Spansion Seeks to Emerge From Bankruptcy in Q4

Chip maker Spansion plans to emerge from Chapter 11 bankruptcy in the fourth quarter of this year as steps taken to reduce debt and operating costs appear to be paying off.

The world's largest NOR Flash memory chip maker credited cost reductions and improved operating efficiencies with increasing its cash position in the second quarter to US$220 million. Net sales for the company were $376 million, down from $401 million in the first quarter.

"The company delivered higher than forecasted net sales, decreased operating expenses and significantly improved its cash balances, providing solid momentum for emergence from Chapter 11 in the fourth quarter," Spansion said in a statement late Monday.

Spansion chips are used in mobile phones, cars, digital set top boxes for TVs, PCs and other products.

Spansion became the second major chip maker to file for protection from its creditors in March, after German DRAM maker Qimonda made a similar filing in January. Spansion ran into trouble after a memory chip glut sent prices down and caused customers for some products to choose cheaper NAND flash chips over Spansion's NOR for some products. The two kinds of flash chips are similar except that NOR performs speedier software operations while NAND boasts greater storage capacity. The global recession made business tougher by hurting demand and making it harder to secure loans.

Spansion started as a joint venture between microprocessor maker Advanced Micro Devices (AMD) and Fujitsu. In 2005, AMD decided to spin off Spansion because flash memory was less profitable than its main microprocessor business.

Spansion did not say when Spansion Japan might emerge from corporate reorganization proceedings.

The recession has been hard on the global chip industry. Memory chip manufacturers such as Spansion and Qimonda are normally hit harder during downturns because of the massive amounts of money they have to spend to build new chip factories, which cost around US$3 billion each.

So far, only South Korea and Taiwan have signalled a willingness to help chip makers during the recession, while the U.S. has focused on financial institutions and auto makers.

Worldwide chip revenue is expected to fall 20 percent year-on-year to $199.2 billion this year, according to In-Stat. Industry revenue won't return to 2007 levels until at least 2012, the market researcher said.

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