Micron Technology and Intel have agreed to form a new company to manufacture NAND flash memory for use in consumer electronics, while they will be the basic suppliers of NAND memory for Apple's iPod.
The new company will exclusively manufacture product for Micron and Intel. Formation of the company is subject to customary closing conditions and is expected to be finalized around the end of the year.
The company will be called IM Flash Technologies, LLC,. The new company combines Micron?s experience in developing NAND technology and operating highly efficient manufacturing facilities with Intel?s multi-level cell technology.
Intel and Micron have agreed to initially contribute approximately $1.2 billion each in cash, notes and assets to IM Flash Technologies. Subject to certain conditions, the parties will each contribute an additional approximately $1.4 billion over the next three years and intend to make additional investments as appropriate to support the growth of the operation.
The company will be 51 percent owned by Micron and 49 percent owned by Intel.
Production will initially take place in manufacturing facilities located in Boise, Idaho, Manassas, Va. and Lehi, Utah. The new company plans to convert to advanced 72nm and 50nm technology. Initial production from the company is expected in early 2006.
The management team for the new company will be led by Intel?s Dave Baglee, who previously served as manager of Intel?s Fab 11 in New Mexico, and Micron?s Rod Morgan, who most recently served as manager of Micron?s fabrication facility in Manassas.
The Apple deal
Both Intel and Micron have also entered into separate long-term agreements to supply Apple with a significant portion of each of their share of IM Flash Technologies? NAND flash memory output. As part of these agreements, Apple would prepay $250 million each to Intel and Micron.
Apple, however, announced that it has also reached long-term supply agreements with Hynix, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010. As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months.
?We want to be able to produce as many of our wildly popular iPods as the market demands,? said Steve Jobs, Apple?s CEO.
Siginificant growth for NAND
The global NAND market will reach US$15.4 billion in 2006, up from US$10.8 billion in 2005, according to iSuppli's latest forecast.
This makes NAND the fastest-growing segment of entire semiconductor memory business, according to iSuppli.
Although iSuppli expects that IM Flash Technologies potentially could emerge as a competitive threat to the NAND flash suppliers, including Samsung and Toshiba, the new company will require at least one year before it reaches the critical mass needed to compete head to head with the established players.
Furthermore, the manufacturing cost per megabyte is the most important factor determining success in the commodity NAND market. To compete successfully, IM Flash Technologies will have to prove its cost effectiveness to the market quickly.
Yet another challenge for IM Flash Technologies will be the rapid rise in NAND flash densities.
Toshiba and Samsung already are ramping up production of NAND flash chips with a density of 8Gbit. Samsung in 2005 introduced a 16Gbit NAND chip, which will be followed by 32Gbit device in 2006. IM Flash Technologies is expected to offer a maximum density of only 8Gbits in 2006.