Intel and Micron Technology are forming a new company to manufacture NAND flash memory chips.
To be called IM Flash Technologies, the new firm 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 about $US1.2 billion to the new joint venture, with each likely to invest an additional $US1.4 billion over the next three years.
By combining their manufacturing technologies and expertise, Intel and Micron hope to be able to compete in the vibrant and profitable NAND business and they already have their first major customer, Apple Computer. NAND flash memory continues to be a very hot product area since the memory chips are used in a wide range of consumer electronics device 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 only store data 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.
Intel and Micron hope to finalise 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. Apple is to prepay $US250 million each to Intel and Micron, the release stated.
IM Flash will be 51 per cent owned by Micron and 49 per cent owned by Intel. The first products are likely to appear in early 2006.
In a recent report from market researcher iSuppli, Samsung had a 50.2 per cent 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 per cent of the NAND market, the revenue the company derived from the flash memory chips increased four-fold 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.
Just by itself, Apple could account for about 25 per cent of the global market for NAND memory next year, iSuppli said.
This situation has constrained the supply of NAND memory for other music player vendors, such as Creative Labs, whose president warned last month that the company's second-half results could be affected by the shortage.
Intel's investment in IM Flash Technologies will allow the company to develop expertise in NAND flash memory.
Currently Intel only makes NOR flash memory, which has been the traditional flash memory of choice for mobile phones and personal digital assistants.
However, revenue from NAND memory was expected to outpace NOR revenue this year for the first time, and increase to $US15.4 billion next year, iSuppli said.