information.If Optionee maintains a foreign bank account outside of Japan with a value exceeding ¥50 million as of December 31 of any calendar year, Optionee is required to report such to the Japanese authorities by March 15th of the following year.

KENYA

There are no country specific provisions.

KOREA

Notifications

Exchange Control Information. If Optionee remits funds out of Korea to purchase Option Shares under the Plan, the remittance must be “confirmed” by a foreign exchange bank in Korea. This is an automatic procedure, i.e., the bank does not need to “approve” the remittance, and it should take no more than a single day to process. Optionee likely will need to present to the bank processing the transaction the following supporting documents evidencing the nature of the remittance: (i) the Grant Notice and Agreement; (ii) the Plan; and (iii) Optionee’s certificate of employment. This confirmation is not necessary for cashless exercises since there is no remittance out of Korea.

In addition, if Optionee realizes US$500,000 or more from the sale of Option Shares, Korean exchange laws require Optionee to repatriate the proceeds to Korea within eighteen months of the sale.

Foreign Account Reporting Information. Under a proposed rule that would be applicable to foreign financial accounts held in 2013 and onwards, Korean residents would have to declare all overseas financial accounts to the Korean tax authority and file a report if the value of such accounts exceeds KRW 1 billion (approximately US$908,000). 

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NETHERLANDS

Notifications

Insider Trading Information. Optionee should be aware of the Dutch insider-trading rules, which may impact the sale of Option Shares acquired under the Plan. In particular, Optionee may be prohibited from effectuating certain transactions if Optionee has inside information about the Corporation.

Under Article 5:56 of the Dutch Financial Supervision Act, anyone who has “insider information” related to an issuing company is prohibited from effectuating a transaction in securities in or from the Netherlands. “Inside information” is defined as knowledge of specific information concerning the issuing company to which the securities relate or the trade in securities issued by such company, which has not been made public and which, if published, would reasonably be expected to affect the share price, regardless of the development of the price. The insider could be any employee of a Parent or Subsidiary in the Netherlands who has inside information as described herein.

Given the broad scope of the definition of inside information, certain Optionees working at a Parent or Subsidiary in the Netherlands may have inside information and, thus, would be prohibited from effectuating a transaction in securities in the Netherlands at a time when Optionee has such inside information.

If Optionee is uncertain whether the insider-trading rules apply to him or her, Optionee should consult his or her personal legal advisor.

POLAND

Notifications

Exchange Control Information. Polish residents holding foreign securities (including Option Shares) and maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets held abroad) exceeds PLN 7,000,000. If required, the reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland. Further, any transfer of funds in excess of a specified threshold (currently €15,000) must be effected through a bank account in Poland. Optionee should maintain evidence of such foreign exchange transactions for five years, in case of a request for their production by the National Bank of Poland.

B - 11

SINGAPORE

Notifications

Securities Law Information.The option is being granted to Optionee pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan and this Agreement have not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Optionee should note that such option is subject to section 257 of the SFA and Optionee will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Option Shares underlying the option unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Director Notification Obligation. If Optionee is a director or shadow director of the Corporation or a Singapore Subsidiary, Optionee is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Corporation or the Singaporean Subsidiary in writing when Optionee receives an interest (e.g., option, Option Shares) in the Corporation or any related companies. Please contact the Corporation to obtain a copy of the notification form. In addition, Optionee must notify the Corporation or the Singapore Subsidiary when Optionee sells Option Shares of the Corporation or any related Corporation (including when Optionee sell Option Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Corporation or any related corporation. In addition, a notification must be made of Optionee’s interests in the Corporation or any related corporation within two business days of becoming a director.

Insider Trading Information. Optionee should be aware of the Singapore insider trading rules, which may impact the acquisition or disposal of Option Shares or rights to Option Shares under the Plan. Under the Singapore insider-trading rules, Optionee is prohibited from selling Option Shares when he or she is in possession of information which is not generally available and which Optionee knows or should know will have a material effect on the price of Option Shares once such information is generally available.

B - 12

SPAIN

Terms and Conditions

Nature of Grant. This provision supplements Paragraph 11 of the Agreement:

In accepting the option, Optionee acknowledges that he or she consents to participation in the Plan and has received a copy of the Plan.

Optionee understands and agrees that, as a condition of the grant of the option, except as provided for in Paragraph 5 of the Agreement, the termination of Optionee’s Service for any reason (including for the reasons listed below) will automatically result in the loss of the option that may have been granted to Optionee and that have not vested and become exercisable on the date of termination.

In particular, Optionee understands and agrees that any unvested options as of Optionee’s termination date and any vested options not exercised within the period set forth in the Agreement following Optionee’s termination date will be forfeited without entitlement to the underlying Option Shares or to any amount as indemnification in the event of a termination by reason of, including, but not limited to: resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause, individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.

Furthermore, Optionee understands that the Corporation has unilaterally, gratuitously and discretionally decided to grant this option under the Plan to individuals who may be employees of the Corporation (or any Parent or Subsidiary). The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Corporation (or any Parent or Subsidiary) on an ongoing basis. Consequently, Optionee understands that the option is granted on the assumption and condition that the option and the Option Shares issued upon exercise shall not become a part of any employment or service contract (either with the Corporation, any Parent or Subsidiary or the Employer) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, Optionee understands that the option grant would not be made to Optionee but for the assumptions and conditions referred to above; thus, Optionee acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant to Optionee of the option shall be null and void.

Notifications

Securities Law Information. The option described in the Agreement and this Appendix B do not qualify under Spanish regulations as a security.  No “offer of securities to the public”, as defined under Spanish law, has taken place or will take place in the Spanish territory. The Agreement (including this Appendix B) has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and do not constitute a public offering prospectus.

Exchange Control Information. The acquisition of Option Shares under the Plan must be declared for statistical purposes to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”), which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January; however, if the value of the Option Shares acquired under the Plan or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or sale, as applicable.

When receiving foreign currency payments derived from the ownership of any Option Shares (i.e., sale proceeds), Optionee must inform the financial institution receiving the payment of the basis upon which such payment is made if the payment exceeds €50,000. Optionee will need to provide the institution with the following information: (i) Optionee’s name, address, and tax identification number; (ii) the name and corporate domicile of the Corporation; (iii) the amount of the payment; the currency used; (iv) the country of origin; (v) the reasons for the payment; and (vi) further information that may be required.

In addition, Optionee may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Option Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Option Shares made to Optionee by the Corporation) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year.

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Foreign Account Reporting Information. If Optionee holds rights or assets (e.g., Option Shares or cash held in a bank or brokerage account) outside of Spain with a value in excess of €50,000 per type of right or asset (e.g., Option Shares, cash, etc.) as of December 31 each year, Optionee is required to report certain information regarding such rights and assets on tax form 720.  After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of any previously-reported rights or assets increases by more than €20,000.  The reporting must be completed by the March 31 each year. 

SWEDEN

There are no country specific provisions.

TAIWAN

Terms and Conditions

Data Privacy. Optionee acknowledges that he or she has read and understands the terms regarding collection, processing and transfer of Data contained in Paragraph 23 of the Agreement and agrees that, upon request of the Corporation or the Employer, Optionee will provide any executed data privacy consent form to the Employer or the Corporation (or any other agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in Optionee’s country, either now or in the future. Optionee understands he or she will not be able to participate in the Plan if Optionee fails to execute any such consent or agreement.

Notifications

Exchange Control Information. Optionee may acquire and remit foreign currency (including proceeds from the sale of Option Shares) into and out of Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, Optionee must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank. If the transaction amount is US$500,000 or more, Optionee understands that he or she may be required to provide additional supporting documentation to the satisfaction of the remitting bank. Optionee acknowledges that he or she should consult Optionee’s personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.

TURKEY

Terms and Conditions

Manner of Exercising Option. This provision supplements the Paragraph 9 of the Agreement:

Due to legal restrictions in Turkey, Optionee will be required to exercise his or her option using the cashless sell-all exercise method whereby all Option Shares subject to the exercised option will be sold immediately upon exercise and the proceeds of sale, less the Exercise Price, any Tax-Related Items and broker’s fees or commissions, will be remitted to Optionee in accordance with any applicable laws and regulations. Optionee will not be permitted to acquire and hold Option Shares after exercise. The Corporation reserves the right to provide additional methods of exercise to Optionee depending on the development of local law.

Notifications

Securities Law Information. Under Turkish law, Optionee is not permitted to sell any Option Shares acquired under the Plan in Turkey. The Corporation’s Shares are currently traded on the Nasdaq Global Select Market, which is located outside of Turkey, under the ticker symbol “SNDK” and Option Shares acquired under the Plan may be sold through this exchange.

Exchange Control Information. Under Turkish law, Turkish residents are permitted to purchase and sell securities or derivatives traded on exchanges abroad only through a financial intermediary licensed in Turkey.  Therefore, Optionee may be required to appoint a Turkish broker to assist with the exercise of the option and the sale of the Option Shares acquired under the Plan.  Optionee should consult his or her personal legal advisor before exercising the option and/or selling any Option Shares acquired under the Plan to confirm the applicability of this requirement to Optionee.

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UNITED ARAB EMIRATES

Notifications

Securities Law Information. The option granted under the Plan is only being offered to Employees and is in the nature of providing equity incentives to Employees. Any documents related to the option, including the Plan, the Agreement and any other grant documents (“Grant Documents”), are intended for distribution only to such Employees and must not be delivered to, or relied on by, any other person.

The United Arab Emirates securities or financial/economic authorities have no responsibility for reviewing or verifying any Grant Documents and have not approved the Grant Documents nor taken steps to verify the information set out in them, and thus, are not responsible for their content.

Optionee is aware that he or she should, as a prospective stockholder, conduct his or her own due diligence on the securities. Optionee acknowledges that if he or she does not understand the contents of the Grant Documents, Optionee should consult an authorized financial advisor.

UNITED KINGDOM

Terms and Conditions

Tax-Related Items. The following provisions supplement Paragraph 10 of the Agreement:

If payment or withholding of the Tax-Related Items (including the Employer’s Liability, as defined below) is not made within ninety (90) days of the event giving rise to the Tax-Related Items (the “Due Date”) or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, the amount of any uncollected income tax will constitute a loan owed by Optionee to the Employer, effective on the Due Date. Optionee agrees that the loan will bear interest at the then-current official rate of Her Majesty’s Revenue and Customs (“HMRC”), it will be immediately due and repayable, and the Corporation or the Employer may recover it at any time thereafter by any of the means referred to in Paragraph 10 of the Agreement.

Notwithstanding the foregoing, if Optionee is a director or executive officer of the Corporation (within the meaning of Paragraph 13(k) of the 1934 Act), Optionee will not be eligible for such a loan to cover the unpaid income taxes. In the event that Optionee is such a director or executive officer and the income taxes are not collected from or paid by Optionee by the Due Date, the amount of any uncollected income taxes will constitute a benefit to Optionee on which additional income tax and National Insurance Contributions (“NICs”) (including the Employer’s Liability, as defined below) may be payable. Optionee will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Corporation or the Employer (as appropriate) for the value of any NICs due on this additional benefit.

Joint Election. As a condition of Optionee’s participation in the Plan and the exercise of the option, Optionee agrees to accept any liability for secondary Class 1 NICs which may be payable by the Corporation and/or the Employer in connection with the option and any event giving rise to Tax-Related Items (the “Employer’s Liability”).Without prejudice to the foregoing, Optionee agrees to enter into a joint election with the Corporation, the form of such joint election being formally approved by HMRC (the “Joint Election”), and any other required consent or elections. Optionee further agrees to enter into such other Joint Elections as may be required between Optionee and any successor to the Corporation and/or the Employer. Optionee further agrees that the Corporation and/or the Employer may collect the Employer’s Liability from Optionee by any of the means set forth in Paragraph 10 of the Agreement.

If Optionee does not enter into the Joint Election prior to the exercise of the option, Optionee will forfeit the option and any Option Shares that have been issued will be returned to the Corporation at no cost to the Corporation, without any liability to the Corporation and/or the Employer.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

Onscreen disclaimer

If you are liable to National Insurance contributions (“NICs”) in the UK on option grants or restricted stock unit awards to you, you are required to enter into a Joint Election to transfer to you any liability to employer’s NICs that may arise in connection with your awards.

Clicking on the “ACCEPT” box where indicated indicates your acceptance of the Joint Election. You should read the Important Note on the Joint Election to Transfer Employer NICs before accepting the Joint Election.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

Important note on the Joint Election to Transfer Employer NICs

If you are liable to National Insurance contributions (“NICs”) in the UK on your option grant or restricted stock unit awards, you are required to enter into a Joint Election to transfer any liability to employer’s NICs that may arise in connection with your awards to you.

By entering into the Joint Election:

• you agree that any employer’s National Insurance liability that may arise in connection with your awards will be transferred to you; and

• you will authorise your employer to recover an amount sufficient to cover this liability by such methods including, but not limited to, deductions from your salary or other payments due, or the sale of sufficient shares acquired pursuant to your awards.

To enter into the Joint Election, please click on the “ACCEPT” box where indicated.

Please read the Joint Election carefully before accepting the Joint Election.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

This Election is between:

A. [insert name of employee](the “Employee”), who is eligible to receive stock options granted by SanDisk Corporation with its headquarters at 951 SanDisk Drive, Milpitas, California, 95035, U.S.A. (the “Company”) pursuant to the SanDisk Corporation 2013 Incentive Plan (the “Plan”), and

B. the Company, which may grant stock options under the Plan and is entering into this Election on behalf of the Employer.

1. Introduction

1.1 This Election relates to all stock options granted to the Employee under the Plan on or after [insert date] up to the termination date of the Plan.

1.2 In this Election the following words and phrases have the following meanings:

(a) “Chargeable Event” means, in relation to the stock options:

(i) the acquisition of securities pursuant to stock options, (within section 477(3)(a) of ITEPA);

(ii) the assignment (if applicable) or release of the stock options, in return for consideration (within section 477(3)(b) of ITEPA);

(iii) the receipt of a benefit in connection with the stock options, other than a benefit within (i) or (ii) above (within section 477(3)(c) of ITEPA);

(iv) post-acquisition charges relating to the shares acquired pursuant to the stock options, (within section 427 of ITEPA); and/or

(v) post-acquisition charges relating to the shares acquired pursuant to the stock options, (within section 439 of ITEPA).

(b) “ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.

(c) “SSCBA” means the Social Security Contributions and Benefits Act 1992.

1.3 This Election relates to the employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise on the occurrence of a Chargeable Event in respect of the stock options pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.

1.4 This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

1.5 This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).

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2. The Election

The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability on the Chargeable Event is hereby transferred to the Employee. The Employee understands that, by signing or electronically accepting this Election, he or she will become personally liable for the Employer’s Liability covered by this Election. This Election is made in accordance with paragraph 3B(1) of Schedule 1 of the SSCBA.

3. Payment of the Employer’s Liability

3.1 The Employee hereby authorises the Company and/or the Employer to collect the Employer’s Liability from the Employee at any time after the Chargeable Event:

(i) by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Chargeable Event; and/or

(ii) directly from the Employee by payment in cash or cleared funds; and/or

(iii) by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the stock options; and/or

(iv) by any other means specified in the applicable award agreement.

3.2 The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities related to the stock options to the Employee until full payment of the Employer’s Liability is received.

3.3 The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HM Revenue & Customs on behalf of the Employee within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days after the end of the UK tax month during which the Chargeable Event occurs if payments are made electronically).

4. Duration of Election

4.1 The Employee and the Company agree to be bound by the terms of this Election regardless of whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.

4.2 This Election will continue in effect until the earliest of the following:

(i) the Employee and the Company agree in writing that it should cease to have effect;

(ii) on the date the Company serves written notice on the Employee terminating its effect;

(iii) on the date HM Revenue & Customs withdraws approval of this Election; or

(iv) after due payment of the Employer’s Liability in respect of the entirety of the stock options to which this Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.

4.3 This Election will continue in force regardless of whether the Employee ceases to be an employee of the Employer.

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Acceptance by the Employee

The Employee acknowledges that by signing this Election or clicking on the “ACCEPT” box where indicated, the Employee agrees to be bound by the terms of this Election as stated above from the date of doing so.

Signature

Date

OR

ACCEPT

Acceptance by the Company

The Company acknowledges that, by signing this Election or arranging for the scanned signature of an authorised representative to appear on this Election, the Company agrees to be bound by the terms of this Election as stated above.

Signature for and on behalf of the Company

Position

Date

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SCHEDULE OF EMPLOYER COMPANIES

The following are employer companies to which this Election may apply:

For each company, provide the following details:

(1) SanDisk UK Limited

Registered Office:	24 Great King Street Edinburgh EH3 6QN
Company Registration Number:	SC234218
Corporation Tax District:
Corporation Tax Reference:
PAYE District:
PAYE Reference:

(2)    SanDisk Scotland Limited

Registered Office:	24 Great King Street Edinburgh EH3 6QN
Company Registration Number:	SC234217
Corporation Tax District:
Corporation Tax Reference:
PAYE District:
PAYE Reference:

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UNITED STATES OF AMERICA

Terms and Conditions

Manner of Exercising Option.This provision supplements Paragraph 9 of the Agreement:

In addition to the methods of exercise of the option in Paragraph 9 of the Agreement, Employees located in the U.S. at the time of exercise may also exercise the option by paying the Exercise Price for the purchase of shares through delivering to the Corporation shares of Common Stock held by Optionee (or any other person or persons exercising the option) for any requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date.

Incentive Stock Options. In the event the option is designated as an Incentive Option (as defined in Appendix A of the Agreement) in the Grant Notice, the following terms and conditions shall also apply to the grant:

1.The option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) the option is exercised for one or more Option Shares: (A) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability or (B) more than twelve (12) months after the date Optionee ceases to be an Employee by reason of Permanent Disability.

2.No installment under the option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Statutory Option.

3.Should the exercisability of the option be accelerated upon a Change in Control, then this option shall qualify for favorable tax treatment as an Incentive Option only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which the option first becomes exercisable in the calendar year in which the Change in Control transaction occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which the option or one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such Change in Control, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option.

4.Should Optionee hold, in addition to the option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this option, then for purposes of the foregoing limitations on the exercisability of such options as Incentive Options, the option and each of those other options shall be deemed to become first exercisable in that calendar year, on the basis of the chronological order in which such options were granted, except to the extent otherwise provided under applicable law or regulation.

5.The Corporation does not represent or guarantee that the option qualifies as an Incentive Stock Option.

6.To obtain certain tax benefits afforded to Incentive Options, Optionee must hold the shares issued upon the exercise of the option for two years after the Grant Date and one year after the date of exercise. Optionee may be subject to the alternative minimum tax at the time of exercise.

By accepting the option, Optionee agrees to promptly notify the Corporation if Optionee disposes of any of the Option Shares within one year from the date Optionee exercises all or part of the option or within two years from the Grant Date.

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EX-10.4

EXHIBIT 10.4

SANDISK CORPORATION

2013 INCENTIVE PLAN

GLOBAL RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

RECITALS

A.    The Board has adopted the Plan to promote the interests of the Corporation by providing eligible persons in the service of the Corporation (or any Parent or Subsidiary) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in such service.

B.    The Participant is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s issuance of shares of Common Stock to the Participant under the Plan.

C.    Except as otherwise set forth in the attached Appendix A, all capitalized terms in this Agreement shall have the meaning assigned to them in the Plan.

NOW, THEREFORE, it is hereby agreed as follows:

1.Grant of Restricted Stock Units. The Corporation hereby awards to the Participant, as of the Award Date, Restricted Stock Units under the Plan. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the vesting date of that unit. The number of Shares subject to the awarded Restricted Stock Units, the applicable vesting schedule for those Shares, the dates on which those vested Shares shall become issuable to Participant and the remaining terms and conditions governing the Award shall be as set forth in this Agreement.

2.Grant Acceptance. If the Participant does not wish to receive this Award and/or does not consent and agree to the terms and conditions on which the Award is offered, as set forth in this Agreement (including the Appendices hereto) and the Plan, then the Participant must reject the Award via the website of the Corporation’s designated broker, no later than 90 days following the Award Date set forth in this Agreement. If the Participant rejects the Award, the Award will immediately be forfeited and cancelled. The Participant’s failure to reject the Award within this 90 day period will constitute the Participant’s acceptance of the Award and all terms and conditions of this Award, as set forth in this Agreement (including any Appendices hereto) and the Plan.

AWARD SUMMARY

Award Date:	As approved by the Plan Administrator and as indicated on internet site of the Corporation’s designated broker.
Number of Shares Subject to Award:	Number of Shares approved by appropriate Plan Administrator and as indicated on internet site of the Corporation’s designated broker.
Vesting Schedule:	The Shares shall vest in a series of installments over the Participant’s continued Service as follows: (i) twenty-five percent (25%) of the Shares shall vest upon the Participant’s completion of one year of Service measured from the Award Date and (ii) the balance of the Shares shall vest in a series of (3) successive equal annual installments upon the Participant’s completion of each successive one (1) year period of Service over the three (3) year period measured from the Award Date. However, one or more Shares may be subject to accelerated vesting in accordance with the provisions of Paragraph 6 of this Agreement.
Issuance Schedule	The Shares in which the Participant vests in accordance with the foregoing Vesting Schedule will be issuable immediately upon vesting, subject to the Corporation’s collection of the applicable Tax-Related Items withholding. The procedures pursuant to which the applicable Tax-Related Items withholding will be collected are set forth in Paragraph 9 of this Agreement.

3.Limited Transferability. Prior to actual receipt of the Shares which vest hereunder, the Participant may not transfer any interest in the Award or the underlying Shares. Any Shares which vest hereunder but which otherwise remain unissued at the time of the Participant’s death may be transferred pursuant to the provisions of the Participant’s will or the laws of inheritance or to the Participant’s designated beneficiary or beneficiaries of this Award.

4.Cessation of Service. Should the Participant cease to provide Services for any reason prior to vesting in one or more Shares subject to this Award, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units will be reduced accordingly. The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled Award. Service will not be extended by any notice period mandated under local law(e.g., active Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s contract of employment, if any); the Plan Administratorshall have the exclusive discretion to determine when Participant is no longer actively providing Service for purposes of this Award.

5.Stockholder Rights and Dividend Equivalents.

(a)The holder of this Award shall not have any stockholder rights, including voting or dividend rights, with respect to the Shares subject to the Award until the Participant becomes the record holder of those Shares following their actual issuance upon the Corporation’s collection of the applicable Tax-Related Items withholding.

(b)Notwithstanding the foregoing, should any dividend or other distribution payable other than in Shares, whether regular or extraordinary, be declared and paid on the outstanding Common Stock while one or more Shares remain subject to this Award (i.e., those Shares are not otherwise issued and outstanding for purposes of entitlement to the dividend or distribution), then a special book account shall be established for the Participant and credited with a dividend equivalent of the actual dividend or distribution which would have been paid on those Shares had they been issued and outstanding and entitled to that dividend or distribution. As the Shares subsequently vest hereunder, the phantom dividend equivalents credited to those Shares in the book account shall be distributed to the Participant (in cash or such other form as the Plan Administrator may deem appropriate in its sole discretion) concurrently with the issuance of the vested Shares to which those phantom dividend equivalents relate and such dividend equivalents shall be subject to the same vesting requirements as the Shares and to any special terms or conditions as set forth in Appendix B. However, each such distribution shall be subject to the Corporation’s collection of the Tax-Related Items withholding applicable to that distribution.

6.Change of Control.

(a)Any Restricted Stock Units subject to this Award at the time of a Change in Control may be assumed by the successor entity or otherwise continued in full force and effect or may be replaced with a cash incentive program of the successor entity which preserves the Fair Market Value of the Shares related to the unvested Restricted Stock Units at the time of the Change in Control and provides for subsequent payout of that value in accordance with the vesting schedule applicable to the Award. In the event of such assumption or continuation of the Award or such replacement of the Award with a cash incentive program, no accelerated vesting of the Restricted Stock Units shall occur at the time of the Change in Control.

(b)In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award shall be adjusted immediately after the consummation of the Change in Control so as to apply to the number and class of securities into which the Shares subject to those Award immediately prior to the Change in Control would have been converted in consummation of that Change in Control had those Shares actually been issued and outstanding at that time. To the extent the actual holders of the outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation (or parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in Control transaction, provided such common stock is readily tradable on an established U.S. securities exchange or market.

(c)If the Restricted Stock Units subject to this Award at the time of the Change in Control are not assumed or otherwise continued in effect or replaced with a cash incentive program in accordance with Paragraph 6(a), then those Award will vest immediately prior to the closing of the Change in Control. The Shares subject to those vested Award will be issued immediately upon such vesting (or otherwise converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control), subject to the Corporation’s collection of the applicable Tax-Related Items withholding pursuant to the provisions of Paragraph 9.

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(d)This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7.Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

8.Issuance of Shares of Common Stock. Except as otherwise provided in Paragraph 6, the settlement of all Restricted Stock Units which vest under the Award shall be made solely in Shares. In no event, however, shall any fractional Shares be issued. Accordingly, the total number of Shares to be issued at the time the Award vests shall, to the extent necessary, be rounded down to the next whole Share in order to avoid the issuance of a fractional Share.

9.Tax-Related Items.

(a)The Participant acknowledges that, regardless of any action taken by the Corporation or, if different, the Employer, the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount of Tax-Related Items withholding actually withheld by the Corporation or the Employer. The Participant further acknowledges that the Corporation and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends and/or any dividend equivalents; and (ii) do not commit to and are under no obligation to structure the terms of the Award or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction between the Award Date and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Corporation and/or the Employer (or former employer, as applicable) may be required to collect Tax-Related Items withholding in more than one jurisdiction.

(b)Prior to the relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Corporation and/or the Employer to satisfy all Tax-Related Items. In this regard, the Participant authorizes the Corporation or its respective agents to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(i)    withholding from the Participant’s wages or other cash compensation paid to the Participant by the Corporation and/or the Employer; or

(ii)    withholding from proceeds of the sale of Shares of acquired upon settlement of the Restricted Stock Units either through a voluntary sale or through a mandatory sale arranged by the Corporation (on the Participant’s behalf pursuant to this authorization without further consent); or

(iii)    withholding in Shares to be issued upon settlement of the Restricted Stock Units, provided, however, that if the Participant is a Section 16 officer of the Corporation under the 1934 Act, then the Committee shall establish the method of withholding from alternatives (i)-(iii) herein and, if the Committee does not exercise its discretion prior to the Tax-Related Items withholding event, then the Participant shall be entitled to elect the method of withholding from the alternatives above.

(c)Depending on the withholding method, the Corporation or the Employer may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case the Participant will receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the vested Restricted Stock Units, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items.

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(d)Finally, the Participant agrees to pay to the Corporation or the Employer any amount of Tax-Related Items that the Corporation or the Employer may be required to withhold or account for as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.

10.Acknowledgments. In accepting this Award, the Participant acknowledges, understands and agrees that:

(a)the Plan is established voluntarily by the Corporation, is discretionary in nature and it may be modified, amended, suspended or terminated by the Corporation at any time, to the extent permitted by the Plan;

(b)the grant of this Award is voluntary and occasional and does not create any contractual or other right to receive future Awards, or benefits in lieu of Awards, even if Awards have been granted in the past;

(c)all decisions with respect to future Awards, if any, will be at the sole discretion of the Corporation;

(d)the Award and the Participant’s participation in the Plan shall not confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary), and/or the Employer to terminate the Participant’s Service at any time for any reason, with or without cause;

(e)the Participant is voluntarily participating in the Plan;

(f)the Award and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;

(g)the Award and the Shares subject to the Award, and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

(h)the future value of the Shares underlying this Award is unknown, indeterminable and cannot be predicted with certainty;

(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the Participant’s ceasing to provide Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s contract of employment, if any), and in consideration of the grant of the Award to which the Participant is otherwise not entitled, the Participant irrevocably agrees never to institute any claim against the Corporation (or any Parent or Subsidiary) or the Employer, waives the Participant’s ability, if any, to bring any such claim, and releases the Corporation (or any Parent or Subsidiary) and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim; and

(j)unless otherwise provided in the Plan or by the Corporation in its discretion, the Award and the benefits evidenced by this Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another Corporation nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Common Stock of the Corporation; and

(k)the following provisions apply only if the Participant is providing Services outside the United States:

(l)the Award and the Shares subject to the Award are not part of normal or expected compensation or salary for any purpose;

(m)The Participant acknowledges and agrees that neitherthe Corporation (or any Parent or Subsidiary) nor the Employer shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the settlement of the Restricted Stock Units or the subsequent sale of any Shares acquired upon settlement.

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11.No Advice Regarding Award. The Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding the Participant’s participation in the Plan or the sale of the Shares acquired upon settlement of this Award. The Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

12.Data Privacy.

(a)The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Data by and among, as applicable, the Employer, the Corporation (or any Parent or Subsidiary) for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.

(b)The Participant understands that the Corporation and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan.

(c)The Participant understands that Data will be transferred to the Corporation’s designated broker or such other stock plan service provider as may be selected by the Corporation in the future, which is assisting the Corporation with the implementation, administration and management of the Plan. The Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant authorizes the Corporation, the Corporation’s designated broker and any other possible recipients which may assist the Corporation (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that if he or she resides outside the United States he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, the Participant understands that he or she is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke his or her consent, his or her employment status or Service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant the Participant Awards or other equity awards or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.

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13.Compliance with Laws and Regulations. The Participant understands that the vesting of the Restricted Stock Units under the Plan and the issuance, transfer, assignment, sale, or other dealings of the Shares shall be subject to compliance by the Corporation (or any Parent or Subsidiary) and the Participant with all applicable requirements under the laws, rules, and regulations of the country of which the Participant is a resident. Furthermore, the Participant agrees that he or she will not acquire Shares pursuant to the Plan except in compliance with all applicable federal, state, local, or foreign laws, rules, and regulations.

14.Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated below Participant’s signature line on this Agreement. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

15.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant, Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries of the Award designated by Participant.

16.Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.

17.Governing Law/Venue. The interpretation, performance and enforcement of the Plan and this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Agreement is made and/or to be performed.

18.Electronic Delivery and Execution. By executing this Agreement the Participant consents to the electronic delivery of the Plan documents and this Agreement. The Corporation may request that, in certain countries, the Participant execute this Agreement electronically via a link to a Corporation intranet or the internet site of a third party involved in administering the Plan or via electronic mail (“e-mail”) or such other means as may be specified by the Corporation. Electronic execution of this Agreement or the Notice of Grant shall have the same binding effect as a written or hard copy signature and accordingly, shall bind the Participant and the Corporation to all of the terms and conditions set forth in the Plan, and this Agreement.

19.Language. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.

20.Appendix B. Notwithstanding any provision in this Agreement to the contrary, this Award shall be subject to any special terms and provisions as set forth in Appendix B to this Agreement for the Participant’s country. Moreover, if the Participant relocates to one of the countries included in Appendix B, the special terms and conditions for such country will apply to the Participant, to the extent the Corporation determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. Appendix B constitutes part of this Agreement.

21.Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible.

22.Imposition of Other Requirements. The Corporationreserves the right to impose other requirements on the Participant’s participation in the Plan, on this Award and on any Shares acquired under the Plan, to the extent the Corporationdetermines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

23.Waiver. The Participant acknowledges that a waiver by the Corporation of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant any other Participant of the Plan.

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24.Entire Agreement. This Agreement (including any country specific provisions in Appendix B) and the Plan, including any appendices or exhibits thereto, together with information regarding the details of the Award provided on the internet site of the Corporation’s designated broker, contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto. To the extent any provision of this Agreement is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on the Participant and all persons claiming under or through the Participant.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.

SANDISK CORPORATION

By:

Title:

PARTICIPANT:

Signature:

Address:

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APPENDIX A

DEFINITIONS

The following definitions shall be in effect under the Agreement, which includes this Appendix A and also includes Appendix B:

A.1934 Act shall mean the U.S. Securities Exchange Act of 1934, as amended from time to time.

B.Agreement shall mean this Global Restricted Stock Unit Issuance Agreement.

C.Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this Agreement.

D.Award Date shall mean the date the restricted stock units are awarded to the Participant pursuant to the appropriate Plan Administrator approval.

E.Board shall mean the Corporation’s Board of Directors.

(a)

F.Corporation shall mean SanDisk Corporation, a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan.

G.Data shall mean any information relating to the Participant who is or can be identified from the data alone or in conjunction with other information that is in, or likely to come into, the possession of data controller.

H.Participant shall mean the person to whom the Award is made pursuant to the Agreement.

I.Plan shall mean the 2013 Incentive Plan.

J.Share shall mean one share of Common Stock.

K.Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange.

L.Tax-Related Items shall mean income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax‑related items related to the Participant’s participation in the Plan and legally applicable to the Participant or deemed by the Corporation or the Employer in its discretion to be an appropriate charge to the Participant even if legally applicable to the Corporation or the Employer.

A - 1

SANDISK CORPORATION

2013 INCENTIVE PLAN

APPENDIX B TO THE

GLOBAL RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

Terms and Conditions

This Appendix B includes additional terms and conditions that govern the Award granted to the Participant under the Plan if the Participant resides in one of the countries listed below. Certain capitalized terms used but not defined in this Appendix B have the meanings set forth in the Plan and the Agreement.

Notifications

This Appendix B also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of May 2013. Such laws are often complex and change frequently. As a result, the Corporation strongly recommends that the Participant not rely on the information in this Appendix B as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that the Award vests and Shares are issued to the Participant or the Participant sells Shares acquired upon vesting of the Award under the Plan.

It is the Participant’s sole responsibility to comply with any obligations set forth in the notifications in this Appendix B with respect to the Awards and his or her participation in the Plan. The Participant acknowledges and agrees that, unless otherwise stated in this Appendix B, the Corporation, any Parent or Subsidiary and the Employer have no responsibility with respect to any of the requirements or obligations the Participant may have with respect to any notifications which are set forth below.

In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation, and the Corporation is not in a position to assure the Participant of a particular result. Accordingly, the Participant is advised to seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to his or her situation.

Finally, if the Participant is a citizen or resident of a country other than the one in which the Participant is currently working, transfers employment after the Award Date, or is considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to the Participant, and the Corporation shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to the Participant.

AUSTRALIA

Notifications

Securities Law Information.If the Participant acquires Shares under the Plan upon the vesting of the Restricted Stock Units and subsequently offers the Shares for sale to a person or entity resident in Australia, such an offer may be subject to disclosure requirements under Australian law, and the Participant should obtain legal advice regarding any applicable disclosure requirements prior to making any such offer.

B - 1

AUSTRIA

Notifications

Exchange Control Information.If the Participant holds Shares acquired under the Plan outside of Austria, the Participant must submit a report to the Austrian National Bank. An exemption applies if the value of the Shares as of any given quarter does not exceed €30,000,000 or as of December 31 does not exceed €5,000,000. If the former threshold is exceeded, quarterly obligations are imposed, whereas if the latter threshold is exceeded, annual reports must be given. The annual reporting date is December 31 and the deadline for filing the annual report is March 31 of the following year.

When the Participant sells Shares acquired at vesting of the Award, there may be exchange control obligations if the cash received is held outside Austria. If the transaction volume of all the Participant’s accounts abroad exceeds €3,000,000, the movements and balances of all accounts must be reported monthly, as of the last day of the month, on or before the fifteenth day of the following month.

Consumer Protection Information.To the extent that the provisions of the Austrian Consumer Protection Act are applicable to the Agreement and the Plan, the Participant may be entitled to revoke his or her acceptance of the Agreement if the conditions listed below are met:

(i) If the Participant accepts the Award outside of the business premises of the Corporation, the Participant may be entitled to revoke his or her acceptance of the Agreement, provided the revocation is made within one week after the Participant accepts the Agreement.

(ii) The revocation must be in written form to be valid. It is sufficient if the Participant returns the Agreement to the Corporation or the Corporation’s representative with language that can be understood as the Participant’s refusal to conclude or honor the Agreement, provided the revocation is sent within the period set forth above.

BRAZIL

Notifications

Compliance with Law. By accepting the Award, the Participant acknowledges his or her agreement to comply with applicable Brazilian laws and to pay any and all applicable Tax-Related Items associated with the Restricted Stock Units, the receipt of any dividends or dividend equivalents, and the sale of Shares acquired under the Plan.

Exchange Control Information. If the Participant is a resident or domiciled in Brazil, he or she will be required to submit an annual declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares acquired under the Plan. Foreign individuals holding Brazilian visas are considered Brazilian residents for purposes of this reporting requirement and must declare at least the assets held abroad that were acquired subsequent to the date of admittance as a resident of Brazil.

B - 2

CHINA

Terms and Conditions

Cessation of Service. This provision supplements Paragraph 4 of the Agreement:

In the event of the Participant’s cessation of Service with the Corporation (or any Parent or Subsidiary), the Participant will be required to sell any Shares issued to him or her pursuant to this Award within six months (or such other period as may be required by the State Administration of Foreign Exchange (“SAFE”)) after the date of cessation of the Participant’s active Service. The Participant understands and agrees that if the Participant does not sell his or her Shares prior to the last trading day within the six-month post-termination period (or such other period as may be required by SAFE), the Corporation is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on the Participant’s behalf pursuant to this authorization) on the last trading day of the six-month post-termination period (or such other period as may be required by SAFE), subject to any black-out period, and the Participant expressly authorizes the Corporation’s designated broker to complete the sale of such Shares. The Participant understands and agrees that the Corporation’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Corporation agrees to pay the Participant the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items. The Participant acknowledges that he/she is not aware of any material nonpublic information with respect to the Corporation or any securities of the Corporation as of the date of this Agreement. These requirements will not apply to non-PRC citizens, unless required by SAFE.

Exchange Control Requirements. The Participant understands and agrees that, pursuant to local exchange control requirements, the Participant will be required to immediately repatriate the cash proceeds from the sale of Shares related to the Award to China. The Participant further understands that, under local law, such repatriation of his or her cash proceeds will need to be effectuated through a special exchange control account established by the Corporation (or any Parent or Subsidiary) or the Employer, and the Participant hereby consents and agrees that any proceeds from the sale of Shares will be transferred to such special account prior to being delivered to the Participant. The Corporation is under no obligation to secure any exchange conversion rate, and the Corporation may face delays in converting the proceeds to local currency due to exchange control restrictions in China. The Participant agrees to bear any currency fluctuation risk between the time the Shares are sold and the time the sale proceeds are distributed through any such special exchange account. The Participant further agrees to comply with any other requirements that may be imposed by the Corporation in the future in order to facilitate compliance with exchange control requirements in China. These requirements will not apply to non-PRC citizens, unless required by SAFE.

B - 3

DENMARK

Terms and Conditions

Danish Stock Option Act. By accepting the Award, the Participant acknowledges that he or she has received a Danish translation of an Employer Statement, which is being provided to comply with the Danish Stock Option Act.

Notifications

Exchange Control and Tax Reporting Information

The Participant may hold Shares acquired under the Plan in a safety-deposit account (e.g., a brokerage account) with either a Danish bank or with an approved foreign broker or bank. If the Shares are held with a non-Danish broker or bank, the Participant is required to inform the Danish Tax Administration about the safety-deposit account. For this purpose, the Participant must file a Declaration V (Erklaering V) with the Danish Tax Administration. In the event that the applicable broker or bank with which the account is held does not also sign the Form V, the Participant acknowledges that he or she is solely responsible for providing certain details regarding the foreign brokerage or bank account and any Shares acquired at vesting held in such account to the Danish Tax Administration as part of the Participant’s annual income tax return. By signing the Form V, the Participant authorizes the Danish Tax Administration to examine the account. A sample of the Declaration V can be found at the following website: www.skat.dk/getFile.aspx?Id=47392.

In addition, when the Participant opens a deposit account or a brokerage account other foreign bank for the purpose of holding cash outside of Denmark, the bank or brokerage account, as applicable, will be treated as a deposit account because cash can be held in the account. Therefore, the Participant must also file a Declaration K (Erklaering K) with the Danish Tax Administration. Both the Participant and the bank/broker must sign the Declaration K. By signing the Declaration K, the bank/broker undertakes an obligation, without further request each year, to forward information to the Danish Tax Administration concerning the content of the deposit account. By signing the Declaration K, the Participant authorizes the Danish Tax Administration to examine the account. A sample of Declaration K can be found at the following website: www.skat.dk/getFile.aspx?Id=42409&newwindow=true.

EGYPT

Notifications

Exchange Control Information. If the Participant transfers funds into or out of Egypt in connection with the sale of Shares, the Participant is required to transfer the funds through a registered bank in Egypt.

FRANCE

Term and Conditions

Language Consent. By accepting the Award, the Participant confirms having read and understood the documents relating to this grant (the Plan, the Agreement and this Appendix B) which were provided in English language. The Participant accepts the terms of those documents accordingly.

En acceptant l’attribution, vous confirmez ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan, le contrat et cette Annexe B) qui ont été communiqués en langue anglaise. Vous acceptez les termes en connaissance de cause.

Notifications

Foreign Account Reporting Information.If the Participant holds Shares outside of France or maintains a foreign bank account, he or she is required to report such to the French tax authorities when filing his or her annual tax return. Failure to comply could trigger significant penalties.

B - 4

GERMANY

Notifications

Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If the Participant uses a German bank to effect a cross-border payment in excess of €12,500 in connection with the sale of Shares acquired under the Plan, the bank will make the report for the Participant. In addition, the Participant must report any receivables or payables or debts in foreign currency exceeding an amount of €5,000,000 on a monthly basis.

HONG KONG

Terms and Conditions

Warning: The Award and Shares acquired upon vesting of the Award do not constitute a public offering of securities under Hong Kong law and are available only to employees of the Corporation (or any Parent or Subsidiary). The Agreement, including this Appendix B, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. Nor have the documents been reviewed by any regulatory authority in Hong Kong. The Award is intended only for the personal use of each eligible employee of the Employer, the Corporation (or any Parent or Subsidiary) and may not be distributed to any other person. If the Participant is in any doubt about any of the contents of the Agreement, including this Appendix B, or the Plan, the Participant should obtain independent professional advice.

Sale Restriction. Notwithstanding anything contrary in the Agreement or the Plan, in the event the Restricted Stock Units vest and Shares are issued to Participant within six months of the Award Date, Participant agrees that the Participant will not dispose of any Shares acquired prior to the six-month anniversary of the Award Date.

Notifications

Nature of Scheme.The Corporation specifically intends that the Plan will not be an occupational retirement scheme for purposes of the Occupational Retirement Schemes Ordinance.

INDIA

Notifications

Exchange Control Information. The Participant must repatriate the proceeds from the sale of Shares and any dividends or dividend equivalents received in relation to the Shares to India within 90 days of receipt. The Participant must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or the Employer requests proof of repatriation. It is the Participant’s responsibility to comply with applicable exchange control laws in India.

Foreign Account Reporting Information. The Participant is required to declare any foreign bank accounts and any foreign financial assets (including Shares acquired under the Plan) in his or her annual tax return.

B - 5

IRELAND

Notifications

Director Notification Obligation. Directors, shadow directors¹ and secretaries of the Corporation’s Irish Subsidiary are subject to certain notification requirements under the Irish Companies Act. Directors, shadow directors and secretaries must notify the Irish Subsidiary in writing of their interest in the Corporation and the number and class of Shares or rights to which the interest relates within five business days of the issuance or disposal of Shares or within five business days of becoming aware of the event giving rise to the notification. This disclosure requirement also applies to any rights or Shares acquired by the director’s spouse or children (under the age of 18).

ISRAEL

Terms and Conditions

Trust Arrangement.The Participant understands and agrees that the Award is offered subject to and in accordance with the terms of the Plan, Israeli Subplan (the “Subplan”) under the 102 Capital Gains Track (as defined in the Subplan), the Israeli Addendum to the Plan (the “Israeli Addendum”), the Trust Agreement among the trustee appointed by Sandisk Israel (Tefen) Ltd and Sandisk IL Ltd., and the Agreement. In the event of any inconsistencies between the Plan, the Sub-Plan, the Israeli Addendum and/or the Agreement, the Plan will govern, and if there are inconsistencies between the Sub-Plan, Israeli Addendum and/or the Agreement, the Sub-Plan and Israeli Addendum will govern the Award granted to the Participant in Israel.

Written Acceptance.If the Participant resides in Israel, then the Participant must print, sign and deliver the signed copy of the Israel Beneficiary 102 Undertaking within 45 days to: [Insert Address]. If the Corporation does not receive the signed Israel Beneficiary 102 Undertaking within 45 days, the Award shall terminate and will become null and void.

¹  A shadow director is an individual who is not on the board of directors of the Irish Subsidiary but who has sufficient control so that the board of directors of the Irish Subsidiary acts in accordance with the directions or instructions of the individual.

B - 6

SANDISK CORPORATION

2013 INCENTIVE PLAN

ISRAEL BENEFICIARY 102 UNDERTAKING

If Optionee/Participant has not already executed an Israel Beneficiary 102 Undertaking in connection with grants made under the Israeli Subplan to the 2013 Incentive Plan (the “Plan”), Optionee/Participant must print, sign and deliver the signed copy of this Israel Beneficiary 102 Undertaking within 45 days to [Insert Address]. If the Corporation does not receive the signed Israel Beneficiary 102 Undertaking within 45 days, the options/restricted stock units may not qualify for preferential tax treatment.

1. I hereby agree that any restricted stock units or options (collectively, the “Options”) granted to me by SanDisk Corporation (the “Corporation”) according to and under the terms and conditions of the Plan and the Israeli Subplan adopted by the Corporation as of June 12, 2013 (collectively, the “Plan”) are granted to me to qualify under the capital gain tax treatment in accordance and pursuant to Section 102(b)(2) of the Income Tax Ordinance [New Version] (the “Tax Ordinance”) after 132 amendment (“Section 102”) and the Income Tax Rules (Tax Relief upon the Allotment of Shares to Employees), 2003 (the “Rules”) unless I am otherwise notified subject to the Corporation’s absolute discretion to change such election on future grants and subject to the Tax Authorities’ approval.

2. I hereby declare and confirm that I am familiar with the provisions of the trust agreement signed between the Corporation and Tamir Fishman Trusts 2004 Ltd. (the “Trustee”) (the “Trust Agreement”), as well as the terms of the Plan, Section 102, the Rules, and the implications and consequences of the chosen tax arrangement with respect to the Options, and consent that all the terms and conditions set forth in Section 102 and the Rules, as shall be amended from time to time, shall apply to me and bind me.

3. Without derogating from the generality of the aforesaid, I agree that the Options and all the rights that I shall be entitled to with respect to the Options, including, without limitation, dividend, bonus shares and shares issued pursuant to adjustments made by the Corporation will be deposited in trust with the Trustee and be held in trust in accordance with Section 102, the Rules and the Trust Agreement.

4. Without derogating from the generality of the aforesaid, I acknowledge that during the “Holding Period” as determined by the Tax Ordinance I am prevented from selling the Options or the underlying shares, or releasing them from the Trustee, before the termination of the “Holding Period” and I understand the tax implications and consequences that may be applied as a result of breaching such obligation, as set by Section 102, which I am familiar with.

5. If I will cease to be an Israeli resident or if my employment will be terminated for any reason, the Options shall remain subject to section 102, the Rules and the Trust Agreement.

6. I hereby agree that any tax liability whatsoever arising from the grant, exercise of any options, vesting of any restricted stock units, the sale of shares, the release of shares from the Trustee or any other event or act with respect to the Options granted to me, shall be borne solely by me. I declare and consent that the Corporation and/or the Trustee shall make any tax payment due, out of the proceeds of any sale of shares, to any tax authority, according to Section 102, the Rules, the Trust Agreement or any other compulsory payments or applicable law.

7. I understand that this grant of Options under the capital gain track is conditioned upon the receipt, inter alia, of all required approvals from the tax authorities. Accordingly, to the extent that for whatever reason the Corporation shall not be granted an approval by the Israeli Tax Authorities under section 102, I shall bear and pay any and all taxes and any other compulsory payments applicable to the grant, exercise, sale or other disposition of Options or stocks; I hereby declare and consent for the Corporation and/or the Trustee to deduct any tax payment due, out of the proceeds of any sale of Shares, for any payment to the tax authorities, according to the Rules, or any other applicable compulsory payments.

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8. I confirm that the Corporation and/or the Trustee shall not be required to release any shares or any proceeds deriving from the sale of shares, to me, until all required tax payments according to section 102, the Rules and the Trust Agreement, including any other compulsory payments, or applicable law, have been fully assured.

Name of the Beneficiary I.D. Number Signature

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ITALY

Terms and Conditions

Data Privacy. This provision replaces Paragraph 12 of the Agreement:

The Participant understands that the Corporation and the Employer are the Privacy Representative of the Corporation in Italy and may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation (or any Parent or Subsidiary), details of all Awards or any other entitlement to Common Stock awarded, canceled, vested, unvested or outstanding in the Participant’s favor, and that the Corporation and the Employer will process said data and other data lawfully received from third parties (“Personal Data”) for the exclusive purpose of managing and administering the Plan and complying with applicable laws, regulations and Community legislation. The Participant also understands that providing the Corporation with Personal Data is mandatory for compliance with laws and is necessary for the performance of the Plan and that the Participant’s denial to provide Personal Data would make it impossible for the Corporation to perform its contractual obligations and may affect the Participant’s ability to participate in the Plan. The Participant understands that Personal Data will not be publicized, but it may be accessible by the Employer as the Privacy Representative of the Corporation and within the Employer’s organization by its internal and external personnel in charge of processing, and by the Corporation’s designated broker or any other data processor appointed by the Corporation. The updated list of Processors and of the subjects to which Data are communicated will remain available upon request from the Employer. Furthermore, Personal Data may be transferred to banks, other financial institutions or brokers involved in the management and administration of the Plan. The Participant understands that Personal Data may also be transferred to the independent registered public accounting firm engaged by the Corporation, and also to the legitimate addressees under applicable laws. The Participant further understands that the Corporation (or any Parent or Subsidiary) will transfer Personal Data amongst themselves as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan, and that the Corporation (or any Parent or Subsidiary) may each further transfer Personal Data to third parties assisting the Corporation in the implementation, administration and management of the Plan, including any requisite transfer of Personal Data to the Corporation’s designated broker or other third party with whom the Participant may elect to deposit any Shares acquired under the Plan or any proceeds from the sale of such Shares. Such recipients may receive, possess, use, retain and transfer Personal Data in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan. The Participant understands that these recipients may be acting as Controllers, Processors or persons in charge of processing, as the case may be, according to applicable privacy laws, and that they may be located in or outside the European Economic Area, such as in the United States or elsewhere, in countries that do not provide an adequate level of data protection as intended under Italian privacy law.

Should the Corporation exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, it will delete Personal Data as soon as it has accomplished all the necessary legal obligations connected with the management and administration of the Plan.

The Participant understands that Personal Data processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Personal Data is collected and with confidentiality and security provisions as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.

The processing activity, including the transfer of Personal Data abroad, including outside of the European Economic Area, as specified herein and pursuant to applicable laws and regulations, does not require the Participant’s consent thereto as the processing is necessary to performance of law and contractual obligations related to implementation, administration and management of the Plan. The Participant understands that, pursuant to Section 7 of the Legislative Decree no. 196/2003, the Participant has the right at any moment to, including, but not limited to, obtain confirmation that Personal Data exists or not, access, verify its contents, origin and accuracy, delete, update, integrate, correct, blocked or stop, for legitimate reason, the Personal Data processing. To exercise privacy rights, the Participant should contact the Employer. Furthermore, the Participant is aware that Personal Data will not be used for direct marketing purposes. In addition, Personal Data provided can be reviewed and questions or complaints can be addressed by contacting the Participant’s human resources department.

Plan Document Acknowledgement. The Participant acknowledges that the Participant has read and specifically and expressly approves the following paragraphs of the Participant’s applicable Agreement regarding Paragraph 1: Grant of Restricted Stock Units; Paragraph 2: Grant Acceptance; Paragraph 3: Limited Transferability; Paragraph 4: Cessation of Service; Paragraph 5: Shareholder Rights and Dividend Equivalents; Paragraph 6: Change of Control; Paragraph 7: Adjustment of Shares; Paragraph 8: Issuance of Shares of Common Stock; Paragraph 9: Tax-Related Items; Paragraph 10: Acknowledgments; Paragraph 11: No Advice

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Regarding Award; Paragraph 13: Compliance with Laws and Regulations; Paragraph 17: Governing Law/Venue; Paragraph 18: Electronic Delivery and Execution; Paragraph 19: Language; Paragraph 20: Appendix B; Paragraph 22: Imposition of Other Requirements and the Data Privacy section of this Appendix B.

Notifications

Exchange Control Information. The Participant is required to report in his or her annual tax return: (a) any transfers of cash or Shares to or from Italy exceeding €10,000; (b) any foreign investments or investments held outside of Italy at the end of the calendar year exceeding €10,000 if such investments (cash, Shares) that may give rise to taxable income in Italy that combined with other foreign assets exceeds €10,000; and (c) the amount of the transfers to and from Italy which have had an impact during the calendar year on the Participant’s foreign investments or investments held outside of Italy. The Participant may be exempt from the requirement in (a) if the transfer or investment is made through an authorized broker resident in Italy, as the broker will generally comply with the reporting obligation on his or her behalf.

JAPAN

Notifications

Foreign Account Reporting Information.If the Participant maintains a foreign bank account outside of Japan with a value exceeding ¥50 million as of December 31 of any calendar year, the Participant is required to report such to the Japanese authorities by March 15th of the following year.

KENYA

There are no country specific provisions.

KOREA

Notifications

Exchange Control Information. If the Participant realizes US$500,000 or more from the sale of Shares, Korean exchange laws require the Participant to repatriate the proceeds to Korea within eighteen months of the sale.

Foreign Account Reporting Information. Under a proposed rule that would be applicable to foreign financial accounts held in 2013 and onwards, Korean residents would have to declare all overseas financial accounts to the Korean tax authority and file a report if the value of such accounts exceeds KRW 1 billion (approximately US$908,000). 

NETHERLANDS

Notifications

Securities Law Information. The Participant should be aware of the Dutch insider-trading rules, which may impact the sale of Shares acquired under the Plan. In particular, the Participant may be prohibited from effectuating certain transactions if the Participant has inside information about the Corporation.

Under Article 5:56 of the Dutch Financial Supervision Act, anyone who has “insider information” related to an issuing company is prohibited from effectuating a transaction in securities in or from the Netherlands. “Inside information” is defined as knowledge of specific information concerning the issuing company to which the securities relate or the trade in securities issued by such company, which has not been made public and which, if published, would reasonably be expected to affect the share price, regardless of the development of the price. The insider could be any employee of a Parent or Subsidiary in the Netherlands who has inside information as described herein.

Given the broad scope of the definition of inside information, certain Participants working at a Parent or Subsidiary in the Netherlands may have inside information and, thus, would be prohibited from effectuating a transaction in securities in the Netherlands at a time when the Participant has such inside information.

If the Participant is uncertain whether the insider-trading rules apply to him or her, the Participant should consult his or her personal legal advisor.

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POLAND

Notifications

Exchange Control Information. Polish residents holding foreign securities (including Shares) and maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets held abroad) exceeds PLN 7,000,000. If required, the reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland. Further, any transfer of funds in excess of a specified threshold (currently €15,000) must be effected through a bank account in Poland. The Participant should maintain evidence of such foreign exchange transactions for five years, in case of a request for their production by the National Bank of Poland.

RUSSIA

Terms and Conditions

U.S. Transaction. The Participant understands that the acceptance of the Award through the website of the Corporation’s designated broker, results in an agreement between the Participant and the Corporation completed in the United States and that the Agreement is governed by the laws of the State of California, without giving effect to the conflict of law principles thereof.

Issuance of Shares of Common Stock.This provision supplements Paragraph 8 of the Agreement:

The Participant agrees that the Corporation is authorized, at its discretion, to instruct its designated broker to assist with the sale of the Shares acquired at vesting of the Restricted Stock Units (on the Participant’s behalf pursuant to this authorization and without further consent) should the Corporation determine that such sale is necessary or advisable under local law. The Participant expressly authorizes the Corporation’s designated broker to complete the sale of such Shares and acknowledges that the Corporation’s designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Corporation agrees to pay Participant the cash proceeds from the sale of the Shares, less any brokerage fees, commissions or Tax-Related Items. The Participant acknowledges that he or she is not aware of any material nonpublic information with respect to the Corporation or any securities of the Corporation as of the date of the Award.

Securities Law Information.TheParticipant acknowledges that the Award, the Agreement, the Plan and all other materials the Participant may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. The Shares acquired pursuant to the Plan have not and will not be registered in Russia and therefore, neither the Award nor the Shares may be used for offering or public circulation in Russia. The Participant acknowledges that he or she may hold Shares acquired upon vesting of the Restricted Stock Units in the Participant’s account with the Corporation’s third party broker/administrator in the U.S. However, in no event will Shares issued to the Participant under the Plan be delivered to Participant in Russia. Further, the Participant is not permitted to sell Shares directly to other Russian individuals.

Data Privacy. This provision supplements Paragraph 12 of the Agreement:

The Participant understands and agree that he or she must complete and return a Written Consent to Processing of Personal Data (the “Consent”) to the Corporation. Further, the Participant understands and agrees that if he or she does not complete and return the Consent to the Corporation, the Corporation will not be able to grant Restricted Stock Units or other awards to the Participant or administer or maintain such awards. Therefore, Participant understands that refusing to complete the Consent or withdrawing your consent may affect the Participant’s ability to participate in the Plan.

Notifications

Exchange Control Information.Proceeds from the sale of Shares and any dividends received in relation to the Shares must be repatriated to Russia within a reasonably short period after receipt. The sale proceeds and any dividends received must be initially credited to the Participant through a foreign currency account opened in the Participant’s name at an authorized bank in Russia. After the funds are initially received in Russia, they may be further remitted to a foreign bank subject to the following limitations: (i) the foreign account may be opened only for individuals; (ii) the foreign account may not be used for business activities; (iii) the Russian tax authorities must be given notice about the opening/closing of each foreign account within one month of the account opening/closing.

Labor Law Information. If the Participant continues to hold Shares acquired at vesting of the Restricted Stock Units after an involuntary termination of the Participant’s Service, the Participant will not be eligible to receive unemployment benefits in Russia.

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SINGAPORE

Notifications

Securities Law Information.The Award is being granted to the Participant pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan and the Agreement have not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that such Award is subject to section 257 of the SFA and the Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares underlying the Award unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

Director Notification Obligation. If the Participant is a director or shadow director of the Corporation or a Singapore Subsidiary, the Participant is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Corporation or the Singaporean Subsidiary in writing when the Participant receives an interest (e.g., an Award, Shares) in the Corporation or any related companies. Please contact the Corporation to obtain a copy of the notification form. In addition, the Participant must notify the Corporation or the Singapore Subsidiary when the Participant sells Shares of the Corporation or any related Corporation (including when the Participant sell Shares acquired under the Plan). These notifications must be made within two business days of acquiring or disposing of any interest in the Corporation or any related corporation. In addition, a notification must be made of the Participant’s interests in the Corporation or any related corporation within two business days of becoming a director.

Insider Trading Information. The Participant should be aware of the Singapore insider trading rules, which may impact the acquisition or disposal of Shares or rights to Shares under the Plan. Under the Singapore insider-trading rules, the Participant is prohibited from selling Shares when he or she is in possession of information which is not generally available and which the Participant knows or should know will have a material effect on the price of Shares once such information is generally available.

SPAIN

Terms and Conditions

Acknowledgements. This provision supplements Paragraph 10 of the Agreement:

In accepting the Award, the Participant acknowledges that he or she consents to participation in the Plan and has received a copy of the Plan.

The Participant understands and agrees that, as a condition of the grant of the Award, except as provided for in Paragraph 4 of the Agreement, the cessation of the Participant’s Service for any reason (including for the reasons listed below) will automatically result in the forfeiture the Award and loss of the Shares that may have been granted to the Participant and that have not vested on the date of termination.

In particular, the Participant understands and agrees that the Award will be forfeited without entitlement to the underlying Shares or to any amount as indemnification in the event of a cessation of the Participant’s Service prior to vesting by reason of, including, but not limited to: death, disability, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause, individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause, material modification of the terms of employment under Article 41 of the Workers’ Statute, relocation under Article 40 of the Workers’ Statute, Article 50 of the Workers’ Statute, unilateral withdrawal by the Employer, and under Article 10.3 of Royal Decree 1382/1985.

Furthermore, the Participant understands that the Corporation has unilaterally, gratuitously and discretionally decided to grant the Awards under the Plan to individuals who may be employees of the Corporation (or any Parent or Subsidiary). The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Corporation (or any Parent or Subsidiary) on an ongoing basis. Consequently, the Participant understands that the Awards are granted on the assumption and condition that the Awards and the Shares underlying the Awards shall not become a part of any employment or service contract (either with the Corporation, the Employer (or any Parent or Subsidiary)) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, the Participant understands that the Award would not be made to the Participant but for the assumptions and conditions referred to above; thus, the Participant acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any Award shall be null and void.

B - 12

Notifications

Securities Law Information. The Award described in the Agreement and this Appendix B do not qualify under Spanish regulations as a security.  No “offer of securities to the public”, as defined under Spanish law, has taken place or will take place in the Spanish territory. The Agreement (including this Appendix B) has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and do not constitute a public offering prospectus.

Exchange Control Information. The acquisition of Shares under the Plan must be declared for statistical purposes to the Spanish Dirección General de Comercio e Inversiones (the “DGCI”) which is a department of the Ministry of Economy and Competitiveness. Generally, the declaration must be filed in January; however, if the value of the Shares acquired under the Plan or the amount of the sale proceeds exceeds €1,502,530, the declaration must be filed within one month of the acquisition or sale, as applicable.

When receiving foreign currency payments derived from the ownership of any Shares (i.e., dividends or sale proceeds), the Participant must inform the financial institution receiving the payment of the basis upon which such payment is made if the payment exceeds €50,000. The Participant will need to provide the institution with the following information: (i) the Participant’s name, address, and tax identification number; (ii) the name and corporate domicile of the Corporation; (iii) the amount of the payment; the currency used; (iv) the country of origin; (v) the reasons for the payment; and (vi) further information that may be required.

In addition, the Participant may be required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including any Shares acquired under the Plan) and any transactions with non-Spanish residents (including any payments of Shares made to the Participant by the Corporation) depending on the value of such accounts and instruments and the amount of the transactions during the relevant year as of December 31 of the relevant year.

Foreign Account Reporting Information. If the Participant holds rights or assets (e.g., Shares or cash held in a bank or brokerage account) outside of Spain with a value in excess of €50,000 per type of right or asset (e.g., Shares, cash, etc.) as of December 31 each year, the Participant is required to report certain information regarding such rights and assets on tax form 720.  After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of any previously-reported rights or assets increases by more than €20,000.  The reporting must be completed by the March 31 each year. 

SWEDEN

There are no country specific provisions.

TAIWAN

Terms and Conditions

Data Privacy. The Participant acknowledges that he or she has read and understands the terms regarding collection, processing and transfer of Data contained in Paragraph 12 of the Agreement and agrees that, upon request of the Corporation or the Employer, the Participant will provide any executed data privacy consent form to the Employer or the Corporation (or any other agreements or consents that may be required by the Employer or the Corporation) that the Corporation and/or the Employer may deem necessary to obtain under the data privacy laws in the Participant’s country, either now or in the future. The Participant understands he or she will not be able to participate in the Plan if the Participant fails to execute any such consent or agreement.

Notifications

Exchange Control Information. The Participant may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year. If the transaction amount is TWD$500,000 or more in a single transaction, the Participant must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank.

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TURKEY

Notifications

Securities Law Information. Under Turkish law, the Participant is not permitted to sell any Shares acquired under the Plan in Turkey. The Corporation’s Shares are currently traded on the Nasdaq Global Select Market, which is located outside of Turkey, under the ticker symbol “SNDK” and Shares acquired under the Plan may be sold through this exchange.

Exchange Control Information. Under Turkish law, Turkish residents are permitted to purchase and sell securities or derivatives traded on exchanges abroad only through a financial intermediary licensed in Turkey.  Therefore, the Participant may be required to appoint a Turkish broker to assist with the sale of the Shares acquired under the Plan.  The Participant should consult his or her personal legal advisor before selling any Shares acquired under the Plan to confirm the applicability of this requirement to the Participant.

UNITED ARAB EMIRATES

Notifications

Securities Law Information. The Award under the Plan is only being offered to Employees and is in the nature of providing equity incentives to Employees. Any documents related to the Award, including the Plan, the Agreement and any other grant documents (“Award Documents”), are intended for distribution only to such Employees and must not be delivered to, or relied on by, any other person.

The United Arab Emirates securities or financial/economic authorities have no responsibility for reviewing or verifying any Award Documents and have not approved the Award Documents nor taken steps to verify the information set out in them, and thus, are not responsible for their content.

The Participant is aware that he or she should, as a prospective stockholder, conduct his or her own due diligence on the securities. The Participant acknowledges that if he or she does not understand the contents of the Award Documents, the Participant should consult an authorized financial advisor.

B - 14

UNITED KINGDOM

Terms and Conditions

Tax-Related Items. The following provisions supplement Paragraph 9 of the Agreement:

If payment or withholding of the Tax-Related Items (including the Employer’s Liability, as defined below) is not made within ninety (90) days of the event giving rise to the Tax-Related Items (the “Due Date”) or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, the amount of any uncollected income tax will constitute a loan owed by the Participant to the Employer, effective on the Due Date. The Participant agrees that the loan will bear interest at the then-current official rate of Her Majesty’s Revenue and Customs (“HMRC”), it will be immediately due and repayable, and the Corporation or the Employer may recover it at any time thereafter by any of the means referred to in Paragraph 9 of the Agreement.

Notwithstanding the foregoing, if the Participant is a director or executive officer of the Corporation (within the meaning of Section 13(k) of the 1934 Act), the Participant will not be eligible for such a loan to cover the unpaid income taxes. In the event that the Participant is such a director or executive officer and the income taxes are not collected from or paid by the Participant by the Due Date, the amount of any uncollected taxes will constitute a benefit to the Participant on which additional income tax and national insurance contributions (“NICs”) (including the Employer’s Liability, as defined below) may be payable. The Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Corporation or the Employer (as appropriate) for the value of any NICs due on this additional benefit.

Joint Election. As a condition of the Participant’s participation in the Plan and the vesting of the Restricted Stock Units, the Participant agrees to accept any liability for secondary Class 1 NICs which may be payable by the Corporation and/or the Employer in connection with the Award and any event giving rise to Tax-Related Items (the “Employer’s Liability”).Without prejudice to the foregoing, the Participant agrees to enter into a joint election with the Corporation, the form of such joint election being formally approved by HMRC (the “Joint Election”), and any other required consent or elections. The Participant further agrees to enter into such other joint elections as may be required between the Participant and any successor to the Corporation and/or the Employer. The Participant further agrees that the Corporation and/or the Employer may collect the Employer’s Liability from the Participant by any of the means set forth in Paragraph 9 of the Agreement.

If the Participant does not enter into the Joint Election prior to the vesting of the Restricted Stock Units, the Participant will forfeit the Award and any Shares that have been issued will be returned to the Corporation at no cost to the Corporation, without any liability to the Corporation and the Employer.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

Onscreen disclaimer

If you are liable to National Insurance contributions (“NICs”) in the UK on option grants or restricted stock unit awards to you, you are required to enter into a Joint Election to transfer to you any liability to employer’s NICs that may arise in connection with your awards.

Clicking on the “ACCEPT” box where indicated indicates your acceptance of the Joint Election. You should read the Important Note on the Joint Election to Transfer Employer NICs before accepting the Joint Election.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

Important note on the Joint Election to Transfer Employer NICs

If you are liable to National Insurance contributions (“NICs”) in the UK on your option grant or restricted stock unit awards, you are required to enter into a Joint Election to transfer any liability to employer’s NICs that may arise in connection with your awards to you.

By entering into the Joint Election:

• you agree that any employer’s National Insurance liability that may arise in connection with your awards will be transferred to you; and

• you will authorise your employer to recover an amount sufficient to cover this liability by such methods including, but not limited to, deductions from your salary or other payments due, or the sale of sufficient shares acquired pursuant to your awards.

To enter into the Joint Election, please click on the “ACCEPT” box where indicated.

Please read the Joint Election carefully before accepting the Joint Election.

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SANDISK CORPORATION

2013 INCENTIVE PLAN

Election To Transfer the Employer’s National Insurance Liability to the Employee

This Election is between:

A. [insert name of employee](the “Employee”), who is eligible to receive restricted stock units granted by SanDisk Corporation with its headquarters at 951 SanDisk Drive, Milpitas, California, 95035, U.S.A. (the “Company”) pursuant to the SanDisk Corporation 2013 Incentive Plan (the “Plan”), and

B. the Company, which may grant restricted stock units under the Plan and is entering into this Election on behalf of the Employer.

1. Introduction

1.1 This Election relates to all restricted stock units granted to the Employee under the Plan on or after [insert date] up to the termination date of the Plan.

1.2 In this Election the following words and phrases have the following meanings:

(a) “Chargeable Event” means, in relation to the restricted stock units:

(i) the acquisition of securities pursuant to restricted stock units, (within section 477(3)(a) of ITEPA);

(ii) the assignment (if applicable) or release of the restricted stock units, in return for consideration (within section 477(3)(b) of ITEPA);

(iii) the receipt of a benefit in connection with the restricted stock units, other than a benefit within (i) or (ii) above (within section 477(3)(c) of ITEPA);

(iv) post-acquisition charges relating to the shares acquired pursuant to the restricted stock units, (within section 427 of ITEPA); and/or

(v) post-acquisition charges relating to the shares acquired pursuant to the restricted stock units, (within section 439 of ITEPA).

(b) “ITEPA” means the Income Tax (Earnings and Pensions) Act 2003.

(c) “SSCBA” means the Social Security Contributions and Benefits Act 1992.

1.3 This Election relates to the employer’s secondary Class 1 National Insurance Contributions (the “Employer’s Liability”) which may arise on the occurrence of a Chargeable Event in respect of the restricted stock units pursuant to section 4(4)(a) and/or paragraph 3B(1A) of Schedule 1 of the SSCBA.

1.4 This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

1.5 This Election does not apply to the extent that it relates to relevant employment income which is employment income of the earner by virtue of Chapter 3A of Part VII of ITEPA (employment income: securities with artificially depressed market value).

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2. The Election

The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability on the Chargeable Event is hereby transferred to the Employee. The Employee understands that, by signing or electronically accepting this Election, he or she will become personally liable for the Employer’s Liability covered by this Election. This Election is made in accordance with paragraph 3B(1) of Schedule 1 of the SSCBA.

3. Payment of the Employer’s Liability

3.1    The Employee hereby authorises the Company and/or the Employer to collect the Employer’s Liability from the Employee at any time after the Chargeable Event:

(i) by deduction from salary or any other payment payable to the Employee at any time on or after the date of the Chargeable Event; and/or

(ii) directly from the Employee by payment in cash or cleared funds; and/or

(iii) by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is entitled to receive in respect of the restricted stock units; and/or

(iv) by any other means specified in the applicable award agreement.

3.2 The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities related to the restricted stock units to the Employee until full payment of the Employer’s Liability is received.

3.3 The Company agrees to procure the remittance by the Employer of the Employer’s Liability to HM Revenue & Customs on behalf of the Employee within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days after the end of the UK tax month during which the Chargeable Event occurs if payments are made electronically).

4. Duration of Election

4.1 The Employee and the Company agree to be bound by the terms of this Election regardless of whether the Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability becomes due.

4.2 This Election will continue in effect until the earliest of the following:

(i) the Employee and the Company agree in writing that it should cease to have effect;

(ii) on the date the Company serves written notice on the Employee terminating its effect;

(iii) on the date HM Revenue & Customs withdraws approval of this Election; or

(iv) after due payment of the Employer’s Liability in respect of the entirety of the restricted stock units to which this Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.

4.3    This Election will continue in force regardless of whether the Employee ceases to be an employee of the Employer.

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Acceptance by the Employee

The Employee acknowledges that by signing this Election or clicking on the “ACCEPT” box where indicated, the Employee agrees to be bound by the terms of this Election as stated above from the date of doing so.

Signature

Date

OR

ACCEPT

Acceptance by the Company

The Company acknowledges that, by signing this Election or arranging for the scanned signature of an authorised representative to appear on this Election, the Company agrees to be bound by the terms of this Election as stated above.

Signature for and on behalf of the Company

Position

Date

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SCHEDULE OF EMPLOYER COMPANIES

The following are employer companies to which this Election may apply:

For each company, provide the following details:

(1) SanDisk UK Limited

Registered Office:	24 Great King Street Edinburgh EH3 6QN
Company Registration Number:	SC234218
Corporation Tax District:
Corporation Tax Reference:
PAYE District:
PAYE Reference:

(2)    SanDisk Scotland Limited

Registered Office:	24 Great King Street Edinburgh EH3 6QN
Company Registration Number:	SC234217
Corporation Tax District:
Corporation Tax Reference:
PAYE District:
PAYE Reference:

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UNITED STATES OF AMERICA

Terms and Conditions

Limited Transferability. This provision supplements Paragraph 3 of the Agreement:

The Participant may direct the Corporation to issue the stock certificates for any Shares which in fact vest and become issuable under the Award during his or her lifetime to one or more designated Family Members or a trust established for the Participant and/or his or her Family Members. The Participant may make such a beneficiary designation or certificate directive at any time by filing the appropriate form with the Plan Administrator or its designee.

Code Section 409A.For U.S. taxpayers, the grant and settlement of the Award is intended to be exempt from Section 409A of the Code under the “short-term deferral” exception, and in any event in compliance with Section 409A of the Code, and the Agreement will be interpreted, operated and administered in a manner that is consistent with this intent. In furtherance of this intent, the Plan Administrator may, at any time and without the Participant’s consent, modify the terms of the Award as it determines appropriate to comply with the requirements of Section 409A of the Code and the related U.S. Department of Treasury guidance. The Corporation makes no representation or covenant to ensure that the Award, settlement of the Award or other payment hereunder are exempt from or compliant with Section 409A of the Code, and will have no liability to the Participant or any other party if the settlement of the Award or other payment hereunder that is intended to be exempt from, or compliant with, Section 409A of the Code, is not so exempt or compliant or for any action taken by the Plan Administrator with respect thereto.

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EX-10.5

EXHIBIT 10.5

SANDISK CORPORATION

NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR

STOCK OPTION

Notice is hereby given of the following option grant (the “Option”) to purchase shares of the Common Stock of SanDisk Corporation (the “Corporation”):

Optionee:

Grant Date:

Exercise Price: $ per share

Number of Option Shares: [ ] shares of Common Stock

Expiration Date

Type of Option: Non-Statutory Stock Option

Date Exercisable: Immediately Exercisable

Vesting Schedule: [To be completed in accordance with the Non-Employee Director Compensation Policy]

Optionee understands and agrees that the Option is granted subject to and in accordance with the terms of the SanDisk Corporation 2013 Stock Incentive Plan (the “Plan”) and the Non-Employee Director Compensation Plan. Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee hereby acknowledges receipt of a copy of the official prospectus for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is available upon request made to the Corporate Secretary at the Corporation’s principal offices.

REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ANY UNVESTED OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF THE OPTION EXERCISE.

Definitions. Except as otherwise specified in this Notice, all capitalized terms in this Notice shall have the meaning assigned to them in the Plan or in the attached Stock Option Agreement.

DATED: , 20

SANDISK CORPORATION
By:
Title:
	, OPTIONEE
Address:

ATTACHMENTS

Exhibit A -Stock Option Agreement

Exhibit B - Plan Summary and Prospectus

EXHIBIT A

STOCK OPTION AGREEMENT

EXHIBIT B

PLAN SUMMARY AND PROSPECTUS

EX-10.6

EXHIBIT 10.6

SANDISK CORPORATION

2013 INCENTIVE PLAN

STOCK OPTION AGREEMENT

RECITALS

A.    The Board has adopted the Plan to promote the interests of the Corporation by providing eligible persons in the service of the Corporation (or any Parent or Subsidiary) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in such service.

B.    Optionee is an eligible non-employee Board member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant of an option to purchase shares of Common Stock pursuant to the Non-Employee Director Compensation Policy.

C.    Except as otherwise set forth in the attached Appendix A, all capitalized terms in this Agreement shall have the meaning assigned to them in the Plan.

NOW, THEREFORE, it is hereby agreed as follows:

1.Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price.

2.Option Term. This option shall have a maximum term of seven (7) years measured from the Grant Date and shall accordingly expire at the close of business in California on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.

3.Limited Transferability.

(a)This option may be assigned in whole or in part during Optionee’s lifetime to one or more of the Optionee’s Family Members or to a trust established for the exclusive benefit of one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this option immediately prior to such assignment.

(b)Should the Optionee die while holding this option, then this option shall be transferred in accordance with Optionee’s will or the laws of inheritance. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this option, and this option shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding this option. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this option may, pursuant to Paragraph 5, be exercised following Optionee’s death.

4.Dates of Exercise.

(a)This option shall be immediately exercisable for any or all of the Option Shares, whether or not the Option Shares are at the time vested in accordance with the Exercise Schedule set forth in the Grant Notice, and shall remain so exercisable until the Expiration Date or sooner termination of the option term under Paragraphs 5 or 6.

(b)Optionee shall, in accordance with the Exercise Schedule set forth in the Grant Notice, vest in the Option Shares in one or more installments over his or her period of Service (whether as a non-employee Board member, Employee or consultant). The Option Shares shall, however, be subject to accelerated vesting pursuant to the provisions of Paragraph 5, 6 or 7, but in no event shall any additional Option Shares vest following Optionee’s cessation of Service.

5.Cessation of Service. The option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(a)Should Optionee cease Service for any reason (other than death or Permanent Disability) while this option is outstanding, then the period during which this option may be exercised shall be reduced to a twelve (12)-month period measured from the date of such cessation of Service, but in no event shall this option be exercisable at any time after the Expiration Date. During such limited period of exercisability, Optionee (or the person or persons to whom this option is transferred pursuant to a permitted transfer under Paragraph 3) may not exercise this option in the aggregate for more than the number of Option Shares (if any) in which Optionee is vested on the date of his or her cessation of Service. Upon the earlier of (i) the expiration of such twelve (12)-month period or (ii) the specified Expiration Date, the option shall terminate and cease to be exercisable with respect to any vested Option Shares for which the option has not been exercised.

(b)Should Optionee die during the twelve (12)-month period following his or her cessation of Service but while this option is outstanding, then (i) the personal representative of Optionee’s estate or (ii) the person or persons to whom the option is transferred pursuant to Optionee’s will or the laws of inheritance following Optionee’s death or to whom the option is transferred during Optionee’s lifetime pursuant to a permitted transfer under Paragraph 3 or (iii) the designated beneficiary or beneficiaries of this option (as the case may be) shall have the right to exercise this option for any or all of the Option Shares in which Optionee is vested at the time of Optionee’s cessation of Service (less any Option Shares purchased by Optionee after such cessation of Service but prior to death). Any such right to exercise this option shall terminate, and this option shall accordingly cease to be exercisable for such vested Option Shares, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of Service or (ii) the specified Expiration Date.

(c)Should Optionee cease Service by reason of death or Permanent Disability, then any Option Shares at the time subject to this option but not otherwise vested shall vest in full so that this option may be exercised for any or all of the Option Shares as fully vested shares of Common Stock at any time prior to the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of Service or (ii) the specified Expiration Date, whereupon this option shall terminate and cease to be outstanding.

(d)Upon Optionee’s cessation of Service for any reason other than death or Permanent Disability, this option shall immediately terminate and cease to be outstanding with respect to any and all Option Shares in which Optionee is not otherwise at that time vested in accordance with the normal Vesting Schedule or the special vesting acceleration provisions of Paragraphs 6 and 7 below.

6.Change in Control.

(a)Should a Change in Control occur during Optionee’s period of Service, then any Option Shares at the time subject to this option but not otherwise vested shall automatically vest so that this option shall, immediately prior to the specified effective date for that Change in Control, become exercisable for all of the Option Shares as fully vested shares of Common Stock and may be exercised for any or all of those vested shares. Immediately following the consummation of the Change in Control, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation or its parent company or otherwise continued in effect pursuant to the terms of the Change in Control transaction.

(b)If this option is assumed in connection with a Change in Control or otherwise continued in effect, then this option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control, and appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control transaction, the successor corporation may, in connection with the assumption or continuation of this option, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction, provided such common stock is readily tradable on an established U.S. securities exchange or market.

7.Hostile Take-Over. In the event of a Hostile Take-Over effected during Optionee’s period of Service, any Option Shares at the time subject to this option but not otherwise vested shall automatically vest so that this option shall, immediately prior to the effective date of that Hostile Take-Over, become exercisable for all of the Option Shares as fully vested shares of Common Stock and may be exercised for any or all of those vested shares. This option shall remain exercisable for such fully vested Option Shares until the earlier of (i) the specified Expiration Date, or (ii) the sooner termination of this option in accordance with Paragraph 5 or 6.

8.Adjustment in Option Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding

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Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

9.Stockholder Rights. The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares.

10.Manner of Exercising Option.

(a)In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions:

(i)To the extent the option is exercised for vested Option Shares, execute and deliver to the Corporation a Notice of Exercise for the Option Shares for which the option is exercised or comply with such other procedures as the Corporation may establish for notifying the Corporation of the exercise of this option for one or more Option Shares. To the extent the option is exercised for unvested Option Shares, execute and deliver to the Corporation a Purchase Agreement for those unvested Option Shares.

(ii)Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A)cash or check made payable to the Corporation;

(B)shares of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period (if any) necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

(C)to the extent the option is exercised for vested Option Shares, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (i) to a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in accordance with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of the Option Shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the Option Shares plus all applicable Tax-Related Items required to be withheld by the Corporation (or any Parent or Subsidiary) by reason of such exercise and (ii) to the Corporation to deliver the certificates for the Option Shares directly to such brokerage firm on such settlement date in order to complete the sale.

(iii)Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

(b)Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Notice of Exercise (or other notification procedure) delivered to the Corporation in connection with the option exercise.

(c)As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto. To the extent any such Option Shares are unvested, the certificates for those Option Shares shall be endorsed with an appropriate legend evidencing the Corporation’s repurchase rights and may be held in escrow with the Corporation until such shares vest.

(d)In no event may this option be exercised for any fractional shares.

11.No Advice Regarding Grant. The Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding Optionee’s participation in the Plan or the sale of the Option Shares issued upon exercise of this option. Optionee is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

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12.No Impairment of Rights. This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. In addition, this Agreement shall not in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Corporation or the stockholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law.

13.Compliance with Laws and Regulations.

(a)The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any U.S., state, local, or foreign stock exchange (or the Nasdaq Global Select Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance.

(b)The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals.

14.Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’s estate and any beneficiaries of this option designated by Optionee.

15.Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

16.Construction. This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

17.Governing Law and Venue. The interpretation, performance and enforcement of the Plan and this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Agreement is made and/or to be performed.

18.Excess Shares. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

19.Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible.

20.Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

21.Authorization to Release Necessary Personal Information.

(a)Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Data by and among, as applicable, the Employer, the Corporation (or any Parent or Subsidiary) for the exclusive purpose of implementing, administering and managing Optionee’s participation in the Plan.

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(b)Optionee understands that the Corporation and the Employer may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor, for the exclusive purpose of implementing, administering and managing the Plan.

(c)Optionee understands that Data will be transferred to the Corporation’s designated broker or such other stock plan provider as may be selected by the Corporation in the future, which is assisting the Corporation with the implementation, administration and management of the Plan. Optionee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections from Optionee’s country. Optionee understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Optionee authorizes the Corporation, the Corporation’s designated broker and any other possible recipients which may assist the Corporation (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing his or her participation in the Plan. Optionee understands that Data will be held only as long as is necessary to implement, administer and manage Optionee’s participation in the Plan. Optionee understands that if he or she resides outside the United States he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Optionee understands that he or she is providing the consents herein on a purely voluntary basis. If Optionee does not consent, or if Optionee later seeks to revoke his or her consent, his or her employment status or Service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Optionee’s consent is that the Corporation would not be able to grant Optionee options or other equity awards or administer or maintain such awards. Therefore, Optionee understands that refusing or withdrawing his or her consent may affect Optionee’s ability to participate in the Plan. For more information on the consequences of Optionee’s refusal to consent or withdrawal of consent, Optionee understands that he or she may contact his or her local human resources representative.

22.Electronic Delivery and Acceptance. The Corporation may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Optionee hereby consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Corporation or a third party designated by the Corporation.

23.Imposition of Other Requirements. The Corporationreserves the right to impose other requirements on Optionee’s participation in the Plan, on this option and on any Option Shares issued upon exercise, to the extent the Corporationdetermines it is necessary or advisable for legal or administrative reasons, and to require Optionee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

24.Waiver. Optionee acknowledges that a waiver by the Corporation of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Optionee any other Participant of the Plan.

25.Entire Agreement. This Agreement, the Grant Notice and the Plan, including any appendices or exhibits thereto, contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto. To the extent any provision of this Agreement is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on the Optionee and all persons claiming under or through the Optionee.

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APPENDIX A

The following definitions shall be in effect under the Agreement:

A.Agreement shall mean this Stock Option Agreement, which includes this Appendix A.

B.Award shall mean the award of this option to purchase up to the number of Option Shares to the Optionee pursuant to the terms of the Agreement.

C.Board shall mean the Corporation’s Board of Directors.

D.Corporation shall mean SanDisk Corporation, a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan.

E.Data shall mean any information relating to the Participant who is or can be identified from the data alone or in conjunction with other information that is in, or likely to come into, the possession of data controller.

F.Employer shall mean the Corporation or any Parent or Subsidiary to which an Employee provides Services.

G.Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

H.Exercise Price shall mean the exercise price per Option Share as specified in the Grant Notice.

I.Exercise Schedule shall mean the schedule set forth in the Grant Notice pursuant to which the option is to become exercisable for the Option Shares in one or more installments over the Optionee’s period of Service.

J.Expiration Date shall mean the date on which the option expires as specified in the Grant Notice.

K.Grant Date shall mean the date of grant of the option as specified in the Grant Notice.

L.Grant Notice shall mean the Notice of Grant of Stock Option incorporating the Agreement, pursuant to which Optionee has been informed of the basic terms of the option evidenced hereby.

M.Notice of Exercise shall mean the notice of option exercise in the form prescribed by the Corporation.

N.Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice.

O.Optionee shall mean the person to whom the option is granted as specified in the Grant Notice.

P.Plan shall mean the Corporation’s 2013 Incentive Plan.

Q.Tax-Related Items shall mean income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax‑related items related to Optionee’s participation in the Plan and legally applicable to Optionee or deemed by the Corporation or the Employer in its discretion to be an appropriate charge to Optionee even if legally applicable to the Corporation or the Employer.

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EX-10.7

EXHIBIT 10.7

SANDISK CORPORATION

2013 INCENTIVE PLAN

RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

RECITALS

A.    The Board has adopted the Plan to promote the interests of the Corporation by providing eligible persons in the service of the Corporation (or any Parent or Subsidiary) with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in such service.

B.    Participant is an eligible non-employee Board member, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the grant of Restricted Stock Units pursuant to the Non-Employee Director Compensation Policy.

C.    Except as otherwise set forth in the attached Appendix A, all capitalized terms in this Agreement shall have the meaning assigned to them in the Plan.

NOW, THEREFORE, it is hereby agreed as follows:

1.Grant of Restricted Stock Units. Participant is hereby awarded, as of the Award Date, Restricted Stock Units pursuant to the Non-Employee Director Compensation Policy, under the Plan. Each Restricted Stock Unit represents the right to receive one share of Common Stock on the vesting date of that unit. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the Award shall be as set forth in this Agreement.

AWARD SUMMARY

Award Date:	[____]
Number of Shares Subject to Award:	[____]
Vesting Schedule:	The Shares shall vest in one or more installments in accordance with the Vesting Schedule set forth on attached Schedule I. However, the Shares will be subject to accelerated vesting pursuant to the provisions of Paragraph 5 of this Agreement.
Issuance Schedule	The Shares in which the Participant vests in accordance with the foregoing Vesting Schedule will be issuable immediately upon vesting.

2.Limited Transferability. Prior to actual receipt of the Shares which vest hereunder, the Participant may not transfer any interest in the Award or the underlying Shares. Any Shares which vest hereunder but which otherwise remain unissued at the time of the Participant’s death may be transferred pursuant to the provisions of the Participant’s will or the laws of inheritance or to the Participant’s designated beneficiary or beneficiaries of this Award. The Participant may also direct the Corporation to issue the stock certificates for any Shares which in fact vest and become issuable under the Award during his or her lifetime to one or more designated family members or a trust established for the Participant and/or his or her family members. The Participant may make such a beneficiary designation or certificate directive at any time by filing the appropriate form with the Plan Administrator or its designee.

3.Cessation of Service. Should the Participant cease to provide Services for any reason prior to vesting in one or more Shares subject to this Award, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units will be reduced accordingly. The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled Award.

4.Stockholder Rights and Dividend Equivalents.

(a)The holder of this Award shall not have any stockholder rights, including voting or dividend rights, with respect to the Shares subject to the Award until the Participant becomes the record holder of those Shares following their actual issuance upon the Corporation’s collection of the applicable Tax-Related Items withholding.

(b)Notwithstanding the foregoing, should any dividend or other distribution payable other than in Shares, whether regular or extraordinary, be declared and paid on the outstanding Common Stock while one or more Shares remain subject to this Award (i.e., those Shares are not otherwise issued and outstanding for purposes of entitlement to the dividend or distribution), then a special book account shall be established for the Participant and credited with a dividend equivalent of the actual dividend or distribution which would have been paid on those Shares had they been issued and outstanding and entitled to that dividend or distribution. As the Shares subsequently vest hereunder, the phantom dividend equivalents credited to those Shares in the book account shall be distributed to the Participant (in cash or such other form as the Plan Administrator may deem appropriate in its sole discretion) concurrently with the issuance of the vested Shares to which those phantom dividend equivalents relate and such dividend equivalents shall be subject to the same vesting requirements as the Shares.

5.Special Vesting Acceleration.

(a)Should a Change in Control occur during Participant’s period of Service, then the Restricted Stock Units at the time subject to this Award will vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units will be issued immediately upon such vesting (or otherwise converted into the right to receive the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control).

(b)Should Participant cease Service by reason of death or Permanent Disability, then the Restricted Stock Units at the time subject to this Award will vest immediately, and the Shares subject to those vested units will be issued as soon as administratively practicable following such cessation of Service.

(c)This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

6.Adjustment in Shares. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder.

7.Issuance of Shares of Common Stock. As soon as administratively practicable following each date one or more Shares vest in accordance with the provisions of this Agreement, the Corporation shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for the shares of Common Stock which vest on that date under the Award and shall concurrently distribute to the Participant any phantom dividend equivalents with respect to those Shares. Except as otherwise provided in Paragraph 6, the settlement of all Restricted Stock Units which vest under the Award shall be made solely in Shares. In no event, however, shall any fractional Shares be issued. Accordingly, the total number of Shares to be issued at the time the Award vests shall, to the extent necessary, be rounded down to the next whole Share in order to avoid the issuance of a fractional Share.

8.No Advice Regarding Award. The Corporation is not providing any tax, legal or financial advice, nor is the Corporation making any recommendations regarding the Participant’s participation in the Plan or the sale of the Shares acquired upon settlement of this Award. The Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

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9.Data Privacy.

(a)The Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Data by and among, as applicable, the Employer, the Corporation (or any Parent or Subsidiary) for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan.

(b)The Participant understands that the Corporation and the Employer may hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Corporation, details of all Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor, for the exclusive purpose of implementing, administering and managing the Plan.

(c)The Participant understands that Data will be transferred to the Corporation’s designated broker or such other stock plan service provider as may be selected by the Corporation in the future, which is assisting the Corporation with the implementation, administration and management of the Plan. The Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than the Participant’s country. The Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Participant authorizes the Corporation, the Corporation’s designated broker and any other possible recipients which may assist the Corporation (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan. The Participant understands that if he or she resides outside the United States he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, the Participant understands that he or she is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke his or her consent, his or her employment status or Service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Corporation would not be able to grant the Participant Awards or other equity awards or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing his or her consent may affect the Participant’s ability to participate in the Plan. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.

10.Compliance with Laws and Regulations. The Participant understands that the vesting of the Restricted Stock Units under the Plan and the issuance, transfer, assignment, sale, or other dealings of the Shares shall be subject to compliance by the Corporation (or any Parent or Subsidiary) and the Participant with all applicable requirements under the laws, rules, and regulations of the country of which the Participant is a resident. Furthermore, the Participant agrees that he or she will not acquire Shares pursuant to the Plan except in compliance with all applicable federal, state, local, or foreign laws, rules, and regulations.

11.Notices. Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated below Participant’s signature line on this Agreement. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

12.Successors and Assigns. Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant, Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries of the Award designated by Participant.

13.Construction. This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.

3

14.Governing Law/Venue. The interpretation, performance and enforcement of the Plan and this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by the Award or this Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation shall be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this Agreement is made and/or to be performed.

15.Electronic Delivery and Execution. By executing this Agreement the Participant consents to the electronic delivery of the Plan documents and this Agreement. The Corporation may request that, in certain countries, the Participant execute this Agreement electronically via a link to a Corporation intranet or the internet site of a third party involved in administering the Plan or via electronic mail (“e-mail”) or such other means as may be specified by the Corporation. Electronic execution of this Agreement or the Notice of Grant shall have the same binding effect as a written or hard copy signature and accordingly, shall bind the Participant and the Corporation to all of the terms and conditions set forth in the Plan, and this Agreement.

16.Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent possible.

17.Imposition of Other Requirements. The Corporationreserves the right to impose other requirements on the Participant’s participation in the Plan, on this Award and on any Shares acquired under the Plan, to the extent the Corporationdetermines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

18.Waiver. The Participant acknowledges that a waiver by the Corporation of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant any other Participant of the Plan.

19.Entire Agreement. This Agreement and the Plan, including any appendices or exhibits thereto, contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and therein and supersede all prior communications, representations and negotiations in respect thereto. To the extent any provision of this Agreement is inconsistent or in conflict with any term or provision of the Plan, the Plan shall govern. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on the Participant and all persons claiming under or through the Participant.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first indicated above.

SANDISK CORPORATION

By:

Title:

PARTICIPANT:

Signature:

Address:

4

APPENDIX A

DEFINITIONS

The following definitions shall be in effect under the Agreement, which includes this Appendix A and also includes Appendix B:

A.1934 Act shall mean the U.S. Securities Exchange Act of 1934, as amended from time to time.

B.Agreement shall mean this Global Restricted Stock Unit Issuance Agreement.

C.Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this Agreement.

D.Award Date shall mean the date the restricted stock units are awarded to the Participant pursuant to the appropriate Plan Administrator approval.

E.Board shall mean the Corporation’s Board of Directors.

(a)

F.Corporation shall mean SanDisk Corporation, a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of SanDisk Corporation which shall by appropriate action adopt the Plan.

G.Data shall mean any information relating to the Participant who is or can be identified from the data alone or in conjunction with other information that is in, or likely to come into, the possession of data controller.

H.Participant shall mean the person to whom the Award is made pursuant to the Agreement.

I.Plan shall mean the 2013 Incentive Plan.

J.Share shall mean one share of Common Stock.

K.Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange.

L.Tax-Related Items shall mean income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax‑related items related to the Participant’s participation in the Plan and legally applicable to the Participant or deemed by the Corporation or the Employer in its discretion to be an appropriate charge to the Participant even if legally applicable to the Corporation or the Employer.

A - 1

SCHEDULE I

VESTING SCHEDULE

[To be completed in accordance with the Non-Employee Director Compensation Plan]

EX-12.1

EXHIBIT 12.1

Computation of Ratio of Earnings to Fixed Charges

	Six months ended			Fiscal years ended
	June 30, 2013			December 30, 2012			January 1, 2012			January 2, 2011			January 3, 2010			December 28, 2008
	(In thousands, except ratios)
Computation of earnings:
Income (loss) before provision for income taxes	$	617,351		$	626,916		$	1,476,754		$	1,457,433		$	503,801		$	(1,952,374	)
Fixed charges excluding capitalized interest	54,692			128,934			125,057			101,434			81,630			67,821
Distributed earnings from 50%-or-less-owned affiliates	(9,788		)	(451		)	(2,729		)	(147		)	(392		)	(3,604		)
Adjusted earnings	$	662,255		$	755,399		$	1,599,082		$	1,558,720		$	585,039		$	(1,888,157	)
Computation of fixed charges:
Interest expense	$	53,713		$	119,869		$	122,512		$	90,377		$	70,205		$	65,207
Interest relating to lease guarantee of 50%-or-less-owned affiliates	—			7,065			—			8,746			8,898			—
Interest portion of operating lease expense	979			2,000			2,545			2,311			2,527			2,614
Fixed charges	$	54,692		$	128,934		$	125,057		$	101,434		$	81,630		$	67,821
Ratio of earnings to fixed charges (1)	12.1		x	5.9		x	12.8		x	15.4		x	7.2		x	—

————

⁽¹⁾  Computed by dividing (i) income (loss) before provision for income taxes adjusted for fixed charges by (ii) fixed charges which include interest expense plus amortization of debt issuance costs, the portion of rent expense under operating leases deemed to be representative of the interest factor and interest relating to lease guarantees of 50%-or-less-owned affiliates.  In fiscal year 2008, earnings were insufficient to cover fixed charges by $1.96 billion.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Sanjay Mehrotra, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedJune 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	July 29, 2013	/s/ Sanjay Mehrotra
		Sanjay Mehrotra President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Judy Bruner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedJune 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	July 29, 2013	/s/ Judy Bruner
		Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Sanjay Mehrotra, Chief Executive Officer of SanDisk Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedJune 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SanDisk Corporation.

By:	/s/ Sanjay Mehrotra
	Sanjay Mehrotra President and Chief Executive Officer (Principal Executive Officer)
	July 29, 2013

A signed original of this written statement required by Section 906 has been provided to SanDisk Corporation and will be retained by SanDisk Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Judy Bruner, Chief Financial Officer of SanDisk Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedJune 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SanDisk Corporation.

By:	/s/ Judy Bruner
	Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)
	July 29, 2013

A signed original of this written statement required by Section 906 has been provided to SanDisk Corporation and will be retained by SanDisk Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Commitments, Contingencies and Guarantees-Obligation Tbl (Details 4) (Flash Ventures [Member]) In Thousands, unless otherwise specified	Jun. 30, 2013 USD ($)		Jun. 30, 2013 JPY (¥)	Dec. 30, 2012 USD ($)
Guarantor Obligations
Guarantee of Flash Ventures equipment leases	$ 612,370	[1]	¥ 60,700,000	$ 926,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

XML

Commitments, Contingencies and Guarantees-Rent Expense (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Net rent expense
Rent expense, net	$ 1,330	$ 1,685	$ 3,173	$ 2,798

XML

Related Parties and Strategic Investments

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Parties and Strategic Investments

Related Parties and Strategic Investments

Flash Ventures with Toshiba. The Company owns 49.9% of each entity within Flash Ventures and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 11, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are variable interest entities. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling $455.4 million, $934.3 million, $746.1 million and $1.43 billion in the three and six months endedJune 30, 2013 and July 1, 2012, respectively. The Company received loan repayments from Flash Ventures of $19.8 million, $73.4 million, $148.0 million and $211.8 million in the three and six months endedJune 30, 2013 and July 1, 2012, respectively. At June 30, 2013 and December 30, 2012, the Company had accounts payable balances due to Flash Ventures of $167.0 million and $214.5 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	June 30, 2013		December 30, 2012
Notes receivable	$	641	$	820
Equity investments	564		640
Operating lease guarantees	612		926
Prepayments	15		26
Maximum loss exposure	$	1,832	$	2,412

Solid State Storage Solutions, Inc. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions, Inc. (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a variable interest entity. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Condensed Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012.

XML

Balance Sheet Information-AOCI (Details 8) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Other Comprehensive Income
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	$ (865)	$ (679)	$ (551)	$ (1,202)
Cost of Sales [Member]
Other Comprehensive Income
Foreign Currency Cash Flow Hedge Gain (Loss) Reclassified to Cost of Sales, Before Tax	(17,933)	(1,529)	(19,374)	4,785
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, Tax	0	0	0	0
Foreign Currency Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net	(17,933)	(1,529)	(19,374)	4,785
Other Income [Member]
Other Comprehensive Income
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	865	679	551	1,202
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax	(308)	(248)	(483)	(417)
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax	557	431	68	785
Net Income [Member]
Other Comprehensive Income
Total reclassifications for the period	$ (17,376)	$ (1,098)	$ (19,306)	$ 5,570

XML

Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Net income	$ 261,789	$ 12,969	$ 428,018	$ 127,354
Other Comprehensive Income (Loss), before Tax
Unrealized holding gain (loss) on marketable securities	(20,302)	3,028	(14,075)	11,762
Reclassification adjustment for realized (gain) loss on marketable securities included in net income	(865)	(679)	(551)	(1,202)
Net unrealized holding gain (loss) on marketable securities, before taxes	(21,167)	2,349	(14,626)	10,560
Foreign currency translation adjustments	(60,815)	55,938	(176,994)	(47,043)
Unrealized holding gain (loss) on derivatives qualifying as cash flow hedges	(7,263)	30,141	(37,893)	(38,920)
Reclassification adjustment for realized (gain) loss on derivatives qualifying as cash flow hedges included in net income	17,933	1,529	19,374	(4,785)
Net unrealized holding gain (loss) on derivatives qualifying as cash flow hedges, before tax	10,670	31,670	(18,519)	(43,705)
Total other comprehensive income (loss), before tax	(71,312)	89,957	(210,139)	(80,188)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(17,074)	8,194	(33,332)	(3,008)
Total other comprehensive income (loss), net of tax	(54,238)	81,763	(176,807)	(77,180)
Comprehensive income (loss)	$ 207,551	$ 94,732	$ 251,211	$ 50,174

XML

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill. Goodwill balances are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of June 30, 2013	$	202,336

Goodwill increased by $0.6 million due to the resolution of a legal contingency matter during the first quarter of fiscal year 2013 related to an acquisition from fiscal year 2012.

Intangible Assets. Intangible asset balances are presented below (in thousands):

	June 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(87,764	)	$	113,196
Customer relationships	13,050		(12,784		)	266
Trademarks	5,700		(2,499		)	3,201
Covenants not to compete	3,100		(2,359		)	741
Acquisition-related intangible assets	222,810		(105,406		)	117,404
Technology licenses and patents	133,909		(77,955		)	55,954
Total intangible assets subject to amortization	356,719		(183,361		)	173,358
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(183,361	)	$	210,883

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may be impaired.  In the first quarter of fiscal year 2013, due to an increase in overall cost estimates and delays in the development timeline related to an in-process research and development (“IPR&D”) project from the Pliant Technology, Inc. (“Pliant”) acquisition, the Company performed impairment tests on the related amortizable intangible assets and indefinite-lived IPR&D intangible asset and determined that none were impaired.  Due to continued project delays, including subsequent to the end of the second quarter of fiscal year 2013, which resulted in the same impairment indicators identified in the first quarter of fiscal year 2013, the Company again tested the recoverability of the amortizable intangible assets and noted that as of the end of the second quarter of fiscal year 2013, the undiscounted cash flows were in excess of the net book value of the amortizable intangible assets, indicating no impairment.  In addition, the Company performed a qualitative impairment assessment of the indefinite-lived IPR&D intangible asset and determined that it was not more-than-likely-than-not that the fair value of the indefinite-lived IPR&D intangible asset was lower than its carrying value.  Therefore the Company did not proceed to a quantitative impairment analysis of the indefinite-lived intangible asset.  While these delays related to the IPR&D project did not indicate that an impairment is required at this time, additional future delays, additional increases in overall cost estimates, program cancellation or other significant events or circumstances affecting the IPR&D project could result in the indefinite-lived IPR&D intangible asset or the amortizable intangible assets being partially or fully impaired. Due to these IPR&D project delays, the Company expects to assess the indefinite-lived IPR&D intangible asset for impairment at the end of the third quarter of fiscal year 2013 and on a quarterly basis until completion of the development of the technology and will continue to monitor any events or circumstances that could indicate the amortizable intangible assets are impaired. As of June 30, 2013, the net book value of the Pliant indefinite-lived IPR&D intangible asset was $36.2 million and the net book value of the related Pliant amortizable intangible assets was $96.8 million, and a potential complete impairment of both would result in a charge of up to $133.0 million.

The annual expected amortization expense of intangible assets as of June 30, 2013, excluding acquired IPR&D intangible assets, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining six months)	$	21,156	$	11,334
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,333
Total intangible assets subject to amortization	$	117,404	$	55,954

On July 2, 2013, the Company entered into a definitive agreement to acquire SMART Storage Systems, a developer of enterprise solid state drives. Under the terms of the agreement, the Company will pay approximately $307 million in cash and certain equity-based incentive awards to acquire SMART Storage Systems. The transaction, which has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and is expected to close in August 2013.

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill balances are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of June 30, 2013	$	202,336

Intangible Assets

Intangible asset balances are presented below (in thousands):

	June 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(87,764	)	$	113,196
Customer relationships	13,050		(12,784		)	266
Trademarks	5,700		(2,499		)	3,201
Covenants not to compete	3,100		(2,359		)	741
Acquisition-related intangible assets	222,810		(105,406		)	117,404
Technology licenses and patents	133,909		(77,955		)	55,954
Total intangible assets subject to amortization	356,719		(183,361		)	173,358
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(183,361	)	$	210,883

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

Estimated Amortization Expense of Intangible Assets

The annual expected amortization expense of intangible assets as of June 30, 2013, excluding acquired IPR&D intangible assets, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining six months)	$	21,156	$	11,334
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,333
Total intangible assets subject to amortization	$	117,404	$	55,954

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Share-Based Compensation-Fair Value (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Fair value of options and RSUs
Fair value of options vested	$ 7,282	$ 8,214	$ 21,850	$ 22,974
Fair value of RSUs vested	6,082	4,283	35,903	23,584
Total fair value of options and RSUs vested	$ 13,364	$ 12,497	$ 57,753	$ 46,558

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Goodwill and Intangible Assets-Intangibles (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Intangible Assets
Total Intangible Assets, gross	$ 394,244	$ 474,904
Accumulated Amortization	(183,361)	(227,125)
Intangible Asset Adjustment		(860)
Total Intangible Assets, net	210,883	246,919
Acquired in-process research and development [Member]
Intangible Assets
Gross Carrying Amount, Indefinite-lived Intangible Asset	37,525	38,385
Adjustments of indefinite lived intangible assets		(860)
Net Carrying Amount, Indefinite-lived Intangible Assets	37,525	37,525
Developed product technology [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	200,960	200,960
Accumulated Amortization	(87,764)	(68,104)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	113,196	132,856
Core Technology [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset		79,800
Accumulated Amortization		(79,800)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization		0
Customer relationships [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	13,050	13,050
Accumulated Amortization	(12,784)	(10,043)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	266	3,007
Trademarks [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	5,700	5,700
Accumulated Amortization	(2,499)	(1,870)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	3,201	3,830
Covenants not to compete [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	3,100	3,100
Accumulated Amortization	(2,359)	(1,618)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	741	1,482
Technology licenses and patents [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	133,909	133,909
Accumulated Amortization	(77,955)	(65,690)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	55,954	68,219
Acquisition-related Intangible Assets [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	222,810	302,610
Accumulated Amortization	(105,406)	(161,435)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	117,404	141,175
Intangible assets subject to amortization [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	356,719	436,519
Accumulated Amortization	(183,361)	(227,125)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	$ 173,358	$ 209,394

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Litigation

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

From time to time, we are involved in various litigation, including those described below, among others. The litigation proceedings in which we are involved from time to time may include matters such as intellectual property, antitrust, commercial, labor, class action, and insurance disputes. The semiconductor industry is characterized by significant litigation seeking to enforce patent and other intellectual property rights. The Company has enforced and likely will continue to enforce its own intellectual property rights through litigation and related proceedings.

In each case listed below where the Company is the defendant, the Company intends to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that losses related to the litigation described below have occurred beyond the amounts, if any, which have been accrued. However, legal discovery and litigation is highly unpredictable and future legal developments may cause current estimates to change in future periods.

Patent Infringement Litigation With Round Rock Research LLC. On October 27, 2011, in response to infringement allegations by Round Rock Research LLC (“Round Rock”), the Company filed a lawsuit against Round Rock in the U.S. District Court for the Northern District of California. The lawsuit seeks a declaratory judgment that twelve Round Rock patents are invalid and/or not infringed by flash memory products sold by the Company. Round Rock has since withdrawn its allegations of infringement as to three of the patents. SanDisk has filed motions for summary judgment of invalidity directed at two additional Round Rock patents, and Round Rock has filed a motion for summary judgment as to certain affirmative defenses asserted by SanDisk to the counterclaims in this action. These motions are currently pending. Discovery is underway and expert discovery has not yet commenced in the case. Trial is currently scheduled to begin on August 11, 2014.

On May 3, 2012, Round Rock filed an action in the U.S. District Court for the District of Delaware alleging that the Company infringed eleven patents, and subsequently filed an amended complaint alleging that SanDisk’s infringement was willful. The parties agreed to dismiss one patent from this Delaware lawsuit that was also being litigated in the California case described above. Discovery is underway. Trial is currently scheduled to begin on September 29, 2014.

Ritz Camera Federal Antitrust Class Action. On June 25, 2010, Ritz Camera & Image, LLC (“Ritz”) filed a complaint in the U.S. District Court for the Northern District of California (the “District Court”), alleging that the Company violated federal antitrust law by conspiring to monopolize and monopolizing the market for flash memory products. The lawsuit captioned Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, purports to be on behalf of direct purchasers of flash memory products sold by the Company and joint ventures controlled by the Company from June 25, 2006 through the present. The complaint alleges that the Company created and maintained a monopoly by fraudulently obtaining patents and using them to restrain competition and by allegedly converting other patents for its competitive use. On February 24, 2011, the District Court issued an Order granting in part and denying in part the Company’s motion to dismiss which resulted in Dr. Harari being dismissed as a defendant. On September 19, 2011, the Company filed a petition for permission to file an interlocutory appeal in the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) for the portion of the District Court’s Order denying the Company’s motion to dismiss based on Ritz’s lack of standing to pursue Walker Process antitrust claims. On October 27, 2011, the District Court administratively closed the case pending the Federal Circuit’s ruling on the Company’s petition. On November 20, 2012, the Federal Circuit affirmed the District Court’s order denying SanDisk’s motion to dismiss. On December 2, 2012, the Federal Circuit issued its mandate returning the case to the District Court. Discovery is now open in the District Court. On February 20, 2013, Ritz filed a motion requesting that Albert Giuliano, the Chapter 7 Trustee of the Ritz bankruptcy estate, be substituted as the plaintiff in this case, which the District Court granted on July 5, 2013.

Samsung Federal Antitrust Action Against Panasonic and SD-3C. On July 15, 2010, Samsung Electronics Co., Ltd. (“Samsung”) filed an action in the U.S. District Court for the Northern District of California (the “District Court”) alleging various claims against Panasonic Corporation and Panasonic Corporation of North America (collectively, “Panasonic”) and SD-3C, LLC (“SD-3C”) under federal antitrust law pursuant to Sections 1 and 2 of the Sherman Act, and under California antitrust and unfair competition laws relating to the licensing practices and operations of SD-3C. The complaint seeks an injunction against collection of Secure Digital (“SD”) card royalties, treble damages, restitution, pre- and post-judgment interest, costs, and attorneys’ fees, as well as a declaration that Panasonic and SD-3C engaged in patent misuse and that the patents subject to such alleged misuse should be held unenforceable. The Company is not named as a defendant in this case, but it established SD-3C along with Panasonic and Toshiba, and the complaint includes various factual allegations concerning the Company. As a member of SD-3C, the Company may be responsible for a portion of any monetary award. Other requested relief, including an injunction or declaration of patent misuse, could result in a loss of revenue to the Company. Defendants filed a motion to dismiss on September 24, 2010, and Samsung filed a First Amended Complaint (“FAC”) on October 14, 2010. On August 25, 2011, the District Court dismissed the patent misuse claim with prejudice, but gave Samsung leave to amend its other claims. On January 3, 2012, the District Court granted defendants’ motion to dismiss Samsung’s complaint without leave to amend. Samsung has appealed, dated January 25, 2012. The briefing on appeal is complete but a hearing date has not yet been set.

Federal Antitrust Class Action Against SanDisk, et al. On March 15, 2011, a putative class action captioned Oliver v. SD-3C LLC, et al was filed in the U.S. District Court for the Northern District of California (the “District Court”) on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims against the Company, SD-3C, Panasonic, Toshiba, and Toshiba America Electronic Components, Inc. under federal antitrust law pursuant to Section 1 of the Sherman Act, California antirust and unfair competition laws, and common law. The complaint seeks an injunction of the challenged conduct, dissolution of “the cooperation agreements, joint ventures and/or cross-licenses alleged herein,” treble damages, restitution, disgorgement, pre- and post-judgment interest, costs, and attorneys’ fees. Plaintiffs allege that the Company (along with the other members of SD-3C) conspired to artificially inflate the royalty costs associated with manufacturing SD cards in violation of federal and California antitrust and unfair competition laws, which in turn allegedly caused plaintiffs to pay higher prices for SD cards. The allegations are similar to, and incorporate by reference the complaint in the Samsung Electronics Co., Ltd. v. Panasonic Corporation; Panasonic Corporation of North America; and SD-3C LLC described above. On May 21, 2012, the District Court granted Defendants’ motion to dismiss the complaint with prejudice. Plaintiffs have appealed. Briefing on the appeal was completed on June 21, 2013. No date for oral argument has been set.

Insurance Litigation. On November 30, 2012, the Company filed a complaint in the U.S. District Court for the Northern District of California against Zurich American Insurance Company (“Zurich”) for breach of an insurance contract issued by Zurich to the Company (the “Policy”). The action relates to Zurich’s denial of the Company’s claim under the Policy for coverage of losses suffered in connection with a power outage that occurred in December 2010 at the Fab 3 and Fab 4 facilities in Yokkaichi, Japan. The Company is seeking damages in an amount to be proven at trial, but in excess of approximately $60 million, less any applicable deductible, as well as costs and other associated remedies. Zurich filed its answer to the Company’s complaint on December 21, 2012. Trial is currently scheduled to begin on July 14, 2014.

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Balance Sheet Information-Other Assets (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Other Current Assets
Tax-related receivables	$ 189,059	$ 186,223
Other non-trade receivable	11,668	0
Prepayment to Flash Forward Ltd.	15,433	20,577
Derivative contract receivables	7,754	19,064
Prepaid expenses	13,118	13,221
Other current assets	14,899	21,794
Total other current assets	251,931	260,879
Other Assets, Noncurrent
Prepaid tax on intercompany transactions	39,932	42,118
Prepayment to Flash Forward Ltd.	0	5,144
Convertible note issuance costs	7,767	8,708
Long-term prepaid income tax	63,008	63,008
Other non-current assets	38,939	34,832
Total other non-current assets	$ 149,646	$ 153,810

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Commitments, Contingencies and Guarantees-Indemnity (Details Textual 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Supplier and Customer [Member]
Indemnification
Indemnification Accrual At Carrying Value	$ 0
Officers, Employees and Directors [Member]
Indemnification
Indemnification Accrual At Carrying Value	0	0
Environmental Cost [Member]
Indemnification
Indemnification Accrual At Carrying Value	$ 0

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Goodwill and Intangible Assets-Intangible Amortization (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Acquisition-related Intangible Assets [Member]
Estimated Amortization Expense of Intangible Assets
2013 (Remaining 6 months)	$ 21,156
2014	40,545
2015	40,380
2016	15,323
Intangible assets subject to amortization	117,404	141,175
Technology licenses and patents [Member]
Estimated Amortization Expense of Intangible Assets
2013 (Remaining 6 months)	11,334
2014	21,231
2015	20,056
2016	3,333
Intangible assets subject to amortization	$ 55,954	$ 68,219

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Investments and Fair Value Measurements-Fixed Income Maturities (Details 7) (Fixed Income Securities [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Fixed income securities by contractual maturity
Amortized Cost	$ 4,488,350	$ 4,920,082
Fair Value	4,498,967	4,945,325
Due Within One Year [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in one year or less	1,450,513
Fair Value, due in one year or less	1,455,297
Due Within Two to Five Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in years two through five	2,823,465
Fair Value, due in years two through five	2,829,301
Due Within Six To Ten Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in years six through ten	32,293
Fair Value, due in years six through ten	32,288
Due Over Ten Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due after year ten	182,079
Fair Value, due after year ten	$ 182,081

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Expense And Effective Tax Rate

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Provision for income taxes	$	121,668		$	6,017		$	189,333		$	58,180
Effective tax rate	31.7		%	31.7		%	30.7		%	31.4		%

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees

The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.32	0.40	0.38	0.43
Risk-free interest rate	0.72%	0.53%	0.68%	0.61%
Expected term	4.3 years	3.9 years	4.4 years	4.3 years
Estimated annual forfeiture rate	8.51%	8.59%	8.51%	8.59%
Weighted average fair value at grant date	$16.22	$11.34	$16.44	$16.72

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.33	0.38	0.33	0.38
Risk-free interest rate	0.13%	0.15%	0.13%	0.15%
Expected term	½ year	½ year	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24	$12.54	$12.24

Stock options and stock appreciation rights

A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of June 30, 2013 and changes during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	1,010		52.14
Exercised	(4,954	)	34.17			98,469
Forfeited	(300	)	43.20
Expired	(2,316	)	60.78
Options and SARs outstanding at June 30, 2013	8,866		40.38		4.2	183,720
Options and SARs vested and expected to vest after June 30, 2013, net of forfeitures	8,440		40.00		4.1	178,132
Options and SARs exercisable at June 30, 2013	4,748		35.12		3.1	123,343

Summary of the changes in RSUs outstanding

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	2,131		52.25
Vested	(851	)	42.18		44,068
Forfeited	(180	)	45.97
Non-vested share units at June 30, 2013	4,177		48.15		201,113

Share-based compensation expense

The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	2,447		$	1,923		$	4,164		$	3,460
Research and development	12,704			10,623			24,344			20,650
Sales and marketing	4,701			3,634			8,572			7,263
General and administrative	4,809			4,073			9,315			7,960
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488
Share-based compensation expense by type of award:
Stock options and SARs	$	8,054		$	9,426		$	16,323		$	18,642
RSUs	14,788			8,608			26,758			16,502
ESPP	1,819			2,219			3,314			4,189
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488

Fair value of options and RSUs

The total grant date fair value of options and RSUs vested during the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Fair value of options vested	$	7,282	$	8,214	$	21,850	$	22,974
Fair value of RSUs vested	6,082		4,283		35,903		23,584
Total fair value of options and RSUs vested	$	13,364	$	12,497	$	57,753	$	46,558

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Balance Sheet Information-Receivables (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Accounts Receivable, net
Accounts receivable from product revenues	$ 763,246	$ 766,583
Accounts receivable from license and royalty revenues	42,737	37,638
Allowance for doubtful accounts	(7,536)	(6,627)
Price protection, promotions and other activities	(162,354)	(171,569)
Total accounts receivable, net	$ 636,093	$ 626,025

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Investments and Fair Value Measurements-Fin Assets and Liabilities 2 (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 30, 2012
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	$ 1,533,898		$ 1,880,034
Long-term marketable securities	2,766,474		2,835,931
Total financial assets	5,120,439		5,548,126
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	10,351		13,584
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	742,523		610,129
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0		0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	4,377,916		4,937,997
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	10,351		13,584
Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	0		0
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0		0
Other Current and Noncurrent Liabilities [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	10,351		13,584
Other Current and Noncurrent Liabilities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	0		0
Other Current and Noncurrent Liabilities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	10,351		13,584
Other Current and Noncurrent Liabilities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	0		0
Cash Equivalents [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	812,313	[1]	812,103	[1]
Cash Equivalents [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	662,517	[1]	582,743	[1]
Cash Equivalents [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	149,796	[1]	229,360	[1]
Cash Equivalents [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	0	[1]	0	[1]
Short-term marketable securities [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	1,533,898		1,880,034
Short-term marketable securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	66,912		16,589
Short-term marketable securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	1,466,986		1,863,445
Short-term marketable securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	0		0
Long term Marketable Securities [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	2,766,474		2,835,931
Long term Marketable Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	13,094		10,797
Long term Marketable Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	2,753,380		2,825,134
Long term Marketable Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	0		0
Other Current and Non-Current Assets [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	7,754		20,058
Other Current and Non-Current Assets [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	0		0
Other Current and Non-Current Assets [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	7,754		20,058
Other Current and Non-Current Assets [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	$ 0		$ 0

[1] Cash equivalents exclude cash of $241.8 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012, respectively.

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Investments and Fair Value Measurements (Details Textual) (USD $)	Jun. 30, 2013	Dec. 30, 2012
Investments and Fair Value Measurements
Cash	$ 241,800,000	$ 183,400,000
Assets, Fair Value Disclosure	5,120,439,000	5,548,126,000
Liabilities, Fair Value Disclosure	10,351,000	13,584,000
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Inputs, Level 3 [Member]
Investments and Fair Value Measurements
Assets, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure	$ 0	$ 0

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Balance Sheet Information-Equity Investments (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Accounts, Notes, Loans and Financing Receivable
Related Party Transactions	$ 1,204,740	$ 1,460,112
Flash Partners Ltd [Member]
Accounts, Notes, Loans and Financing Receivable
Notes Receivable	156,455	180,254
Investments	202,796	232,547
Flash Alliance Ltd [Member]
Accounts, Notes, Loans and Financing Receivable
Notes Receivable	343,192	476,800
Investments	302,285	342,048
Flash Forward Ltd [Member]
Accounts, Notes, Loans and Financing Receivable
Notes Receivable	141,314	162,810
Investments	58,698	65,653
Flash Ventures [Member]
Accounts, Notes, Loans and Financing Receivable
Related Party Transactions	$ 1,204,740	$ 1,460,112

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Organization and Summary of Significant Accounting Policies (Details Textuals)	3 Months Ended
	Jun. 30, 2013 Week	Jul. 01, 2012 Week	Dec. 30, 2012
Organization and Presentation
Exchange rate used to translate Japanese yen to U.S. dollar	99.07	79.53	85.99
Number of Weeks in Fiscal Quarter	13	13

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Share-Based Compensation-Option Rollforward (Details 2) (Employee Stock Option [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 30, 2012
Employee Stock Option [Member]
Stock options and stock appreciation rights
Options and SARs outstanding Beginning Balance, Shares	15,426
Options and SARs outstanding Beginning Balance, Weighted Average Exercise Price (per share)	$ 40.73
Options and SARs outstanding Beginning Balance, Weighted Average Remaining Contractual Term	4 years 2 months	3 years 2 months
Options and SARs outstanding Beginning Balance, Aggregate Intrinsic Value	$ 109,411
Granted, Shares	1,010
Granted Weighted Average Exercise Price (per share)	$ 52.14
Exercised, Shares	(4,954)
Exercised Weighted Average Exercise Price (per share)	$ 34.17
Exercised Aggregate Intrinsic Value	98,469
Forfeited, Shares	(300)
Forfeited Weighted Average Exercise Price (per share)	$ 43.20
Expired, Shares	(2,316)
Expired Weighted Average Exercise Price (per share)	$ 60.78
Options and SARs outstanding Ending Balance, shares	8,866	15,426
Options and SARs outstanding Ending Balance, Weighted Average Exercise Price (per share)	$ 40.38	$ 40.73
Options and SARs outstanding Ending Balance, Weighted Average Remaining Contractual Term	4 years 2 months	3 years 2 months
Options and SARs outstanding Ending Balance, Aggregate Intrinsic Value	183,720	109,411
Stock options and stock appreciation rights, expected to vest
Options and SARs vested and expected to vest, net of forfeitures, Shares	8,440
Options and SARs vested and expected to vest, net of forfeitures,Weighted Average Exercise Price (per share)	$ 40.00
Options and SARs vested and expected to vest, net of forfeitures, Weighted Average Remaining Contractual Term	4 years 1 month
Options and SARs vested and expected to vest, net of forfeitures, Aggregate Intrinsic Value	178,132
Stock options and stock appreciation rights, exercisable
Options and SARs, Exercisable, shares	4,748
Options and SARs, Exercisable, Weighted Average Exercise Price	$ 35.12
Options and SARs, Exercisable, Weighted Average Remaining Contractual Term	3 years 1 month
Options and SARs, Exercisable, Intrinsic Value	$ 123,343

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Net Income Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Numerator for basic net income per share:
Net income	$ 261,789	$ 12,969	$ 428,018	$ 127,354
Denominator for basic net income per share:
Weighted average common shares outstanding	241,519	242,276	242,019	242,579
Basic net income per share	$ 1.08	$ 0.05	$ 1.77	$ 0.53
Numerator for diluted net income per share:
Net income	$ 261,789	$ 12,969	$ 428,018	$ 127,354
Denominator for diluted net income per share:
Weighted average common shares outstanding	241,519	242,276	242,019	242,579
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	2,733	2,294	3,083	3,447
Effect of dilutive 1% Sr. Convertible Notes due 2013	1,563	0	467	0
Shares used in computing diluted net income per share	245,815	244,570	245,569	246,026
Diluted net income per share	$ 1.06	$ 0.05	$ 1.74	$ 0.52
Antidilutive Shares
Anti-dilutive shares excluded from net income per share calculation	32,515	74,276	34,670	71,043

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Share-Based Compensation-Valuation Parameters (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Employee Stock Option [Member]
Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	32.00%	40.00%	38.00%	43.00%
Risk-free interest rate	0.72%	0.53%	0.68%	0.61%
Expected term	4 years 4 months	3 years 11 months	4 years 5 months	4 years 4 months
Estimated annual forfeiture rate	8.51%	8.59%	8.51%	8.59%
Weighted average fair value at grant date	$ 16.22	$ 11.34	$ 16.44	$ 16.72
Employee Stock Purchase Plan Shares [Member]
Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees
Dividend yield	0.00%	0.00%	0.00%	0.00%
Expected volatility	33.00%	38.00%	33.00%	38.00%
Risk-free interest rate	0.13%	0.15%	0.13%	0.15%
Expected term	0 years 6 months	0 years 6 months	0 years 6 months	0 years 6 months
Weighted average fair value at grant date	$ 12.54	$ 12.24	$ 12.54	$ 12.24

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Derivatives and Hedging Activities (Details 3) (Foreign exchange contracts [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Foreign exchange contracts [Member]
Derivative Instruments, Gain (Loss)
Foreign exchange contracts	$ (139)	$ (799)	$ (446)	$ (5,246)

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Share-Based Compensation-Plan Info (Details Textuals 2)	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
2013 Incentive Plan [Member]
Stock Plan Summary
Effective Date of Plan Acquisition		Jun. 12, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date		7 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	20,000,000	20,000,000
Common Stock, Capital Shares Reserved for Future Issuance	10,000,000	10,000,000
Additional Common Stock Added to Reserve Kept for Incentive Plan		31,626
2005 Incentive Plan [Member]
Stock Plan Summary
Stock Plan Termination Date	Jun. 12, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Date		7 years
2005 Employee Stock Purchase Plan [Member]
Stock Purchase Plan Activity
Purchase price of common stock under Employee stock purchase plan as a percentage of fair market value of share	85.00%	85.00%

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Financing Arrangements (Tables)

6 Months Ended

Jun. 30, 2013

Debt Instrument

Schedule of Long-term Debt Instruments

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	June 30, 2013			December 30, 2012
1% Notes due 2013	$	—		$	928,061
Less: Unamortized bond discount	—			(21,353		)
Net carrying amount of 1% Notes due 2013	—			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(190,374		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	809,626			789,913
Total convertible debt	809,626			1,696,621
Less: Convertible short-term debt	—			(906,708		)
Convertible long-term debt	$	809,626		$	789,913

1% Sr. Convertible Notes due 2013 [Member]

Debt Instrument

Interest cost recognized for Convertible notes

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	1,162	$	2,321	$	3,481	$	4,640
Amortization of bond issuance costs	318		696		1,014		1,392
Amortization of bond discount	6,964		13,276		21,022		26,301
Total interest cost recognized	$	8,444	$	16,293	$	25,517	$	32,333

1.5% Sr. Convertible Notes due 2017 [Member]

Debt Instrument

Interest cost recognized for Convertible notes

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	3,750	$	3,750	$	7,500	$	7,500
Amortization of bond issuance costs	666		666		1,333		1,333
Amortization of bond discount	9,802		9,080		19,321		17,941
Total interest cost recognized	$	14,218	$	13,496	$	28,154	$	26,774

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Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Organization and Summary of Significant Accounting Policies

Organization

These interim Condensed Consolidated Financial Statements are unaudited but reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of SanDisk Corporation and its subsidiaries (the “Company”) as of June 30, 2013, the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income for the three and six months endedJune 30, 2013 and July 1, 2012, and the Condensed Consolidated Statements of Cash Flows for the six months endedJune 30, 2013 and July 1, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10–K filed with the SEC on February 19, 2013. The results of operations for the three and six months endedJune 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The second quarters of fiscal years 2013 and 2012 ended on June 30, 2013 and July 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 99.07, 85.99 and 79.53 at June 30, 2013, December 30, 2012 and July 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Note 4, “Balance Sheet Information,” as well as cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows. Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using its flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

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Derivatives and Hedging Activities

6 Months Ended

Jun. 30, 2013

Derivative Instruments, Gain (Loss)

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivatives and Hedging Activities

The Company uses derivative instruments primarily to manage exposures to foreign currency. The Company’s primary objective in holding derivative instruments is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designated for trading or speculative purposes. The Company’s derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored by the Company on an ongoing basis.

The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value and provides qualitative disclosures about objectives and strategies for using derivative instruments, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as cost of revenues or other income (expense), or as other comprehensive income (“OCI”). The Company does not offset or net the fair value amounts of derivative instruments and separately discloses the fair value amounts of the derivative instruments as either assets or liabilities.

Cash Flow Hedges. The Company uses forward contracts designated as cash flow hedges to hedge a portion of future forecasted purchases in Japanese yen. The gain or loss on the effective portion of a cash flow hedge is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized, or reclassified into other income (expense) if the hedged transaction becomes probable of not occurring. Any gain or loss after a hedge is no longer designated, because it is no longer probable of occurring or it is related to an ineffective portion of a cash flow hedge, as well as any amount excluded from the Company’s hedge effectiveness, is recognized as other income (expense) immediately. As of June 30, 2013, the Company had forward contracts in place to hedge future purchases of approximately 24.5 billion Japanese yen, or approximately $247 million based upon the exchange rate as of June 30, 2013, and the net unrealized loss on the effective portion of these cash flow hedges was ($7.4) million. The forward contracts on the Company’s future Japanese yen wafer purchases will settle in fiscal year 2013.

Other Derivatives. Other derivatives that are non-designated consist primarily of forward and cross currency swap contracts to minimize the risk associated with the foreign exchange effects of revaluing monetary assets and liabilities. Monetary assets and liabilities denominated in foreign currencies and the associated outstanding forward and cross currency swap contracts were marked-to-market at June 30, 2013 with realized and unrealized gains and losses included in other income (expense). As of June 30, 2013, the Company had foreign currency forward contracts hedging exposures in European euros, British pounds and Japanese yen. Foreign currency forward contracts were outstanding to buy and sell U.S. dollar equivalents of approximately $107.9 million and ($72.5) million in foreign currencies, respectively, based upon the exchange rates at June 30, 2013.

The Company currently has a cross currency swap contract to exchange Japanese yen for U.S. dollars that requires the Company to comply with certain covenants, the strictest of which is to maintain a minimum liquidity of $1.0 billion. Liquidity is defined as the sum of the Company’s cash and cash equivalents and short and long-term marketable securities. This cross currency swap contract was outstanding to sell U.S. dollar equivalents of approximately $29.3 million based upon the exchange rate at June 30, 2013. Should the Company fail to comply with these covenants, the Company may be required to settle the unrealized gain or loss on the foreign exchange contract prior to the original maturity date. The Company was in compliance with these covenants as of June 30, 2013.

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts. Fair value of derivative contracts as of June 30, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	72	$	—	$	—	$	—
Foreign exchange contracts not designated	7,682		19,064		—		994
Total derivatives	$	7,754	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	7,454	$	7,058	$	—	$	—
Foreign exchange contracts not designated	2,897		6,526		—		—
Total derivatives	$	10,351	$	13,584	$	—	$	—

Foreign Exchange and Equity Market Risk Contracts Designated as Cash Flow Hedges. The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended											Six months ended
	Amount of gain (loss) recognized in OCI					Amount of gain (loss) reclassified from AOCI to earnings						Amount of gain (loss) recognized in OCI						Amount of gain (loss) reclassified from AOCI to earnings
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(7,263	)	$	30,141	$	(17,933	)	$	(1,529	)	$	(37,893	)	$	(38,920	)	$	(19,374	)	$	4,785

Foreign exchange contracts designated as cash flow hedges relate primarily to wafer purchases in Japanese yen. Gains and losses associated with foreign exchange contracts designated as cash flow hedges are expected to be recorded in cost of revenues when reclassified out of AOCI. The Company expects to realize the majority of the AOCI balance related to foreign exchange contracts within the next twelve months.

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(139	)	$	(799	)	$	(446	)	$	(5,246	)

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations. The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gain (loss) on foreign exchange contracts including forward point income	$	(3,194	)	$	(2,376	)	$	6,465		$	2,586
Gain (loss) from revaluation of foreign currency exposures hedged by foreign exchange contracts	1,975			2,242			(9,408		)	(1,969		)

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Financing Arrangements

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Financing Arrangements

Financing Arrangements

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	June 30, 2013			December 30, 2012
1% Notes due 2013	$	—		$	928,061
Less: Unamortized bond discount	—			(21,353		)
Net carrying amount of 1% Notes due 2013	—			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(190,374		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	809,626			789,913
Total convertible debt	809,626			1,696,621
Less: Convertible short-term debt	—			(906,708		)
Convertible long-term debt	$	809,626		$	789,913

1% Convertible Senior Notes Due 2013. On May 15, 2013, the maturity date for the 1% Convertible Senior Notes due May 15, 2013 (“1% Notes due 2013”), the Company settled the 1% Notes due 2013 through an all-cash transaction for principal and accrued interest of $928.1 million and $4.6 million, respectively. As of the date of the redemption, the Company had no further obligations related to the 1% Notes due 2013. In connection with the maturity of the 1% Notes due 2013, the associated convertible bond hedge transaction also terminated, with no shares purchased under the convertible bond hedge agreement. As of June 30, 2013, there were warrants outstanding to purchase up to 11.3 million shares of the Company’s common stock which mature on 20 different dates from August 23, 2013 through September 20, 2013 and are exercisable at each respective maturity date at an exercise price of $95.03 per share. At each maturity date, the Company may, at its option, elect to settle the warrants on a net share basis.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	1,162	$	2,321	$	3,481	$	4,640
Amortization of bond issuance costs	318		696		1,014		1,392
Amortization of bond discount	6,964		13,276		21,022		26,301
Total interest cost recognized	$	8,444	$	16,293	$	25,517	$	32,333

The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for each of the three and six months endedJune 30, 2013 and July 1, 2012.

1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (“1.5% Notes due 2017”) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below, based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from the sale of the 1.5% Notes due 2017 were $981.0 million.

The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. As of June 30, 2013, the carrying value of the equity component of $294.0 million was unchanged from the date of issuance.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Contractual interest coupon	$	3,750	$	3,750	$	7,500	$	7,500
Amortization of bond issuance costs	666		666		1,333		1,333
Amortization of bond discount	9,802		9,080		19,321		17,941
Total interest cost recognized	$	14,218	$	13,496	$	28,154	$	26,774

The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each of the three and six months endedJune 30, 2013 and July 1, 2012. The remaining unamortized bond discount of $190.4 million as of June 30, 2013 will be amortized over the remaining life of the 1.5% Notes due 2017, which is approximately 4.1 years.

Concurrent with the issuance of the 1.5% Notes due 2017, the Company sold warrants to acquire up to approximately 19.1 million shares of its common stock at an exercise price of $73.33 per share. The warrants mature on 40 different dates from November 13, 2017 through January 10, 2018 and are exercisable at the maturity date. At each maturity date, the Company may, at its option, elect to settle the warrants on a net share basis. In addition, concurrent with the issuance of the 1.5% Notes due 2017, the Company entered into a convertible bond hedge transaction in which counterparties agreed to sell to the Company up to approximately 19.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 1.5% Notes due 2017. As of June 30, 2013, the Company had not purchased any shares under this convertible bond hedge agreement.

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Commitments, Contingencies and Guarantees-JV Leases (Details 1) In Thousands, unless otherwise specified			6 Months Ended								6 Months Ended										6 Months Ended
	Jun. 30, 2013 Flash Alliance Ltd [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] JPY (¥)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2008-06 [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2008-06 [Member] JPY (¥)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-03 [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-07 [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-07 [Member] JPY (¥)	Jun. 30, 2013 Flash Partners Ltd [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] JPY (¥)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2010-04 [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2010-04 [Member] JPY (¥)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-01 [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-01 [Member] JPY (¥)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-11 [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-11 [Member] JPY (¥)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2012-03 [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Jun. 30, 2013 Flash Forward Ltd [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] JPY (¥)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2011-11 [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2011-11 [Member] JPY (¥)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-03 [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-07 [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-07 [Member] JPY (¥)	Jun. 30, 2013 Flash Ventures [Member] USD ($)		Jun. 30, 2013 Flash Ventures [Member] JPY (¥)	Dec. 30, 2012 Flash Ventures [Member] USD ($)
Company's portion of the remaining guarantee obligations under each of Flash Ventures' master lease facilities
Lease Agreement Type			Original	Original	Original	Original	Refinanced	Refinanced			Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced			Original	Original	Original	Original	Original	Original
Guarantee of Flash Ventures equipment leases	$ 261,133	¥ 25,900,000	$ 40,659	¥ 4,000,000	$ 76,367	¥ 7,600,000	$ 144,107	¥ 14,300,000	$ 123,090	¥ 12,200,000	$ 12,174	¥ 1,200,000	$ 18,822	¥ 1,900,000	$ 56,209	¥ 5,600,000	$ 35,885	¥ 3,500,000	$ 228,147	¥ 22,600,000	$ 124,205	¥ 12,300,000	$ 75,680	¥ 7,500,000	$ 28,262	¥ 2,800,000	$ 612,370	[1]	¥ 60,700,000	$ 926,000
Lease Expiration (year)			Jul. 31, 2013	Jul. 31, 2013	Mar. 31, 2017	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2017			Oct. 31, 2014	Oct. 31, 2014	Jun. 30, 2014	Jun. 30, 2014	Oct. 31, 2014	Oct. 31, 2014	May 31, 2015	May 31, 2015			Dec. 30, 2016	Dec. 30, 2016	Mar. 31, 2017	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2017

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

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Balance Sheet Information

6 Months Ended

Jun. 30, 2013

Balance Sheet Information [Abstract]

Balance Sheet Information

Balance Sheet Information

Accounts Receivable, net. Accounts receivable, net was as follows (in thousands):

	June 30, 2013			December 30, 2012
Accounts receivable from product revenues	$	763,246		$	766,583
Accounts receivable from license and royalty revenues	42,737			37,638
Allowance for doubtful accounts	(7,536		)	(6,627		)
Price protection, promotions and other activities	(162,354		)	(171,569		)
Total accounts receivable, net	$	636,093		$	626,025

Inventory. Inventory was as follows (in thousands):

	June 30, 2013		December 30, 2012
Raw material	$	400,078	$	404,634
Work-in-process	110,509		102,249
Finished goods	212,816		243,192
Total inventory	$	723,403	$	750,075

Other Current Assets. Other current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Tax-related receivables	$	189,059	$	186,223
Other non-trade receivable	11,668		—
Prepayment to Flash Forward Ltd.	15,433		20,577
Derivative contract receivables	7,754		19,064
Prepaid expenses	13,118		13,221
Other current assets	14,899		21,794
Total other current assets	$	251,931	$	260,879

Notes Receivable and Investments in Flash Ventures. Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	June 30, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	156,455	$	180,254
Notes receivable, Flash Alliance Ltd.	343,192		476,800
Notes receivable, Flash Forward Ltd.	141,314		162,810
Investment in Flash Partners Ltd.	202,796		232,547
Investment in Flash Alliance Ltd.	302,285		342,048
Investment in Flash Forward Ltd.	58,698		65,653
Total notes receivable and investments in Flash Ventures	$	1,204,740	$	1,460,112

Equity-method investments and the Company’s maximum loss exposure related to Flash Ventures are discussed further in Note 11, “Commitments, Contingencies and Guarantees – Flash Ventures” and Note 12, “Related Parties and Strategic Investments.”

The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the borrower, where material or known. Impairments, when required for credit worthiness, are recorded in other income (expense). The Company makes or will make long-term loans to Flash Ventures to fund new process technologies and additional wafer capacities. The Company aggregates its Flash Ventures notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity. For all reporting periods presented, no loans were past due and no loan impairments were recorded.

Other Non-current Assets. Other non-current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	39,932	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	7,767		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	38,939		34,832
Total other non-current assets	$	149,646	$	153,810

Other Current Accrued Liabilities. Other current accrued liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Accrued payroll and related expenses	$	139,927	$	102,269
Derivative contract payables	10,351		13,584
Taxes payable	116,062		25,476
Other accrued liabilities	147,131		116,210
Total other current accrued liabilities	$	413,471	$	257,539

Non-current Liabilities. Non-current liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Deferred tax liabilities	$	10,178	$	28,672
Income tax liabilities	197,202		208,629
Deferred credits on intercompany transactions	50,147		58,548
Other non-current liabilities	99,054		112,098
Total non-current liabilities	$	356,581	$	407,947

Warranties. The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Balance, beginning of period	$	38,972		$	32,119		$	38,787		$	26,957
Additions and adjustments to cost of revenues	6,040			3,073			10,918			13,479
Usage	(6,657		)	(3,552		)	(11,350		)	(8,796		)
Balance, end of period	$	38,355		$	31,640		$	38,355		$	31,640

The majority of the Company’s products have a warranty of less than three years, with a small number of products having a warranty ranging up to ten years or more. For warranties ten years or greater, including lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure. A provision for the estimated future cost related to warranty expense is recorded at the time of customer invoice. The Company’s warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair or replacement costs, differ from the Company’s estimates, increases or decreases to its warranty liability would be required.

Comprehensive Income (Loss) Note

Accumulated Other Comprehensive Income (Loss). AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	June 30, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	6,765		$	15,919
Foreign currency translation	6,255			155,389
Hedging activities	(24,706		)	(6,187		)
Total accumulated other comprehensive income (loss)	$	(11,686	)	$	165,121

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended					Six months ended
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012
Available-for-sale investments	$	(7,525	)	$	841	$	(5,472	)	$	3,834
Foreign currency translation	(9,549		)	7,353		(27,860		)	(6,842		)
	$	(17,074	)	$	8,194	$	(33,332	)	$	(3,008	)

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended						Six months ended
AOCI Component	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			Income Statement Line Item
Unrealized gain on available-for-sale investments	$	865		$	679		$	551		$	1,202		Interest (expense) and other income (expense), net
Tax impact	(308		)	(248		)	(483		)	(417		)	Tax expense
Unrealized gain on available-for-sale investments, net of tax	557			431			68			785			Net of tax
Gain (loss) on hedging activities	(17,933		)	(1,529		)	(19,374		)	4,785			Cost of revenues
Tax impact	—			—			—			—			Tax expense
Gain (loss) on hedging activities, net of tax	(17,933		)	(1,529		)	(19,374		)	4,785			Net of tax
Total reclassifications for the period, net of tax	$	(17,376	)	$	(1,098	)	$	(19,306	)	$	5,570		Net of tax

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Derivatives and Hedging Activities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Non-designated cash flow hedges, assets
Total derivatives, assets	$ 7,754	$ 19,064
Foreign exchange contracts [Member] | Other Current Assets [Member]
Designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Assets	72	0
Non-designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Non-designated, Assets	7,682	19,064
Total derivatives, assets	7,754	19,064
Foreign exchange contracts [Member] | Other Non-current Assets [Member]
Designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Assets	0	0
Non-designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Non-designated, Assets	0	994
Total derivatives, assets	0	994
Foreign exchange contracts [Member] | Other Current Accrued Liabilities [Member]
Designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Liabilities	7,454	7,058
Non-designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Non-designated, Liabilities	2,897	6,526
Total derivatives, liabilities	10,351	13,584
Foreign exchange contracts [Member] | Non-current Liabilities [Member]
Designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Liabilities	0	0
Non-designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Non-designated, Liabilities	0	0
Total derivatives, liabilities	$ 0	$ 0

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted net income (loss) per share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Numerator for basic net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for basic net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Basic net income per share	$	1.08	$	0.05	$	1.77	$	0.53
Numerator for diluted net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for diluted net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	2,733		2,294		3,083		3,447
Effect of dilutive 1.5% Notes due 2017	1,563		—		467		—
Shares used in computing diluted net income per share	245,815		244,570		245,569		246,026
Diluted net income per share	$	1.06	$	0.05	$	1.74	$	0.52
Anti-dilutive shares excluded from net income per share calculation	32,515		74,276		34,670		71,043

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Investments and Fair Value Measurements-Cash and Mkt Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012	Jul. 01, 2012	Jan. 01, 2012
Cash, Cash Equivalents and Marketable Securities [Abstract]
Cash and Cash Equivalents	$ 1,054,131	$ 995,470	$ 1,070,454	$ 1,167,496
Short-term marketable securities	1,533,898	1,880,034
Long-term marketable securities	2,766,474	2,835,931
Total cash, cash equivalents and marketable securities	$ 5,354,503	$ 5,711,435

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Income Taxes (Details Textuals) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012
Income Tax Contingency
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate			35.00%
Provision For Income Taxes
Unrecognized tax benefits that would impact the effective tax rate	$ 171.0		$ 171.0		$ 179.5
Expected decrease in unrecognized tax benefits within the next twelve months	79.8
Unrecognized tax benefits income tax penalties and interest expense or income	$ 0.9	$ 0.7	$ 1.6	$ 1.5

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Investments and Fair Value Measurements-AFS Realized Gains and Losses (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Gross realized gains and (losses) on sales of available-for-sale securities
Gross realized gains	$ 967	$ 949	$ 1,685	$ 2,024
Gross realized losses	$ (102)	$ (270)	$ (1,134)	$ (822)

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Income Taxes Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Income Tax Contingency
Provision for income taxes	$ 121,668	$ 6,017	$ 189,333	$ 58,180
Effective tax rate	31.70%	31.70%	30.70%	31.40%

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Goodwill and Intangible Assets-Goodwill (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Goodwill and Intangible Assets
Goodwill, Beginning Balance	$ 201,735
Goodwill, Purchase Accounting Adjustments	601
Goodwill, Ending Balance	$ 202,336

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Balance Sheet Information-Liabilities (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Other Current Accrued Liabilities
Accrued payroll and related expenses	$ 139,927	$ 102,269
Derivative contract payables	10,351	13,584
Taxes payable	116,062	25,476
Other accrued Liabilities	147,131	116,210
Total other current accrued liabilities	413,471	257,539
Non-current liabilities
Deferred tax liabilities	10,178	28,672
Income tax liabilities	197,202	208,629
Deferred credits on intercompany transactions	50,147	58,548
Other non-current liabilities	99,054	112,098
Total non-current liabilities	$ 356,581	$ 407,947

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Derivatives and Hedging Activities (Details Textuals)		6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2013 Realized within twelve months [Member] USD ($)	Jun. 30, 2013 Realized within twelve months [Member] JPY (¥)
Derivatives and Hedging Activities
Forward contracts cash flow hedge for future purchases of currency		$ 247,000,000	¥ 24,500,000,000
Unrealized Gain (Loss) on Foreign Currency Derivatives, Net, before Tax		(7,400,000)
Foreign currency forward contracts outstanding to buy dollar		107,900,000
Foreign currency forward contracts outstanding to sell dollar		(72,500,000)
Cash Flow Hedge
Minimum liquidity	1,000,000,000
Notional amount of currency swap transactions	$ 29,300,000

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Revenues	$ 1,476,263	$ 1,032,255	$ 2,816,992	$ 2,237,816
Cost of revenues	789,614	742,297	1,588,997	1,517,617
Amortization of acquisition-related intangible assets	9,830	9,181	19,660	22,912
Total cost of revenues	799,444	751,478	1,608,657	1,540,529
Gross profit	676,819	280,777	1,208,335	697,287
Operating expenses:
Research and development	172,041	152,397	343,166	293,354
Sales and marketing	63,601	52,261	122,728	101,296
General and administrative	46,877	37,692	91,981	70,283
Amortization and write-off of acquisition-related intangible assets	1,742	2,244	4,111	4,307
Total operating expenses	284,261	244,594	561,986	469,240
Operating income	392,558	36,183	646,349	228,047
Interest income	12,751	15,004	25,656	29,993
Interest (expense) and other income (expense), net	(21,852)	(32,201)	(54,654)	(72,506)
Total other income (expense), net	(9,101)	(17,197)	(28,998)	(42,513)
Income before income taxes	383,457	18,986	617,351	185,534
Provision for income taxes	121,668	6,017	189,333	58,180
Net income	$ 261,789	$ 12,969	$ 428,018	$ 127,354
Net income per share:
Basic	$ 1.08	$ 0.05	$ 1.77	$ 0.53
Diluted	$ 1.06	$ 0.05	$ 1.74	$ 0.52
Shares used in computing net income per share:
Basic	241,519	242,276	242,019	242,579
Diluted	245,815	244,570	245,569	246,026

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Provision for Income Taxes

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Provision for income taxes	$	121,668		$	6,017		$	189,333		$	58,180
Effective tax rate	31.7		%	31.7		%	30.7		%	31.4		%

The provision for income taxes for the three and six months endedJune 30, 2013 differs from the U.S. statutory tax rate of 35% primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development (“R&D”) credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to the Company’s Irish, Chinese, Israeli and Japanese entities. Earnings in these countries, where tax rates are lower than the U.S. notional rate, contributed to the majority of the difference between the rate of the Company’s tax provision and the U.S. statutory tax rate. The lower effective tax rate for the six months endedJune 30, 2013, compared to the same period in fiscal year 2012, was attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit for fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of June 30, 2013, the Company believes that most of its deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $171.0 million and $179.5 million as of June 30, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $79.8 million at June 30, 2013. Income tax expense for the three and six months endedJune 30, 2013 and July 1, 2012 included interest and penalties of $0.9 million, $1.6 million, $0.7 million and $1.5 million, respectively.

The Company is subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service (“IRS”) completed its field audit of the Company’s federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report.  The most significant proposed adjustments are comprised of related party transactions between SanDisk Corporation and its foreign subsidiaries.  The Company is contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached.

The Company strongly believes the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that the Company’s previously reported income tax provisions for the years in question are appropriate.  The Company believes that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner that is not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of the Company’s federal income tax returns for fiscal years 2009 through 2011. The Company does not expect a resolution of this audit to be reached during the next twelve months. In addition, the Company is currently under audit by various state and international tax authorities. The Company cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm the Company’s financial position, results of operations or liquidity.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012
Cash flows from operating activities:
Net income	$ 428,018	$ 127,354
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	65,494	5,963
Depreciation	108,212	69,703
Amortization	121,246	132,280
Provision for doubtful accounts	1,142	(1,724)
Share-based compensation expense	46,395	39,333
Excess tax benefit from share-based plans	(15,661)	(11,021)
Impairment and other	(5,516)	(9,871)
Other non-operating	(360)	9,440
Changes in operating assets and liabilities:
Accounts receivable, net	(11,210)	194,509
Inventory	27,507	(183,715)
Other assets	21,573	60,274
Accounts payable trade	15,370	(3,410)
Accounts payable to related parties	(46,787)	(41,432)
Other liabilities	109,021	(301,394)
Total adjustments	436,426	(41,065)
Net cash provided by (used in) operating activities	864,444	86,289
Cash flows from investing activities:
Purchases of short and long-term marketable securities	(1,997,087)	(1,362,066)
Proceeds from sales of short and long-term marketable securities	1,847,659	1,173,180
Proceeds from maturities of short and long-term marketable securities	506,905	407,430
Acquisition of property and equipment, net	(119,849)	(240,294)
Investment in Flash Ventures	0	(50,439)
Notes receivable issuances to Flash Ventures	0	(142,316)
Notes receivable proceeds from Flash Ventures	73,388	211,786
Purchased technology and other assets	(3,908)	(222)
Acquisitions, net of cash acquired	(142)	(69,204)
Net cash provided by (used in) investing activities	306,966	(72,145)
Cash flows from financing activities:
Repayment of debt financing	(928,061)	0
Proceeds from employee stock programs	163,016	50,672
Distribution to non-controlling interests	(87)	0
Excess tax benefit from share-based plans	15,661	11,021
Share repurchase program	(369,994)	(154,075)
Net cash received (paid) for stock repurchase contracts	0	(18,858)
Net cash provided by (used in) financing activities	(1,119,465)	(111,240)
Effect of changes in foreign currency exchange rates on cash	6,716	54
Net increase (decrease) in cash and cash equivalents	58,661	(97,042)
Cash and cash equivalents at beginning of the period	995,470	1,167,496
Cash and cash equivalents at end of the period	$ 1,054,131	$ 1,070,454

XML

Goodwill and Intangible Assets (Details Textual) (USD $)	6 Months Ended			3 Months Ended
	Jun. 30, 2013	Dec. 30, 2012	Jun. 30, 2013 Pliant Technology Inc. [Member]	Jun. 30, 2013 SMART Storage Systems (Global Holdings), Inc. [Member]
Goodwill and Finited-lived Intangible Assets
Goodwill, Purchase Accounting Adjustments	$ 601,000
Business Combinations
Business Acquisition, Contingent Consideration, Cash Payment				307,000,000
Business Acquisition, Date of Acquisition Agreement				Jul. 02, 2013
Business Acquisition, Description of Acquired Entity				a developer of enterprise solid state drives
Finite-Lived Intangible Assets
Finite-lived Intangible Assets, net			96,800,000
Indefinite-Lived Intangible Assets (Excluding Goodwill)
Indefinite-Lived Intangible Assets (Excluding Goodwill)			36,200,000
Intangible Assets, Net (Excluding Goodwill)	$ 210,883,000	$ 246,919,000	$ 133,000,000

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Current assets:
Cash and cash equivalents	$ 1,054,131	$ 995,470
Short-term marketable securities	1,533,898	1,880,034
Accounts receivable, net	636,093	626,025
Inventory	723,403	750,075
Deferred taxes	95,423	93,877
Other current assets	251,931	260,879
Total current assets	4,294,879	4,606,360
Long-term marketable securities	2,766,474	2,835,931
Property and equipment, net	674,249	665,542
Notes receivable and investments in Flash Ventures	1,204,740	1,460,112
Deferred taxes	115,789	168,718
Goodwill	202,336	201,735
Intangible assets, net	210,883	246,919
Other non-current assets	149,646	153,810
Total assets	9,618,996	10,339,127
Current liabilities:
Accounts payable trade	269,829	254,459
Accounts payable to related parties	168,019	214,806
Convertible short-term debt	0	906,708
Other current accrued liabilities	413,471	257,539
Deferred income on shipments to distributors and retailers and deferred revenue	256,664	248,155
Total current liabilities	1,107,983	1,881,667
Convertible long-term debt	809,626	789,913
Non-current liabilities	356,581	407,947
Total liabilities	2,274,190	3,079,527
Commitments and contingencies
Stockholders' equity:
Preferred stock	0	0
Common stock	240	241
Capital in excess of par value	5,124,289	5,027,271
Retained earnings	2,235,001	2,071,268
Accumulated other comprehensive income (loss)	(11,686)	165,121
Total stockholders' equity	7,347,844	7,263,901
Non-controlling interests	(3,038)	(4,301)
Total equity	7,344,806	7,259,600
Total liabilities and equity	$ 9,618,996	$ 10,339,127

XML

Balance Sheet Information-Warranty (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Movement in Standard Product Warranty Accrual [Roll Forward]
Product Warranty Accrual, beginning of period	$ 38,972	$ 32,119	$ 38,787	$ 26,957
Additions and adjustments to cost of revenues	6,040	3,073	10,918	13,479
Usage	(6,657)	(3,552)	(11,350)	(8,796)
Product Warranty Accrual, end of period	$ 38,355	$ 31,640	$ 38,355	$ 31,640

XML

Commitments, Contingencies and Guarantees-JV (Details Textual 1)	6 Months Ended		3 Months Ended		6 Months Ended				3 Months Ended		6 Months Ended				6 Months Ended								6 Months Ended
	Jun. 30, 2013 USD ($)	Dec. 30, 2012 USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] USD ($)	Jul. 01, 2012 Flash Partners Ltd [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] USD ($)	Jul. 01, 2012 Flash Partners Ltd [Member] USD ($)	Jun. 30, 2013 Flash Partners Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Partners Ltd [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] USD ($)	Jul. 01, 2012 Flash Alliance Ltd [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] USD ($)	Jul. 01, 2012 Flash Alliance Ltd [Member] USD ($)	Jun. 30, 2013 Flash Alliance Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Alliance Ltd [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Forward Ltd [Member] USD ($)	Jun. 30, 2013 Flash Forward Ltd [Member] SanDisk Corporation [Member]	Jun. 30, 2013 Flash Ventures [Member] USD ($)		Jun. 30, 2013 Flash Ventures [Member] JPY (¥)	Dec. 30, 2012 Flash Ventures [Member] USD ($)	Jun. 30, 2013 Flash Ventures [Member] Standard and Poor [Member]	Jun. 30, 2013 Flash Ventures [Member] Moody's [Member]	Jun. 30, 2013 Flash Ventures [Member] Rating and Investment Information [Member]	Jun. 30, 2013 Flash Ventures [Member] SanDisk Corporation [Member]	Jun. 30, 2013 Flash Ventures [Member] Toshiba Corporation [Member]
Venture Ownership
Firm's ownership in business venture																										49.90%
Partner's ownership in venture business																											50.10%
Venture Origination Year					Sep. 10, 2004						Jul. 07, 2006				Jul. 13, 2010	Jul. 13, 2010
Equity Investments
Notes Receivable, Related Parties, Noncurrent			$ 156,500,000		$ 156,500,000				$ 343,200,000		$ 343,200,000				$ 141,300,000				$ (641,000,000)			$ (820,000,000)
Equity investment in business venture			202,800,000		202,800,000			232,500,000	302,300,000		302,300,000			342,000,000	58,700,000		65,700,000		(564,000,000)			(640,000,000)
Cumulative translation adjustments	6,255,000	155,389,000	28,700,000		28,700,000			59,300,000	8,200,000		8,200,000			53,700,000	(12,500,000)		(3,700,000)
Equity Method Investment Difference Between Carrying Amount And Underlying Equity (Basis Adjustment)			300,000	800,000	600,000	2,100,000			2,100,000	3,800,000	5,000,000	7,800,000
Investment in capacity expansion																		50.00%
Master Lease Agreements
Joint Venture Master Equipment Lease Agreement Amount																			2,650,000,000		262,600,000,000
Joint Venture Master Equipment Lease Agreement Outstanding Amount																			1,220,000,000		121,300,000,000
Guarantee of Flash Ventures equipment leases			123,090,000		123,090,000		12,200,000,000		261,133,000		261,133,000		25,900,000,000		228,147,000	22,600,000,000			612,370,000	[1]	60,700,000,000	926,000,000
Master Lease Covenants
Minimum Rating																							BB-	BB-	BB+
External Credit Rating																							BB		BBB
Joint Venture Master Equipment Lease Agreement Guarantor Equity Covenant																			1,510,000,000
Tax Commitment
Unrecognized tax benefits from the contractual obligation	$ 197,200,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

XML

Commitments, Contingencies and Guarantees-Commitment Tbl (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Contractual Obligations
Facility and other operating leases	$ 15,744
Operating Leases, Future Minimum Payments, Net	15,744
Contractual Obligation	4,011,209
1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	1,067,500	[1]
Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	15,744	[2]
Operating Leases, Future Minimum Payments, Net	15,744	[2]
Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	57,405	[2]
Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	47,345
Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	51,601
Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	255,705	[2],[3]
1 Year or Less [Member]
Contractual Obligations
Contractual Obligation	804,525
1 Year or Less [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	7,500	[1]
1 Year or Less [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	3,379	[2]
Operating Leases, Future Minimum Payments, Net	3,379	[2]
1 Year or Less [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	27,405	[2]
1 Year or Less [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	46,167
1 Year or Less [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	44,587
1 Year or Less [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	255,705	[2],[3]
2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Contractual Obligation	1,472,437
2 - 3 Years (Fiscal 2014 and 2015) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	30,000	[1]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	9,712	[2]
Operating Leases, Future Minimum Payments, Net	9,712	[2]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	30,000	[2]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	1,070
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	7,014
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[2],[3]
4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Contractual Obligation	1,601,441
4 - 5 Years (Fiscal 2016 and 2017) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	1,030,000	[1]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	2,371	[2]
Operating Leases, Future Minimum Payments, Net	2,371	[2]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	0	[2]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	108
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[2],[3]
More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Contractual Obligation	132,806
More than 5 Years (Beyond Fiscal 2017) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	0	[1]
More than 5 Years (Beyond Fiscal 2017) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	282	[2]
Operating Leases, Future Minimum Payments, Net	282	[2]
More than 5 Years (Beyond Fiscal 2017) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	0	[2]
More than 5 Years (Beyond Fiscal 2017) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
More than 5 Years (Beyond Fiscal 2017) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
More than 5 Years (Beyond Fiscal 2017) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[2],[3]
Flash Partners Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	459,073	[2],[4],[5]
Flash Partners Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	92,683	[2],[4],[5]
Flash Partners Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	247,061	[2],[4],[5]
Flash Partners Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	108,555	[2],[4],[5]
Flash Partners Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	10,774	[2],[4],[5]
Flash Alliance Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	1,469,113	[2],[4],[5]
Flash Alliance Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	175,833	[2],[4],[5]
Flash Alliance Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	885,333	[2],[4],[5]
Flash Alliance Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	317,414	[2],[4],[5]
Flash Alliance Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	90,533	[2],[4],[5]
Flash Forward Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	587,723	[2],[4],[5]
Flash Forward Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	151,266	[2],[4],[5]
Flash Forward Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	262,247	[2],[4],[5]
Flash Forward Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	142,993	[2],[4],[5]
Flash Forward Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	$ 31,217	[2],[4],[5]

[1] In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

[2] Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at June 30, 2013.

[3] Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

[4] Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

[5] Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

XML

Commitments Contingencies and Guarantees (Tables)

6 Months Ended

Jun. 30, 2013

Commitments Contingencies and Guarantees [Abstract]

Company's portion of the remaining guarantee obligations under each of Flash Ventures' master lease facilities

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at June 30, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.2	$	12,174	2014
January 2011	Refinanced	1.9		18,822		2014
November 2011	Refinanced	5.6		56,209		2014
March 2012	Refinanced	3.5		35,885		2015
		12.2		123,090
Flash Alliance
June 2008	Original	4.0		40,659		2013
March 2012	Original	7.6		76,367		2017
July 2012	Refinanced	14.3		144,107		2017
		25.9		261,133
Flash Forward
November 2011	Original	12.3		124,205		2016
March 2012	Original	7.5		75,680		2017
July 2012	Original	2.8		28,262		2017
		22.6		228,147
Total guarantee obligations		¥	60.7	$	612,370

Remaining guarantee obligations

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of June 30, 2013 in U.S. dollars based upon the yen/dollar exchange rate at June 30, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	134,938	$	51,826	$	186,764
Year 2	137,240		35,962		173,202
Year 3	90,591		11,544		102,135
Year 4	58,465		63,714		122,179
Year 5	8,691		19,399		28,090
Total guarantee obligations	$	429,925	$	182,445	$	612,370

Contractual Obligations

Contractual cash obligations and commitments as of June 30, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 6 months in Fiscal 2013)		2 – 3 Years (Fiscal 2014 and 2015)		4 – 5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	15,744	(4)	$	3,379	$	9,712	$	2,371	$	282
Flash Partners (1)	459,073		(4)(5)	92,683		247,061		108,555		10,774
Flash Alliance (1)	1,469,113		(4)(5)	175,833		885,333		317,414		90,533
Flash Forward (1)	587,723		(4)(5)	151,266		262,247		142,993		31,217
Toshiba research and development	57,405		(4)	27,405		30,000		—		—
Capital equipment purchase commitments	47,345			46,167		1,070		108		—
1.5% Convertible senior notes principal and interest (2)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	51,601			44,587		7,014		—		—
Noncancelable production purchase commitments (3)	255,705		(4)	255,705		—		—		—
Total contractual cash obligations	$	4,011,209		$	804,525	$	1,472,437	$	1,601,441	$	132,806

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽³⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁴⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at June 30, 2013.

⁽⁵⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

Off Balance Sheet Arrangements

Off-balance sheet arrangements are as follows (in thousands):

	June 30, 2013
Guarantee of Flash Ventures equipment leases (1)	$	612,370

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

Operating leases future minimum payments

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2014 through fiscal year 2018. Future minimum lease payments are presented below (in thousands):

	June 30, 2013
Fiscal year:
2013 (remaining six months)	$	3,640
2014	5,960
2015	4,857
2016	1,837
2017	680
2018	282
	17,256
Sublease income to be received in the future under noncancelable subleases	(1,512		)
Net operating leases	$	15,744

Net rent expense

Net rent expense was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Rent expense, net	$	1,330	$	1,685	$	3,173	$	2,798

XML

Balance Sheet Information (Tables)

6 Months Ended

Jun. 30, 2013

Balance Sheet Information [Abstract]

Accounts Receivable from Product Revenues, net

Accounts receivable, net was as follows (in thousands):

	June 30, 2013			December 30, 2012
Accounts receivable from product revenues	$	763,246		$	766,583
Accounts receivable from license and royalty revenues	42,737			37,638
Allowance for doubtful accounts	(7,536		)	(6,627		)
Price protection, promotions and other activities	(162,354		)	(171,569		)
Total accounts receivable, net	$	636,093		$	626,025

Inventory

Inventory was as follows (in thousands):

	June 30, 2013		December 30, 2012
Raw material	$	400,078	$	404,634
Work-in-process	110,509		102,249
Finished goods	212,816		243,192
Total inventory	$	723,403	$	750,075

Other Current Assets

Other current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Tax-related receivables	$	189,059	$	186,223
Other non-trade receivable	11,668		—
Prepayment to Flash Forward Ltd.	15,433		20,577
Derivative contract receivables	7,754		19,064
Prepaid expenses	13,118		13,221
Other current assets	14,899		21,794
Total other current assets	$	251,931	$	260,879

Notes Receivable and Investments in the Flash Ventures with Toshiba

Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	June 30, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	156,455	$	180,254
Notes receivable, Flash Alliance Ltd.	343,192		476,800
Notes receivable, Flash Forward Ltd.	141,314		162,810
Investment in Flash Partners Ltd.	202,796		232,547
Investment in Flash Alliance Ltd.	302,285		342,048
Investment in Flash Forward Ltd.	58,698		65,653
Total notes receivable and investments in Flash Ventures	$	1,204,740	$	1,460,112

Other Noncurrent Assets

Other non-current assets were as follows (in thousands):

	June 30, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	39,932	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	7,767		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	38,939		34,832
Total other non-current assets	$	149,646	$	153,810

Other Current Accrued Liabilities

Other current accrued liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Accrued payroll and related expenses	$	139,927	$	102,269
Derivative contract payables	10,351		13,584
Taxes payable	116,062		25,476
Other accrued liabilities	147,131		116,210
Total other current accrued liabilities	$	413,471	$	257,539

Non Current liabilities

Non-current liabilities were as follows (in thousands):

	June 30, 2013		December 30, 2012
Deferred tax liabilities	$	10,178	$	28,672
Income tax liabilities	197,202		208,629
Deferred credits on intercompany transactions	50,147		58,548
Other non-current liabilities	99,054		112,098
Total non-current liabilities	$	356,581	$	407,947

Schedule of Product Warranty Liability

The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Balance, beginning of period	$	38,972		$	32,119		$	38,787		$	26,957
Additions and adjustments to cost of revenues	6,040			3,073			10,918			13,479
Usage	(6,657		)	(3,552		)	(11,350		)	(8,796		)
Balance, end of period	$	38,355		$	31,640		$	38,355		$	31,640

Schedule of Accumulated Other Comprehensive Income (Loss)

AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	June 30, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	6,765		$	15,919
Foreign currency translation	6,255			155,389
Hedging activities	(24,706		)	(6,187		)
Total accumulated other comprehensive income (loss)	$	(11,686	)	$	165,121

Allocation Of Amount Of Income Tax Benefit Expense

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended					Six months ended
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012
Available-for-sale investments	$	(7,525	)	$	841	$	(5,472	)	$	3,834
Foreign currency translation	(9,549		)	7,353		(27,860		)	(6,842		)
	$	(17,074	)	$	8,194	$	(33,332	)	$	(3,008	)

Reclassification Of Accumulated Other Comprehensive Income Amounts

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended						Six months ended
AOCI Component	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			Income Statement Line Item
Unrealized gain on available-for-sale investments	$	865		$	679		$	551		$	1,202		Interest (expense) and other income (expense), net
Tax impact	(308		)	(248		)	(483		)	(417		)	Tax expense
Unrealized gain on available-for-sale investments, net of tax	557			431			68			785			Net of tax
Gain (loss) on hedging activities	(17,933		)	(1,529		)	(19,374		)	4,785			Cost of revenues
Tax impact	—			—			—			—			Tax expense
Gain (loss) on hedging activities, net of tax	(17,933		)	(1,529		)	(19,374		)	4,785			Net of tax
Total reclassifications for the period, net of tax	$	(17,376	)	$	(1,098	)	$	(19,306	)	$	5,570		Net of tax

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Derivatives and Hedging Activities (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Effect of nondesignated derivative contracts
Gain (loss) on foreign exchange contracts including forward point income	$ (3,194)	$ (2,376)	$ 6,465	$ 2,586
Gain (loss) from revaluation of foreign currency exposures hedged by foreign exchange contracts	$ 1,975	$ 2,242	$ (9,408)	$ (1,969)

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Commitments, Contingencies and Guarantees-Future Lease Obligation (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Operating leases future minimum payments
2013 (remaining six months)	$ 3,640
2014	5,960
2015	4,857
2016	1,837
2017	680
2018	282
Total future minimum lease rental payments	17,256
Sublease income to be received in the future under noncancelable subleases	(1,512)
Operating Leases, Future Minimum Payments, Net	$ 15,744

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Balance Sheet Information (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012
Balance Sheet Information
Financing Receivable, Recorded Investment, Past Due	$ 0		$ 0		$ 0
Provision for Loan and Lease Losses	$ 0	$ 0	$ 0	$ 0
Product Warranties Disclosures [Abstract]
Weighted Average Warranty For Companys Products	3 years		3 years
Maximum Warranty For Companys Products	10 years		10 years

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Share-Based Compensation-RSU Rollforward (Details 3) (Restricted Stock Units (RSUs) [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Restricted Stock Units (RSUs) [Member]
Summary of the changes in RSUs outstanding
Beginning Balance,Non-vested share units	3,077
Beginning Balance,Non-vested share units Weighted Average Grant Date Fair Value (per share)	$ 43.51
Beginning Balance,Non-vested share units Aggregate Intrinsic Value	$ 131,622,000
Granted, Shares	2,131
Granted Weighted Average Grant Date Fair Value (per share)	$ 52.25
Vested, Shares	(851)
Vested Weighted Average Grant Date Fair Value (per share)	$ 42.18
Vested Aggregate Intrinsic Value	$ 44,068,000
Forfeited, Shares	(180)
Forfeited Weighted Average Grant Date Fair Value (per share)	$ 45.97
Ending Balance Non-vested share units	4,177
Ending Balance Non-vested share units Weighted Average Grant Date Fair Value (per share)	$ 48.15
Ending Balance,Non-vested share units Aggregate Intrinsic Value	$ 201,113,000

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Investments and Fair Value Measurements-Debt Instrument FV (Details 8) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Related costs and the fair values based on quoted market prices
Convertible debt, carrying value	$ 809,626	$ 1,696,621
Convertible Debt [Member]
Related costs and the fair values based on quoted market prices
Convertible debt, carrying value	809,626	1,696,621
Convertible debt, fair value	1,345,260	2,087,190
1% Sr. Convertible Notes due 2013 [Member]
Related costs and the fair values based on quoted market prices
Convertible debt, carrying value	0	906,708
Convertible debt, fair value	0	927,820
1.5% Sr. Convertible Notes due 2017 [Member]
Related costs and the fair values based on quoted market prices
Convertible debt, carrying value	809,626	789,913
Convertible debt, fair value	$ 1,345,260	$ 1,159,370

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Investments and Fair Value Measurements-AFS Investments (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Fixed Income Securities [Member]
Available-for-sale investments
Amortized Cost	$ 4,488,350	$ 4,920,082
Gross Unrealized Gain	19,316	27,111
Gross Unrealized Loss	(8,699)	(1,868)
Fair Value	4,498,967	4,945,325
U.S. Treasury and government agency securities [Member]
Available-for-sale investments
Amortized Cost	128,798	27,377
Gross Unrealized Gain	8	9
Gross Unrealized Loss	(1)	0
Fair Value	128,805	27,386
U.S. Government-sponsored agency securities [Member]
Available-for-sale investments
Amortized Cost	17,599	28,339
Gross Unrealized Gain	17	41
Gross Unrealized Loss	(23)	(1)
Fair Value	17,593	28,379
International Government Securities [Member]
Available-for-sale investments
Amortized Cost	10,210	153,936
Gross Unrealized Gain	1	13
Gross Unrealized Loss	(24)	(3)
Fair Value	10,187	153,946
Corporate notes and bonds [Member]
Available-for-sale investments
Amortized Cost	894,157	864,170
Gross Unrealized Gain	2,184	3,890
Gross Unrealized Loss	(1,159)	(938)
Fair Value	895,182	867,122
Asset-backed securities [Member]
Available-for-sale investments
Amortized Cost	174,920	179,356
Gross Unrealized Gain	62	453
Gross Unrealized Loss	(332)	0
Fair Value	174,650	179,809
Mortgage-backed securities [Member]
Available-for-sale investments
Amortized Cost	1,533	1,872
Gross Unrealized Gain	0	8
Gross Unrealized Loss	(25)	(14)
Fair Value	1,508	1,866
Municipal notes and bonds [Member]
Available-for-sale investments
Amortized Cost	3,261,133	3,665,032
Gross Unrealized Gain	17,044	22,697
Gross Unrealized Loss	(7,135)	(912)
Fair Value	$ 3,271,042	$ 3,686,817

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Investments and Fair Value Measurements-AFS FV and Unrealized Losses (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	$ 1,386,657
Less than 12 months, Gross Unrealized Loss	(8,699)
U.S. Treasury and government agency securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	24,294
Less than 12 months, Gross Unrealized Loss	(1)
U.S. Government-sponsored agency securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	5,763
Less than 12 months, Gross Unrealized Loss	(23)
International Government Securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	2,976
Less than 12 months, Gross Unrealized Loss	(24)
Corporate notes and bonds [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	334,887
Less than 12 months, Gross Unrealized Loss	(1,159)
Asset-backed securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	120,003
Less than 12 months, Gross Unrealized Loss	(332)
Mortgage Backed Securities, Other [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	1,508
Less than 12 months, Gross Unrealized Loss	(25)
Municipal notes and bonds [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	897,226
Less than 12 months, Gross Unrealized Loss	$ (7,135)

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Share-Based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-based Compensation

Share-based Benefit Plans

Share-based Plans. The Company has a share-based compensation program that provides its Board of Directors with broad discretion in creating equity incentives for employees, officers, non-employee board members and non-employee service providers. This program includes incentive and non-statutory stock option awards, stock appreciation right awards, restricted stock awards, and performance-based cash bonus awards for Section 16 executive officers. These awards are granted under various programs, all of which are stockholder approved. Stock option awards generally vest as follows: 25% of the shares vest on the first anniversary of the vesting commencement date and the remaining 75% vest proportionately each quarter over the next 12 quarters of continued service. Restricted stock unit awards generally vest in equal annual installments over a 4-year period, subject to continued service. Under the Company’s current non-employee director compensation policy, stock option awards granted to non-employee board members are immediately exercisable upon grant but vest in one installment on the earlier of (i) the first anniversary of the grant date or (ii) the day immediately preceding the Company’s next annual meeting of stockholders following the grant date and are subject to the Company’s right of repurchase for any shares that have been exercised but have not yet vested. Restricted stock unit awards granted to non-employee board members vest in one installment on the earlier of (i) the first anniversary of the grant date or (ii) the day immediately preceding the Company’s next annual meeting of stockholders following the grant date. Additionally, the Company has an Employee Stock Purchase Plan (“ESPP”) that allows employees to purchase shares of common stock at 85% of the fair market value at the subscription date or the date of purchase, whichever is lower.

2013 Incentive Plan. On June 12, 2013, the Company’s stockholders approved the 2013 Incentive Plan (“2013 Plan”). Shares of the Company’s common stock may be issued under the 2013 Plan pursuant to two separate equity incentive programs: (i) the discretionary grant program under which stock options and stock appreciation rights may be granted to officers and other employees, non-employee board members and independent consultants, and (ii)  the stock issuance and cash bonus program under which eligible persons may, at the discretion of the plan administrator, be issued shares of the Company’s common stock pursuant to restricted stock awards, restricted stock units or other share-based awards which vest upon the completion of a designated service period or the attainment of pre-established performance milestones, be awarded cash bonus opportunities which are earned through the attainment of pre-established performance milestones, or be issued shares of the Company’s common stock through direct purchase or as a bonus for services rendered to the Company. A total of 20,000,000 shares of the Company’s common stock have initially been reserved for issuance under the 2013 Plan. The 2013 Plan share reserve may be increased by up to 10,000,000 shares of common stock to the extent that outstanding share-based awards under the 1995 Stock Option Plan, the 1995 Non-Employee Directors Stock Option Plan, and the 2005 Incentive Plan expire, terminate or lapse, of which 31,626 shares of common stock as of June 30, 2013 had been added to the 2013 Plan share reserve. All options granted under the 2013 Plan are granted with an exercise price equal to the fair market value of the common stock on the date of grant and will expire seven years from the date of grant.

2005 Incentive Plan. The 2005 Incentive Plan terminated on June 12, 2013, and no further share-based awards were made under this plan after that date. However, share-based awards that were outstanding under this plan on June 12, 2013 continue to be governed by their existing terms. Options granted may be exercised for shares of the Company’s common stock at any time prior to the expiration of the seven-year option term or any earlier termination of those options in connection with the optionee’s cessation of service with the Company.

Valuation Assumptions

Option Plan Shares. The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.32	0.40	0.38	0.43
Risk-free interest rate	0.72%	0.53%	0.68%	0.61%
Expected term	4.3 years	3.9 years	4.4 years	4.3 years
Estimated annual forfeiture rate	8.51%	8.59%	8.51%	8.59%
Weighted average fair value at grant date	$16.22	$11.34	$16.44	$16.72

Employee Stock Purchase Plan Shares. The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended		Six months ended
	June 30, 2013	July 1, 2012	June 30, 2013	July 1, 2012
Dividend yield	None	None	None	None
Expected volatility	0.33	0.38	0.33	0.38
Risk-free interest rate	0.13%	0.15%	0.13%	0.15%
Expected term	½ year	½ year	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24	$12.54	$12.24

Share-based Compensation Plan Activities

Stock Options and SARs. A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of June 30, 2013 and changes during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	1,010		52.14
Exercised	(4,954	)	34.17			98,469
Forfeited	(300	)	43.20
Expired	(2,316	)	60.78
Options and SARs outstanding at June 30, 2013	8,866		40.38		4.2	183,720
Options and SARs vested and expected to vest after June 30, 2013, net of forfeitures	8,440		40.00		4.1	178,132
Options and SARs exercisable at June 30, 2013	4,748		35.12		3.1	123,343

At June 30, 2013, the total compensation cost related to stock options granted to employees under the Company’s share-based compensation plans but not yet recognized was approximately $79.3 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.4years. As of June 30, 2013, the Company had fully expensed all of its SARs awards.

Restricted Stock Units. Restricted stock units (“RSUs”) are settled in shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. The cost of these awards is determined using the fair value of the Company’s common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite vesting period.

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the six months endedJune 30, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	2,131		52.25
Vested	(851	)	42.18		44,068
Forfeited	(180	)	45.97
Non-vested share units at June 30, 2013	4,177		48.15		201,113

As of June 30, 2013, the Company had approximately $149.9 million of unrecognized compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized over a weighted average estimated remaining life of threeyears.

Employee Stock Purchase Plan. At June 30, 2013, there was approximately $0.9 million of total unrecognized compensation cost related to the Company’s ESPP that is expected to be recognized over a period of onemonth.

Share-based Compensation Expense. The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	2,447		$	1,923		$	4,164		$	3,460
Research and development	12,704			10,623			24,344			20,650
Sales and marketing	4,701			3,634			8,572			7,263
General and administrative	4,809			4,073			9,315			7,960
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488
Share-based compensation expense by type of award:
Stock options and SARs	$	8,054		$	9,426		$	16,323		$	18,642
RSUs	14,788			8,608			26,758			16,502
ESPP	1,819			2,219			3,314			4,189
Total share-based compensation expense	24,661			20,253			46,395			39,333
Total tax benefit recognized	(6,222		)	(4,676		)	(13,138		)	(9,845		)
Decrease in net income	$	18,439		$	15,577		$	33,257		$	29,488

Share-based compensation expense of $2.6 million and $1.8 million related to manufacturing personnel was capitalized into inventory as of June 30, 2013 and December 30, 2012, respectively.

The total grant date fair value of options and RSUs vested during the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Fair value of options vested	$	7,282	$	8,214	$	21,850	$	22,974
Fair value of RSUs vested	6,082		4,283		35,903		23,584
Total fair value of options and RSUs vested	$	13,364	$	12,497	$	57,753	$	46,558

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Share Repurchase Program (Details Textuals) (USD $) Share data in Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Share Repurchase Program Summary
Share Repurchase Program, Authorized Amount	$ 1,250,000,000
Share Repurchase Program, Remaining Authorized Repurchase Amount	646,100,000
Share Repurchased and Retired During Program, Shares	12.56
Payments for Repurchase of Common Stock, Aggregate	603,900,000
Share Repurchased and Retired During Period, Shares	6.83
Payments for Repurchase of Common Stock During Period	$ 369,900,000

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Related Parties and Strategic Investments (Tables)

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	June 30, 2013		December 30, 2012
Notes receivable	$	641	$	820
Equity investments	564		640
Operating lease guarantees	612		926
Prepayments	15		26
Maximum loss exposure	$	1,832	$	2,412

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Derivatives and Hedging Activities (Details 2) (Foreign exchange contracts [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Foreign exchange contracts [Member]
Effective portion of designated cash flow derivative contracts
Amount of gain (loss) recognized in OCI	$ (7,263)	$ 30,141	$ (37,893)	$ (38,920)
Amount of gain (loss) reclassified from AOCI to earnings	$ (17,933)	$ (1,529)	$ (19,374)	$ 4,785

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Commitments, Contingencies and Guarantees

6 Months Ended

Jun. 30, 2013

Commitments Contingencies and Guarantees [Abstract]

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

Flash Ventures

Flash Ventures, the Company’s business ventures with Toshiba Corporation (“Toshiba”), consists of three separate legal entities: Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. The Company has a 49.9%ownership interest in each of these entities and Toshiba owns 50.1% of each of these entities. Through these ventures, the Company and Toshiba have collaborated in the development and manufacture of NAND flash memory products which are manufactured by Toshiba at its wafer fabrication facility located in Yokkaichi, Japan, using semiconductor manufacturing equipment owned or leased by Flash Ventures. The Flash Ventures purchase wafers from Toshiba at cost and then resell those wafers to the Company and Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in each Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers. In addition, the Company is committed to fund 49.9% of Flash Ventures’ costs to the extent that Flash Ventures’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.

Flash Partners. Flash Partners Ltd. (“Flash Partners”) was formed in fiscal year 2004. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 3”) located in Yokkaichi, Japan. As of June 30, 2013, the Company had notes receivable from Flash Partners of $156.5 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The Company also has guarantee obligations to Flash Partners; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Partners of $202.8 million and $232.5 million, respectively, denominated in Japanese yen, offset by $28.7 million and $59.3 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three and six months endedJune 30, 2013 and July 1, 2012, the Company recorded a basis adjustment of $0.3 million, $0.6 million, $0.8 million and $2.1 million, respectively, to its equity in earnings from Flash Partners related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Partners. Flash Partner’s share of the Fab 3 fabrication facility is fully equipped.

Flash Alliance. Flash Alliance Ltd. (“Flash Alliance”) was formed in fiscal year 2006. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 4”) located in Yokkaichi, Japan. As of June 30, 2013, the Company had notes receivable from Flash Alliance of $343.2 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The Company also has guarantee obligations to Flash Alliance; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Alliance of $302.3 million and $342.0 million, respectively, denominated in Japanese yen, offset by $8.2 million and $53.7 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three and six months endedJune 30, 2013 and July 1, 2012, the Company recorded a basis adjustment of $2.1 million, $5.0 million, $3.8 million and $7.8 million, respectively, to its equity earnings from Flash Alliance related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Alliance. Flash Alliance’s share of the Fab 4 fabrication facility is fully equipped.

Flash Forward. Flash Forward Ltd. (“Flash Forward”) was formed in fiscal year 2010. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 5”) located in Yokkaichi, Japan. Fab 5 is to be built in two phases. As of June 30, 2013, over half of the Phase 1 building has been equipped with wafer capacity or equipment required to enable technology transition of the Flash Ventures’ wafer capacity. No commitment has yet been made for further Phase 1 wafer capacity expansion beyond productivity improvements; however, the Company periodically reviews the opportunity for further Phase 1 capacity expansion. The Company and Toshiba each retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate level of equipment funding. To date, the Company has invested in 50% of the Flash Forward equipment. The Company and Toshiba have announced that the construction of the Phase 2 shell of the Fab 5 wafer fabrication facility will begin in August 2013 with expected completion in mid-2014. The Phase 2 shell is intended to be used primarily for technology transition of the existing Flash Ventures wafer capacity to 1Y and 1Z technology nodes and for a Bit-cost scaleable 3-Dimensional NAND (“BiCS”) pilot line.

As of June 30, 2013, the Company had notes receivable from Flash Forward of $141.3 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward with the note proceeds. The Company also has guarantee obligations to Flash Forward; see “Off-Balance Sheet Liabilities.” At June 30, 2013 and December 30, 2012, the Company had an equity investment in Flash Forward of $58.7 million and $65.7 million, respectively, denominated in Japanese yen, offset by ($12.5) million and ($3.7) million, respectively, of cumulative translation adjustments recorded in AOCI.

Toshiba Foundry.  In the first quarter of fiscal year 2013, the Company concluded its foundry arrangement with Toshiba.

Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled. These outstanding purchase commitments are included as part of the total “Noncancelable production purchase commitments” in the “Contractual Obligations” table.

Off-Balance Sheet Liabilities

Flash Ventures. The Flash Ventures sell and lease back from a consortium of financial institutions (“lessors”) a portion of their tools and have entered into equipment master lease agreements totaling 262.6 billion Japanese yen, or approximately $2.65 billion based upon the exchange rate at June 30, 2013. As of June 30, 2013, the total amount outstanding from these master leases was 121.3 billion Japanese yen, or approximately $1.22 billion based upon the exchange rate at June 30, 2013, of which the amount of the Company’s guarantee obligation of the Flash Ventures’ master lease agreements, which reflects future payments and any lease adjustments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

The master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, the master lease agreements contain an acceleration clause for certain events of default related to the Company as guarantor, including, among other things, the Company’s failure to maintain a minimum stockholders’ equity of at least $1.51 billion, and for one master lease agreement, which matures on July 31, 2013, the Company’s failure to maintain a minimum corporate rating of BB- from Standard & Poors (“S&P”) or Moody’s Corporation (“Moody’s”), or a minimum corporate rating of BB+ from Rating & Investment Information, Inc. (“R&I”). As of June 30, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of June 30, 2013, the Company’s R&I credit rating was BBB, two notches above the required minimum corporate rating threshold from R&I; and the Company’s S&P credit rating was BB, one notch above the required minimum corporate rating threshold from S&P. If both S&P and R&I were to downgrade the Company’s credit rating below the minimum corporate rating threshold, the Company’s stockholders’ equity falls below $1.51 billion, or other events of default occur, Flash Ventures would become non-compliant under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by the Company, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a non-compliance event were to occur and if the Company failed to reach a resolution, the Company could be required to pay a portion or the entire outstanding lease obligations covered by its guarantees under such Flash Ventures master lease agreements.

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at June 30, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.2	$	12,174	2014
January 2011	Refinanced	1.9		18,822		2014
November 2011	Refinanced	5.6		56,209		2014
March 2012	Refinanced	3.5		35,885		2015
		12.2		123,090
Flash Alliance
June 2008	Original	4.0		40,659		2013
March 2012	Original	7.6		76,367		2017
July 2012	Refinanced	14.3		144,107		2017
		25.9		261,133
Flash Forward
November 2011	Original	12.3		124,205		2016
March 2012	Original	7.5		75,680		2017
July 2012	Original	2.8		28,262		2017
		22.6		228,147
Total guarantee obligations		¥	60.7	$	612,370

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of June 30, 2013 in U.S. dollars based upon the yen/dollar exchange rate at June 30, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	134,938	$	51,826	$	186,764
Year 2	137,240		35,962		173,202
Year 3	90,591		11,544		102,135
Year 4	58,465		63,714		122,179
Year 5	8,691		19,399		28,090
Total guarantee obligations	$	429,925	$	182,445	$	612,370

Guarantees

Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged patent infringement. The scope of such indemnity varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. The Company may periodically engage in litigation as a result of these indemnification obligations. The Company’s insurance policies exclude coverage for third-party claims for patent infringement. Although the liability is not remote, the nature of the patent infringement indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its suppliers and customers. Historically, the Company has not made any significant indemnification payments under any such agreements. As of June 30, 2013, no amounts had been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

As permitted under Delaware law and the Company’s certificate of incorporation and bylaws, the Company has agreements, or has assumed agreements in connection with its acquisitions, whereby it indemnifies certain of its officers and employees, and each of its directors for certain events or occurrences while the officer, employee or director is, or was, serving at the Company’s or the acquired company’s request in such capacity. The term of the indemnification period is for the officer’s, employee’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited; however, the Company has a Director and Officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of June 30, 2013 or December 30, 2012, as these liabilities are not reasonably estimable even though liabilities under these agreements are not remote.

The Company and Toshiba have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company and Toshiba have also entered into a Patent Indemnification Agreement under which, in many cases, the Company will share in the expenses associated with the defense and cost of settlement associated with such claims. This agreement provides limited protection for the Company against third-party claims that NAND flash memory products manufactured and sold by Flash Ventures infringe third-party patents. The Company has not made any indemnification payments under any such agreements. As of June 30, 2013, no amounts have been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

Contractual Obligations and Off-Balance Sheet Arrangements

The following tables summarize the Company’s contractual cash obligations, commitments and off-balance sheet arrangements at June 30, 2013, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Contractual Obligations. Contractual cash obligations and commitments as of June 30, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 6 months in Fiscal 2013)		2 – 3 Years (Fiscal 2014 and 2015)		4 – 5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	15,744	(4)	$	3,379	$	9,712	$	2,371	$	282
Flash Partners (1)	459,073		(4)(5)	92,683		247,061		108,555		10,774
Flash Alliance (1)	1,469,113		(4)(5)	175,833		885,333		317,414		90,533
Flash Forward (1)	587,723		(4)(5)	151,266		262,247		142,993		31,217
Toshiba research and development	57,405		(4)	27,405		30,000		—		—
Capital equipment purchase commitments	47,345			46,167		1,070		108		—
1.5% Convertible senior notes principal and interest (2)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	51,601			44,587		7,014		—		—
Noncancelable production purchase commitments (3)	255,705		(4)	255,705		—		—		—
Total contractual cash obligations	$	4,011,209		$	804,525	$	1,472,437	$	1,601,441	$	132,806

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽³⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁴⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at June 30, 2013.

⁽⁵⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

The Company has excluded $197.2 million of unrecognized tax benefits (which includes penalties and interest) from the contractual obligation table above due to the uncertainty with respect to the timing of associated future cash flows at June 30, 2013. The Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Off-Balance Sheet Arrangements. Off-balance sheet arrangements are as follows (in thousands):

	June 30, 2013
Guarantee of Flash Ventures equipment leases (1)	$	612,370

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2014 through fiscal year 2018. Future minimum lease payments are presented below (in thousands):

	June 30, 2013
Fiscal year:
2013 (remaining six months)	$	3,640
2014	5,960
2015	4,857
2016	1,837
2017	680
2018	282
	17,256
Sublease income to be received in the future under noncancelable subleases	(1,512		)
Net operating leases	$	15,744

Net rent expense was as follows (in thousands):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Rent expense, net	$	1,330	$	1,685	$	3,173	$	2,798

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Commitments, Contingencies and Guarantees-JV Lease Amounts (Details 2) (Flash Ventures [Member]) In Thousands, unless otherwise specified	Jun. 30, 2013 USD ($)		Jun. 30, 2013 JPY (¥)	Dec. 30, 2012 USD ($)	Jun. 30, 2013 Payment of Principal Amortization [Member] USD ($)	Jun. 30, 2013 Purchase Option Exercise Price at Final Lease Terms [Member] USD ($)
Remaining guarantee obligations
Year 1	$ 186,764				$ 134,938	$ 51,826
Year 2	173,202				137,240	35,962
Year 3	102,135				90,591	11,544
Year 4	122,179				58,465	63,714
Year 5	28,090				8,691	19,399
Guarantee of Flash Ventures equipment leases	$ 612,370	[1]	¥ 60,700,000	$ 926,000	$ 429,925	$ 182,445

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

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Share Repurchase Program

6 Months Ended

Jun. 30, 2013

Share Repurchase Program [Abstract]

Treasury Stock [Text Block]

Share Repurchase Program

The Company’s Board of Directors has authorized up to $1.25 billion for share repurchases, of which$646.1 million remained available for share repurchases as of June 30, 2013. Under this program, shares repurchased are recorded as a reduction to capital in excess of par value and retained earnings in the Company’s Condensed Consolidated Balance Sheets. From inception of this share repurchase program through June 30, 2013, the Company had repurchased 12.56 million shares for $603.9 million, of which 6.83 million shares for an aggregate purchase price of $369.9 million were repurchased during the six months endedJune 30, 2013. As part of its share repurchase program, the Company may from time-to-time enter into structured share repurchase arrangements with financial institutions. During the six months endedJune 30, 2013, the Company did not enter into any structured share repurchase transactions.

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Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Investments and Fair Value Measurements [Abstract]

Investments and Fair Value Measurements

Investments and Fair Value Measurements

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	June 30, 2013		December 30, 2012
Cash and cash equivalents	$	1,054,131	$	995,470
Short-term marketable securities	1,533,898		1,880,034
Long-term marketable securities	2,766,474		2,835,931
Total cash, cash equivalents and marketable securities	$	5,354,503	$	5,711,435

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	613,718	$	—	$	—	$	613,718	$	582,743	$	—	$	—	$	582,743
Fixed income securities	128,805		4,370,162		—		4,498,967		27,386		4,917,939		—		4,945,325
Derivative assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	662,517	$	149,796	$	—	$	812,313	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	66,912		1,466,986		—		1,533,898		16,589		1,863,445		—		1,880,034
Long-term marketable securities	13,094		2,753,380		—		2,766,474		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $241.8 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012, respectively.

During the six months endedJune 30, 2013, the Company had no transfers of financial assets or liabilities between Level 1 and Level 2. As of June 30, 2013 and December 30, 2012, the Company had no financial assets or liabilities categorized as Level 3 and had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

Available-for-Sale Investments. Available-for-sale investments were as follows (in thousands):

	June 30, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
U.S. Treasury securities	$	128,798	$	8	$	(1	)	$	128,805	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	17,599		17		(23		)	17,593		28,339		41		(1		)	28,379
International government securities	10,210		1		(24		)	10,187		153,936		13		(3		)	153,946
Corporate notes and bonds	894,157		2,184		(1,159		)	895,182		864,170		3,890		(938		)	867,122
Asset-backed securities	174,920		62		(332		)	174,650		179,356		453		—			179,809
Mortgage-backed securities	1,533		—		(25		)	1,508		1,872		8		(14		)	1,866
Municipal notes and bonds	3,261,133		17,044		(7,135		)	3,271,042		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	4,488,350	$	19,316	$	(8,699	)	$	4,498,967	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

The fair value and gross unrealized losses on the available-for-sale securities that have been in a continuous unrealized loss position, aggregated by type of investment instrument, are summarized in the following table (in thousands). As of June 30, 2013, no securities have been in a continuous unrealized loss position for more than twelve months. Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	24,294	$	(1	)
U.S. government-sponsored agency securities	5,763		(23		)
International government securities	2,976		(24		)
Corporate notes and bonds	334,887		(1,159		)
Asset-backed securities	120,003		(332		)
Mortgage-backed securities	1,508		(25		)
Municipal notes and bonds	897,226		(7,135		)
Total	$	1,386,657	$	(8,699	)

The gross unrealized loss related to U.S. Treasury and government-sponsored agency securities, international government securities, corporate and municipal notes and bonds, and asset-backed and mortgage-backed securities was primarily due to changes in interest rates. The gross unrealized loss on all available-for-sale fixed income securities at June 30, 2013 was considered temporary in nature. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold an investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt security investments, the Company considered additional factors including the Company’s intent to sell the investments or whether it is “more likely than not” the Company will be required to sell the investments before the recovery of its amortized cost.

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gross realized gains	$	967		$	949		$	1,685		$	2,024
Gross realized losses	(102		)	(270		)	(1,134		)	(822		)

Fixed income securities by contractual maturity as of June 30, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,450,513	$	1,455,297
After one year through five years	2,823,465		2,829,301
After five years through ten years	32,293		32,288
After ten years	182,079		182,081
Total	$	4,488,350	$	4,498,967

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both June 30, 2013 and December 30, 2012. See Note 6, “Financing Arrangements,” regarding maturity of the 1% Sr. Convertible Notes due 2013.

	June 30, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	—	$	—	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	809,626		1,345,260		789,913		1,159,370
Total	$	809,626	$	1,345,260	$	1,696,621	$	2,087,190

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Balance Sheet Information-OCI (Details 7) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$ 6,765		$ 6,765		$ 15,919
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	6,255		6,255		155,389
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	(24,706)		(24,706)		(6,187)
Total accumulated other comprehensive income (loss)	(11,686)		(11,686)		165,121
Other Comprehensive Income (Loss), Tax, Portion Attributable to Parent
Available-for-sale investments	(7,525)	841	(5,472)	3,834
Foreign currency translation	(9,549)	7,353	(27,860)	(6,842)
Other Comprehensive Income (Loss), Tax	$ (17,074)	$ 8,194	$ (33,332)	$ (3,008)

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Balance Sheet Information-Inventory (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Inventory
Raw Material	$ 400,078	$ 404,634
Work-in-Process	110,509	102,249
Finished Goods	212,816	243,192
Total Inventory	$ 723,403	$ 750,075

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Commitments, Contingencies and Guarantees-Operating Leases (Details Textual 5)	Jun. 30, 2013
Operating Leased Assets
Operating Lease Expiration Minimum (Year)	2014
Operating Lease Expiration Maximum (Year)	2018

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Investments and Fair Value Measurements-Fin Assets and Liabilities 1 (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012
Financial assets measured at fair value on a recurring basis
Total financial assets	$ 5,120,439	$ 5,548,126
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	10,351	13,584
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	742,523	610,129
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0	0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	4,377,916	4,937,997
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	10,351	13,584
Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	0	0
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0	0
Derivative Liabilities [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	10,351	13,584
Derivative Liabilities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	0	0
Derivative Liabilities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	10,351	13,584
Derivative Liabilities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	0	0
Money Market Funds [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	613,718	582,743
Money Market Funds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	613,718	582,743
Money Market Funds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	0	0
Money Market Funds [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	0	0
Fixed Income Securities [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	4,498,967	4,945,325
Fixed Income Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	128,805	27,386
Fixed Income Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	4,370,162	4,917,939
Fixed Income Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	0	0
Derivative Assets [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	7,754	20,058
Derivative Assets [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	0	0
Derivative Assets [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	7,754	20,058
Derivative Assets [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	$ 0	$ 0

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Commitments, Contingencies and Guarantees-Financing Arrangements (Details Textual 4) (1.5% Sr. Convertible Notes due 2017 [Member], USD $) In Thousands, unless otherwise specified	1 Months Ended
	Aug. 31, 2010	Jun. 30, 2013	Dec. 30, 2012
1.5% Sr. Convertible Notes due 2017 [Member]
Debt Instruments
Aggregate principal amount of convertible notes, issued and sold	$ 1,000,000	$ 1,000,000	$ 1,000,000
Debt Instrument, Issuance Date	Aug. 20, 2010
Debt Instrument, Interest Rate, Stated Percentage	1.50%
Debt Instrument, Maturity Date	Aug. 15, 2017

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Share-Based Compensation-Expense Recognition (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 24,661	$ 20,253	$ 46,395	$ 39,333
Total tax benefit recognized	(6,222)	(4,676)	(13,138)	(9,845)
Decrease in net income	18,439	15,577	33,257	29,488
Stock options and SARs [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	8,054	9,426	16,323	18,642
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	14,788	8,608	26,758	16,502
Employee Stock Purchase Plan Shares [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	1,819	2,219	3,314	4,189
Cost of product revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	2,447	1,923	4,164	3,460
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	12,704	10,623	24,344	20,650
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	4,701	3,634	8,572	7,263
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 4,809	$ 4,073	$ 9,315	$ 7,960

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Financing Arrangements-Carrying Value and Interest (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 30, 2012	Aug. 31, 2010
Debt Summary
Convertible debt, carrying value	$ 809,626	$ 1,696,621
Convertible short-term debt, carrying value	0	(906,708)
Convertible long-term debt, carrying value	809,626	789,913
Carrying Value of Convertible Notes
Convertible debt, carrying value	809,626	1,696,621
1% Sr. Convertible Notes due 2013 [Member]
Debt Summary
Convertible debt, carrying value	0	906,708
Carrying Value of Convertible Notes
Convertible debt, par value	0	928,061
Unamortized bond discount	0	(21,353)
Convertible debt, carrying value	0	906,708
1.5% Sr. Convertible Notes due 2017 [Member]
Debt Summary
Convertible debt, carrying value	809,626	789,913
Carrying Value of Convertible Notes
Convertible debt, par value	1,000,000	1,000,000	1,000,000
Unamortized bond discount	(190,374)	(210,087)
Convertible debt, carrying value	$ 809,626	$ 789,913

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Related Parties and Strategic Investments (Details 1) (Flash Ventures [Member])	Jun. 30, 2013 USD ($)		Jun. 30, 2013 JPY (¥)	Dec. 30, 2012 USD ($)
Maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate
Notes receivable	$ 641,000,000			$ 820,000,000
Equity investments	564,000,000			640,000,000
Guarantee of Flash Ventures equipment leases	612,370,000	[1]	60,700,000,000	926,000,000
Prepayments	15,000,000			26,000,000
Maximum loss exposure	$ 1,832,000,000			$ 2,412,000,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 60.7 billion Japanese yen, or approximately $612 million based upon the exchange rate at June 30, 2013.

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Organization and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Operations

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using its flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Basis of Presentation

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The second quarters of fiscal years 2013 and 2012 ended on June 30, 2013 and July 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 99.07, 85.99 and 79.53 at June 30, 2013, December 30, 2012 and July 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Note 4, “Balance Sheet Information,” as well as cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows. Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Consolidation, Policy

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

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Net Income Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Net Income Per Share

Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended				Six months ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Numerator for basic net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for basic net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Basic net income per share	$	1.08	$	0.05	$	1.77	$	0.53
Numerator for diluted net income per share:
Net income	$	261,789	$	12,969	$	428,018	$	127,354
Denominator for diluted net income per share:
Weighted average common shares outstanding	241,519		242,276		242,019		242,579
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	2,733		2,294		3,083		3,447
Effect of dilutive 1.5% Notes due 2017	1,563		—		467		—
Shares used in computing diluted net income per share	245,815		244,570		245,569		246,026
Diluted net income per share	$	1.06	$	0.05	$	1.74	$	0.52
Anti-dilutive shares excluded from net income per share calculation	32,515		74,276		34,670		71,043

Basic earnings per share exclude any dilutive effects of stock options, SARs, RSUs, warrants and convertible debt. Diluted earnings per share include the dilutive effects of stock options, SARs, RSUs, ESPP and the 1.5% Notes due 2017. Certain common stock issuable under stock options, SARs, warrants and the 1.5% Notes due 2017 have been omitted from the current year diluted net income per share calculation because their inclusion is considered anti-dilutive. Certain common stock issuable under stock options, SARs, warrants, the 1% Notes due 2013 and the 1.5% Notes due 2017 have been omitted from the prior year diluted net income per share calculation because their inclusion is considered anti-dilutive.

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Share-Based Compensation-Activity (Details Textuals 1) (USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 30, 2012
Compensation and Benefits
Share-based compensation expense capitalized in inventory	$ 2.6	$ 1.8
Employee Stock Option [Member]
Compensation and Benefits
Total unrecognized compensation cost, net of forfeitures, related to awards granted to employees	79.3
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	2 years 5 months
Restricted Stock Units (RSUs) [Member]
Compensation and Benefits
Total unrecognized compensation cost, net of forfeitures, related to awards granted to employees	149.9
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	3 years 0 months
Employee Stock Purchase Plan Shares [Member]
Compensation and Benefits
Total unrecognized compensation expense for ESPP	$ 0.9
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	0 years 1 month

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Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Instruments, Gain (Loss)

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

Fair value of derivative contracts as of June 30, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	72	$	—	$	—	$	—
Foreign exchange contracts not designated	7,682		19,064		—		994
Total derivatives	$	7,754	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	June 30, 2013		December 30, 2012		June 30, 2013		December 30, 2012
Foreign exchange contracts designated	$	7,454	$	7,058	$	—	$	—
Foreign exchange contracts not designated	2,897		6,526		—		—
Total derivatives	$	10,351	$	13,584	$	—	$	—

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three and six months endedJune 30, 2013 and July 1, 2012 was as follows (in thousands):

	Three months ended											Six months ended
	Amount of gain (loss) recognized in OCI					Amount of gain (loss) reclassified from AOCI to earnings						Amount of gain (loss) recognized in OCI						Amount of gain (loss) reclassified from AOCI to earnings
	June 30, 2013			July 1, 2012		June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(7,263	)	$	30,141	$	(17,933	)	$	(1,529	)	$	(37,893	)	$	(38,920	)	$	(19,374	)	$	4,785

Derivative Instruments Gain Loss Recognized In Income Ineffective Portion And Amount Excluded From Effectiveness Testing Net

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Foreign exchange contracts	$	(139	)	$	(799	)	$	(446	)	$	(5,246	)

Effect Of Non-designated Derivative Contracts

The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gain (loss) on foreign exchange contracts including forward point income	$	(3,194	)	$	(2,376	)	$	6,465		$	2,586
Gain (loss) from revaluation of foreign currency exposures hedged by foreign exchange contracts	1,975			2,242			(9,408		)	(1,969		)

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Investments and Fair Value Measurements Fair Value Of Financial Instruments Policy

6 Months Ended

Jun. 30, 2013

Fair Value Of Financial Instruments Policy [Abstract]

Fair Value of Financial Instruments, Policy

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	SANDISK CORP
Entity Central Index Key	0001000180
Current Fiscal Year End Date	--12-29
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding	240,389,588
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Related Parties and Strategic Investments (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012
Related Parties and Strategic Investments
Accounts payable balances due to related party	$ 168,019,000		$ 168,019,000		$ 214,806,000
Flash Ventures [Member]
Related Parties and Strategic Investments
The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures	455,400,000	746,100,000	934,300,000	1,430,000,000
Repayment of loan from Flash Ventures	19,800,000	148,000,000	73,400,000	211,800,000
Accounts payable balances due to related party	$ 167,000,000		$ 167,000,000		$ 214,500,000
Flash Ventures [Member] | SanDisk Corp [Member]
Related Parties and Strategic Investments
Percentage of ownership with Related party	49.90%		49.90%

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Investments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of Available-for-sale Securities

Cash and Cash Equivalents and Marketable Securities

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	June 30, 2013		December 30, 2012
Cash and cash equivalents	$	1,054,131	$	995,470
Short-term marketable securities	1,533,898		1,880,034
Long-term marketable securities	2,766,474		2,835,931
Total cash, cash equivalents and marketable securities	$	5,354,503	$	5,711,435

Financial assets and liabilities measured at fair value on a recurring basis

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	613,718	$	—	$	—	$	613,718	$	582,743	$	—	$	—	$	582,743
Fixed income securities	128,805		4,370,162		—		4,498,967		27,386		4,917,939		—		4,945,325
Derivative assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured at fair value on a recurring basis

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	June 30, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	662,517	$	149,796	$	—	$	812,313	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	66,912		1,466,986		—		1,533,898		16,589		1,863,445		—		1,880,034
Long-term marketable securities	13,094		2,753,380		—		2,766,474		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		7,754		—		7,754		—		20,058		—		20,058
Total financial assets	$	742,523	$	4,377,916	$	—	$	5,120,439	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	10,351	$	—	$	10,351	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $241.8 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 30, 2012, respectively.

Available for Sale Investments

Available-for-sale investments were as follows (in thousands):

	June 30, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
U.S. Treasury securities	$	128,798	$	8	$	(1	)	$	128,805	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	17,599		17		(23		)	17,593		28,339		41		(1		)	28,379
International government securities	10,210		1		(24		)	10,187		153,936		13		(3		)	153,946
Corporate notes and bonds	894,157		2,184		(1,159		)	895,182		864,170		3,890		(938		)	867,122
Asset-backed securities	174,920		62		(332		)	174,650		179,356		453		—			179,809
Mortgage-backed securities	1,533		—		(25		)	1,508		1,872		8		(14		)	1,866
Municipal notes and bonds	3,261,133		17,044		(7,135		)	3,271,042		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	4,488,350	$	19,316	$	(8,699	)	$	4,498,967	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

Available-for-sale securities that were in an unrealized gain position

The fair value and gross unrealized losses on the available-for-sale securities that have been in a continuous unrealized loss position, aggregated by type of investment instrument, are summarized in the following table (in thousands). As of June 30, 2013, no securities have been in a continuous unrealized loss position for more than twelve months. Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	24,294	$	(1	)
U.S. government-sponsored agency securities	5,763		(23		)
International government securities	2,976		(24		)
Corporate notes and bonds	334,887		(1,159		)
Asset-backed securities	120,003		(332		)
Mortgage-backed securities	1,508		(25		)
Municipal notes and bonds	897,226		(7,135		)
Total	$	1,386,657	$	(8,699	)

Gross realized gains and (losses) on sales of available-for-sale securities

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended						Six months ended
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
Gross realized gains	$	967		$	949		$	1,685		$	2,024
Gross realized losses	(102		)	(270		)	(1,134		)	(822		)

Fixed income securities by contractual maturity

Fixed income securities by contractual maturity as of June 30, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,450,513	$	1,455,297
After one year through five years	2,823,465		2,829,301
After five years through ten years	32,293		32,288
After ten years	182,079		182,081
Total	$	4,488,350	$	4,498,967

Related costs and the fair values based on quoted market prices

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both June 30, 2013 and December 30, 2012. See Note 6, “Financing Arrangements,” regarding maturity of the 1% Sr. Convertible Notes due 2013.

	June 30, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	—	$	—	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	809,626		1,345,260		789,913		1,159,370
Total	$	809,626	$	1,345,260	$	1,696,621	$	2,087,190

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Financing Arrangements (Details Textuals) (USD $)	6 Months Ended			3 Months Ended	6 Months Ended		1 Months Ended	6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Dec. 30, 2012	Jun. 30, 2013 1% Sr. Convertible Notes due 2013 [Member]	Jun. 30, 2013 1% Sr. Convertible Notes due 2013 [Member]	Dec. 30, 2012 1% Sr. Convertible Notes due 2013 [Member]	Aug. 31, 2010 1.5% Sr. Convertible Notes due 2017 [Member]	Jun. 30, 2013 1.5% Sr. Convertible Notes due 2017 [Member]	Dec. 30, 2012 1.5% Sr. Convertible Notes due 2017 [Member]
Debt Instrument
Convertible debt, par value				$ 0	$ 0	$ 928,061,000	$ 1,000,000,000	$ 1,000,000,000	$ 1,000,000,000
Debt Instrument, Interest Rate, Effective Percentage				7.40%	7.40%	7.40%		6.85%	6.85%
Convertible Senior Notes, issuance date							Aug. 20, 2010
Convertible Senior Notes, due date				May 15, 2013			Aug. 15, 2017
Convertible senior notes, interest rate							1.50%
Initial conversion rate, number of share converted							19.0931
Conversion of notes, base conversion price							1,000
Initial conversion price per share							$ 52.37
Net proceeds from the offering of the Notes due							981,000,000
Principal amount of the liability component							706,000,000
Effective interest rate on the liability component							6.85%
Carrying value of the equity component							294,000,000	294,000,000	294,000,000
Debt Instrument, Unamortized Bond Discount				0	0	21,353,000		190,374,000	210,087,000
Remaining amortization period of convertible debt								4 years 2 months
Unamortized Debt Issuance Expense	7,767,000		8,708,000
Debt Redemption
Extinguishment of Debt, Amount	(928,061,000)	0		928,100,000
Interest Payable				$ 4,600,000
Warrants
Number of shares initially agreed to be sold to counterparties							19,100,000
Exercise price of warrants				95.03	95.03		73.33
Number of shares counterparties can purchase from entity net of redemption					11,300,000
Expiry period of Warrants					20 different dates from August 23, 2013 through September 20, 2013			40 different dates from November 13, 2017 through January 10, 2018
Convertible Bond Hedge
Number of shares initially agreed to be purchased from counterparties							19,100,000
Bond hedge options, exercise price							$ 52.37
Number of shares purchased under bond hedge								0

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Financing Arrangments-Interest (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jun. 30, 2013	Jul. 01, 2012
1% Sr. Convertible Notes due 2013 [Member]
Interest Cost Recognized For Convertible Notes
Contractual interest coupon	$ 1,162	$ 2,321	$ 3,481	$ 4,640
Amortization of bond issuance costs	318	696	1,014	1,392
Amortization of bond discount	6,964	13,276	21,022	26,301
Total interest cost recognized	8,444	16,293	25,517	32,333
1.5% Sr. Convertible Notes due 2017 [Member]
Interest Cost Recognized For Convertible Notes
Contractual interest coupon	3,750	3,750	7,500	7,500
Amortization of bond issuance costs	666	666	1,333	1,333
Amortization of bond discount	9,802	9,080	19,321	17,941
Total interest cost recognized	$ 14,218	$ 13,496	$ 28,154	$ 26,774