Intel, Micron form flash memory venture

Apple said it will pay $250 million each to Intel and Micron to supply the memory for iPods. The company also reached long-term supply agreements with Hynix Semiconductor Inc., Samsung Electronics and Toshiba Corp.

In total, Apple’s flash deals are worth $1.25 billion.

"We want to be able to produce as many of our wildly popular iPods as the market demands,” said Steve Jobs, Apple’s CEO, in a statement.

Steve Appleton, the chief executive of Boise-based Micron, said the venture with Intel would have occurred even without Apple’s demand for NAND memory chips.

"The NAND market is about a third the size of the DRAM (dynamic random access memory) market but it is growing at 100 to 120 percent per year, while DRAM is growing at 45 to 50 percent per year,” he said.

Unlike the DRAM chips common in computers and other electronic devices that Micron and others make, flash memory holds data even after the appliance device is turned off.

Before the deal, Intel’s flash focus has been on a type of the nonvolatile memory found in cell phones. Intel, which is best known for its microprocessors, will continue to make so-called NOR flash.

"The creation of this new company supports Intel’s intent to maintain its industry-leading position in nonvolatile memory and enables us to rapidly enter a fast-growing portion of the flash market segment,” said Paul Otellini, Intel president and CEO.

Under the Intel and Micron deal, each company will contribute $1.2 billion in cash, notes and assets to the new venture. Over the next three years, they will invest at least additional $1.2 billion each, subject to certain conditions.

Starting in early 2006, production will take place at Micron factories in Boise, Idaho; Manassas, Va.; and Lehi, Utah. Micron will hold 51 percent of the venture, with Intel holding the remainder.

The new company is good news for other flash-based devices manufacturers who have had trouble procuring enough chips, said Nam Hyung Kim, an analyst at the research firm iSuppli Corp.

By next year, he estimates Apple could be using up to 25 percent of the total supply.

"This new joint venture will supply quite a bit of capacity,” he said. "That will ease the supply issue in the NAND flash market.”

The new company will be led by Intel’s Dave Baglee, who previously managed the company’s Fab 11 factory in New Mexico, and Micron’s Rod Morgan, who ran that company’s plant in Manassas.

Shares of Santa Clara, Calif.-based Intel fell 5 cents to close at $25.25, in Monday trading on the Nasdaq Stock Market, while Micron’s stock rose 2 cents to close at $14.20, on the New York Stock Exchange.

Shares of Apple rose 40 cents to close at $64.96, on the Nasdaq.

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Associated Press Writer Christopher Smith contributed to this report from Boise.

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