1000180--2/25/2008--SANDISK

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Our average selling prices, net of promotions, may decline faster than cost reductions due to industry or SanDisk excess supply, competitive pricing pressures or strategic price reductions initiated by us or our competitors. The continued growth of our business depends on development and performance of new markets and products for NAND flash. We face competition from numerous manufacturers and marketers of products using flash memory, as well as from manufacturers of new and alternative technologies, and if we cannot compete effectively, our results of operations and financial condition will suffer. The semiconductor industry is subject to significant downturns that have harmed our business, financial condition and results of operations in the past and may do so in the future. Our business and the markets we address are subject to significant fluctuations in supply and demand and our commitments to our flash ventures with Toshiba may result in periods of significant excess inventory. We depend on our third-party subcontractors and our business could be harmed if our subcontractors do not perform as planned. We and Toshiba plan to continue to expand the wafer fabrication capacity of the Flash Alliance business venture as well as form a new venture, for which we will make substantial capital investments, which could adversely impact our operating results. Seasonality in our business may result in our inability to accurately forecast our product purchase requirements. We are sole-sourced for a number of our critical components and the absence of a back-up supplier exposes our supply chain to unanticipated disruptions. We may be unable to license intellectual property to or from third parties as needed, or renew existing licenses, which could expose us to liability for damages, reduce our royalty revenues, increase our costs or limit or prohibit us from selling products. Because of our international business and operations, we must comply with numerous international laws and regulations, and we are vulnerable to political instability and other risks related to international operations. Tower Semiconductor s financial situation is challenging. We may engage in business combinations that are dilutive to existing stockholders, result in unanticipated accounting charges or otherwise adversely affect our results of operations, and result in difficulties in assimilating and integrating the operations, personnel, technologies, products and information systems of acquired companies or businesses. Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate could negatively impact our operations. Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability. The accounting method for convertible debt securities with net share settlement, such as our 1% Senior Convertible Notes due 2013 may be subject to change.

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1000180--2/25/2008--SANDISK_CORP