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Intel Joins in Venture to Capitalize on Flash-Memory Boom

Posted on: Wednesday, 23 November 2005, 09:00 CST

By Laurie J. Flynn

Intel, the leading semiconductor maker, and Micron Technology have announced a joint venture to manufacture NAND flash memory chips in an effort to tap into one of the chip industry's fastest- growing segments. [News of the deal, announced Monday, raised concerns over increased competition and a collapse in prices in the fast-growing $11 billion market, which is dominated by Asian firms, Reuters reported on Tuesday.]

Shares of Samsung Electronics, Toshiba and other chip makers declined. "This will enable us to scale and become efficient quickly in this fast-growing market," Brian Harrison, an Intel executive who was named vice president and general manager of the company's flash memory business, including the new venture, said Monday.

NAND flash memory chips are a type of memory used for storing data in portable music players, digital cameras, and personal organizers because they do not use power to retain information. The technology is increasingly being used to replace mini hard disk drives in some devices like Apple's iPod.

The rising demand for NAND flash memory is being driven by the popularity of portable music players, digital cameras and other consumer devices.

Intel and Micron have agreed initially to contribute about $1.2 billion each in cash, notes and assets to the new company, which will be called IM Flash Technologies. The companies will each contribute another $1.4 billion over the next three years, followed by additional investments to expand the operation.

While the new venture is Intel's first foray into the NAND business, Micron was an early supplier of NAND chips to the consumer electronics industry. Micron holds roughly 3.5 percent of the total market.

The worldwide NAND market is led by Samsung, which controls slightly more than half the market, followed by Toshiba, with a 23 percent share, and Hynix Semiconductor, with 13 percent.

The NAND market is growing at an annual rate of 32 percent, and sales this year are expected to reach $10.8 billion, up from $6.6 billion in 2004, according to iSupply, a market research company in San Diego.

Growth in sales of another type of flash memory NOR chips, which are used in cellphones has leveled off in recent years, while the newer NAND market is expanding.

IM Flash will be 51 percent owned by Micron, which is based in Boise, Idaho, and 49 percent owned by Intel, which is based in Santa Clara, California, with production initially taking place in Micron operations in Idaho, Virginia and Utah. Shipments are scheduled to begin in early 2006.

"Intel wants a way into the high-growth market," said Nam Hyung Kim, a director and principal analyst at iSupply. "Micron is a small player and in order to compete better it needs capacity and finances. This joint venture makes a lot of sense."

Apple Computer will be among the venture's first customers, as well as one of its largest. The company said it would pay Intel and Micron $250 million each during the next three months to secure "a significant portion" of IM Flash's NAND flash memory output.

Source: International Herald Tribune

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