Intel, Micron Team Up on Flash Memory

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Intel and Micron Technology are forming a new company to manufacture NAND flash memory chips, the two companies announced today.

By combining their manufacturing technologies and expertise, Intel and Micron hope to compete in the vibrant and profitable NAND business. They already have their first major customer, Apple Computer. NAND flash memory continues to be a hot product area since the memory chips are used in a wide range of consumer electronics devices including digital cameras and Apple's iPod music players.

Flash memory can store data without a constant supply of electricity. Memory in a PC or server can store data only when the power is on, and hard drives with moving parts are needed to store data after the device is shut down. NAND flash memory is named for the logic gate used to build that type of flash memory.

IM Flash Technologies

The new firm, to be called IM Flash Technologies, will exclusively produce flash memory for Intel and Micron targeting the consumer electronics, removable storage, and handheld communication device markets, according to a joint release from the companies. Intel and Micron will each contribute around $1.2 billion to the joint venture, with each likely to invest an additional $1.4 billion over the next three years.

Intel and Micron hope to finalize the formation of IM Flash by year-end, subject to unspecified closing conditions. The two companies also announced that, subject to the closing of the new company, they have each entered into separate long-term agreements to provide Apple with a "significant portion" of IM Flash's NAND flash memory, according to the release. Apple is to prepay $250 million each to Intel and Micron, the release stated.

IM Flash will be 51 percent owned by Micron and 49 percent owned by Intel, according to the release. Initial production of IM Flash's NAND flash memory will occur in manufacturing operations in Boise, Idaho; Manassas, Virginia; and Lehi, Utah. The first products from IM Flash are likely to appear in early 2006.

iSuppli's Comments

In a recent report from market researcher iSuppli, Samsung Electronics had a 50.2 percent share of the NAND flash memory market at the end of the third quarter of 2005. Although Micron was ranked in fifth position with only a 3.4 percent of the NAND market, the revenue the company derived from the flash memory chips increased fourfold over the second quarter, according to iSuppli.

The new joint venture should help smaller music player and expansion card vendors breathe easier in the coming year, according to a research note from iSuppli released after Intel and Micron's announcement. In order to support the continued strong demand for its iPods, Apple signed a deal with Samsung earlier this year to purchase around 40 percent of all NAND memory produced by Samsung over the rest of this year, the San Jose, California, market researcher said.

Apple alone could account for about 25 percent of the global market for NAND memory next year, according to iSuppli. This situation has constrained the supply of NAND memory for other music player vendors, such as Creative Labs.

Intel's investment in IM Flash Technologies will allow the company to develop expertise in NAND flash memory. Currently Intel makes only NOR flash memory, which has been the flash memory of choice for mobile phones and personal digital assistants. However, revenue from NAND memory will likely outpace NOR revenue this year for the first time, and increase from $10.8 billion this year to $15.4 billion next year, iSuppli says. The market researcher predicts revenue from NOR memory will be essentially flat over the next five years.

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