Business Tech

Updated at 9:10 a.m. PDT: adding analyst comments.

On Tuesday, Intel and Micron Technology announced the development of high-data-capacity flash memory technology for flash cards and USB drives.

Intel-Micron chip will enable high-capacity USB drives

(Credit: Lexar)

And in a related announcement, Intel said Monday that it has validated a fix for its new 34-nanometer X25-M solid-state drive, which is based on similar flash memory technology. The bug affects users who set a BIOS drive password. That update is available here.

The two chipmakers, which partner in the manufacture of flash memory chips, said Tuesday that they have developed NAND flash memory capable of 3 bits per cell based on 34-nanometer technology. This allows greater data density than the standard 2-bits-per-cell technology and will result in high-capacity USB flash drives, according to Micron.

While packing more bits into a cell provides greater data densities, it is not as reliable as flash memory based on more standard technology, according to Kevin Kilbuck, director of NAND marketing at Micron. Therefore, the 3-bits-per-cell chips will be limited initially to flash drives, which don't require the data storage reliability of a solid-state drive, which is used as the primary storage device in laptops and servers.

"The chip is not for all markets," according to Jim Handy of semiconductor market researcher Objective Analysis, writing in a research note published Tuesday about the technology. "The companies explained that they need more experience in production volumes before they will be confident to position it as a chip suitable for the high-write environment of the SSD," he said. Handy is referring to the fact that users of solid-state drives typically record data at a much greater frequency than consumers who, for example, buy flash drives for digital cameras.

But Handy added that he expects the Intel-Micron chip by 2010 to "cause snags for the other vendors in the market: Samsung, and Hynix/Numonyx" and potentially be more profitable than the competition.

Micron is currently sampling the chips and will be in mass production in the fourth quarter.

SanDisk and Toshiba disclosed in February that they had developed 4-bit-per-cell technology, which the two companies said was the highest-capacity flash memory technology in the industry.

Taiwan's economic affairs minister has retreated from previous statements that suggested a merger of the country's ailing memory chipmakers was likely, saying it's "too complicated," according to reports.

Instead, Taiwan Memory Co., the new government-backed entity, will focus on acquiring technologies and tapping existing manufacturing plants in Taiwan, according to a Bloomberg report.

Economic affairs minister Yiin Chii-ming and John Hsuan, a former United Microelectronics Corp. executive who was appointed by the state to oversee the formation of Taiwan Memory, are also saying that the scale of the aid plans will be pared back, Bloomberg said. This is a departure from previous statements that suggested a massive consolidation of the six loss-ridden memory chipmakers was likely.

"It is wrong to assume we would take in these companies with all their debts and problems," Bloomberg reported, citing an interview with Chen Chao-yih, head of the economic ministry's industrial development bureau. The six companies have combined debt of about $11 billion.

Taiwan's memory chipmakers lost a combined $12.5 billion in 2007 and 2008, highlighting the dire straits--including bankruptcies, widespread plant closings, and layoffs--that the memory chip industry is in worldwide.

The six companies are: Nanya Technology, Inotera Memories, Powerchip Semiconductor, Rexchip Electronics, ProMOS Technologies, and Winbond Electronics.

Taiwan named a chip industry veteran to head a state-backed company that will merge six memory chipmakers, following pleas from domestic companies desperate for financial aid.

Previous reports had cited an approval for loans, but on Thursday the economic affairs ministry took this a step further and named former United Microelectronics Corp. executive John Hsuan to head a state-backed company, according to Bloomberg. Taiwan's government will hold less than a 50 percent stake.

Taiwan Memory Co. will be established within six months. It has not been decided yet what role Japan's Elpida Memory or U.S.-based Micron Technology would play, according to the report. One of these two memory chipmakers could either collaborate with the merged companies or become part of the new entity.

At stake is Taiwan's dynamic random access memory (DRAM) industry. DRAM is the main memory used in personal computers. While all memory chipmakers have been suffering, Taiwan's DRAM industry has been falling further and further behind market leaders Samsung and Micron and posting big losses.

The Taiwan-based companies are Nanya Technology, Inotera Memories, Powerchip Semiconductor, Rexchip Electronics, ProMOS Technologies, and Winbond Electronics.

The companies posted combined losses $12.5 billion in 2007 and 2008, Bloomberg said.

Memory chipmakers, the hardest-hit of the silicon suppliers, this week faced bankruptcy, layoffs, and bleak prospects.

Micron Technology kicked things off by announcing that it would cut as many as 2,000 jobs. Micron and other memory chip manufacturers are all singing the same sad song: slumping revenues amid a steep downward price spiral.

The largest U.S. maker of memory chips said decreased demand for specialty DRAM products had "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200-millimeter wafer manufacturing operations at the company's Boise facility.

The same day, flash memory chipmaker Spansion, previously a joint venture of Advanced Micro Devices and Fujitsu, announced layoffs totaling approximately 3,000, or 35 percent of the company's total workforce.

Spansion's CEO, John Kispert, said the Sunnyvale, Calif., company has been forced to "bring our costs in line with the current expectations for significantly reduced revenues."

Kispert also mentioned that he is positioning the company for a "restructuring and/or sale." The company expects the reduction in workforce to provide it with annual cash cost savings of approximately $225 million.

But this wasn't the worst of it. Qimonda, an affiliate of Germany-based Infineon Technologies, said on the same day that it was seeking bankruptcy protection under Chapter 11 for its U.S. unit. In January, Qimonda filed for insolvency protection in Germany after it was not able to secure government financing.

Intel topped off the bad news on Wednesday by disclosing that it was considering getting out of the flash memory-manufacturing business. Intel CEO Paul Otellini made this statement at a Goldman Sachs investor's conference: "It may not be essential for us to have our own NAND factories to build (flash memory). We could probably specify the product that we want and buy it from third parties," he said.

Is there any upside to all this bad news? Maybe.

"A lot of the end-market conditions for all electronics are awful, but we know all this already, and to a certain extent, that is looking backward," said Avi Cohen, managing partner of Avian Securities, which tracks the memory chip market. "Several component (suppliers) and semi(conductor) guys have echoed the fact that February is not getting worse, which is a nice improvement."

Micron Technology is cutting as many as 2,000 more jobs because of slumping demand for its products, as the shakeout in the memory chip business continues.

The largest U.S. maker of memory chips said Monday afternoon that decreased demand for specialty DRAM products has "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200 millimeter (mm) wafer manufacturing operations at the company's Boise facility.

"This action will reduce employment at Micron's Idaho sites by approximately 500 employees in the near term and as many as 2,000 positions by the end of the company's fiscal year," the company said in a statement. Its fiscal year ends in August. Micron added that it has sufficient manufacturing capacity remaining and "does not expect any disruption in product supply required for customer needs."

These job cuts are on top of the workforce reduction announced in October in its flash memory chip operations, the company said. "These workforce changes were not anticipated or included in Micron's earlier 15 percent global workforce reduction announcement last October."

This news follows quickly on the heels of an announcement by German memory chipmaker Qimonda, which said earlier Monday that its U.S. operations would seek Chapter 11 bankruptcy protection.

Micron said that market conditions are not improving for memory products. "We remained hopeful that the demand for these products would stabilize in the marketplace and start to improve as we moved into the spring. Unfortunately, a better environment has not materialized," said Steve Appleton, Micron chairman and CEO, in a statement.

The company will continue to operate its 300mm research and development fabrication facility at the Boise site and perform a variety of other activities.

Cash restructuring charges will be approximately $50 million, which will generate a gross annualized operating cash benefit of $150 million, the company said. The net operating cash flow effect will be neutral for fiscal year 2009.

In the fiscal first quarter ended December 4, Micron posted a net loss of $706 million.

The memory chip industry overall has been caught in a particularly brutal downward price spiral that is hurting even the largest players, including companies like Samsung and Hynix.

Solid-state drives may see heady growth despite a sliding world economy, according to a report released Tuesday by a market research company. Devices like the Apple iPod and iPhone are expected to drive growth.

Micron Technology along with its partner Intel are challenging SSD market leaders Samsung and Toshiba, In-Stat said

(Credit: Micron)

Flash memory revenue in the solid-state drive segment will see compound annual growth rates of over 100 percent through 2012, according to market research firm In-Stat. The type of flash used in solid-state drives is referred to as NAND flash.

"You're starting from quite a small base. Back in 2006, you're in the tens of millions (of dollars) kind of a number. By 2012, you're easily over five billion. So the growth rates do get rather high," said Ian Lao, a senior analyst at Scottsdale, Ariz.-based In-Stat. The market researcher forecasts compound annual growth at 106 percent from 2006 through 2012, Lao said.

In the consumer segment, Lao says he expects to see most of the growth in small devices like portable music players and smart phones. Music players such as the Apple iPod and Microsoft Zune will adopt solid-state drives instead of the tiny 1.8-inch hard disk drives they use now because of better durability and shock resistance. "They suffer the risk of, hey, I just dropped my Zune, it doesn't work anymore," Lao said. SSDs will provide much greater reliability, he said.

And as smart phones become more PC-like, they will graduate from relatively simple flash drives to more sophisticated SSDs with the same Serial ATA (SATA) interfaces used in PCs today, Lao said. An iPhone, for example, with a more computer-like operating system and features would use an SSD, Lao said.

Future ultra-portable laptops, represented today by the MacBook Air and HP Voodoo Envy 133, will also drive SSD growth, as will Netbooks.

Sharp growth will also be seen in the corporate enterprise market. SSDs will, in an increasing number of cases, replace very-high-speed hard disk drives in server environments, Lao said.

Flash drives (non-SSD) will remain widely used in various music players, mobile handsets, after-market cards, and USB flash drives, with a combined market share of more than 80 percent during the next couple of years, according to the report. However, this percentage will drop to about 70 percent by 2012, as SSDs grow in importance, the report said.

Worldwide NAND flash revenues are likely to grow at a compound annual growth rate of 29.7 percent from 2007 to 2012 to reach $61 billion, In-Stat said. Revenues for NOR flash--used, for example, to store program code in cell phones--will increase at a 6 percent compound annual growth rate from 2007 through 2012.

The newest solid-state drives are just starting to hit retail. But would you buy one?

Intel X25-M solid-state drive has received glowing reviews for its performance

(Credit: Intel)

Solid-state drives are attractive because they're generally faster than hard-disk drives, particularly at reading data--generally something PC users spend most of their time doing.

But price is still an obstacle, especially to the frugal consumer.

Sunnyvale, Calif.-based OCZ Technology is now offering some of the most competitively priced solid-state drives based the high-speed Serial ATA (SATA) II interface.

OCZ Vertex SSD drives start at $129 for a 30GB SSD. Other capacities include a 120GB drive for $469 and a 250GB SSD for $869. Though $869 may seem pricey compared to a 7200RPM 250GB hard-disk drive that can retail for well under $100, it's relatively cheap for a large-capacity SSD. In the past, SanDisk had sold a 256GB drive through resellers that was priced, almost incredibly, at more than $15,000. Axiom had been selling 256GB solid-state drives priced above $6,000.

OCZ says the Vertex Series of SSDs have a 1.5 million-hour mean time before failure (MTBF), "ensuring peace of mind over the long term." Solid-state drives, since their inception, have been plagued by doubts about write durability. SSD manufacturers such as Intel, Micron Technology, and Samsung say long-term durability is no longer an issue.

The OCZ drives are backed by a two-year warranty.

Intel's X25-M SATA solid-state drive is now widely available at retail. An 80GB X25-M is priced at just more than $500 at most retailers. Reviews of the X25-M's performance have been very positive.

Unfortunately, the only way to get the newest SSDs in some cases is by ordering a laptop. Samsung is now offering its latest-and-greatest 128GB SATA drives in ultraportable laptops such as the MacBook Air and the Dell Latitude E4200 and E4300.

The Latitude E4300 can be configured with a 128GB SSD for $460 more than the standard 160GB 5400RPM hard disk drive.

Micron Technology announced Sunday that it is buying Qimonda AG's $400 million stake in Inotera Memories.

Inotera was founded as a joint venture by Qimonda (formerly the memory products division of Infineon Technologies) and Nanya Technology. Micron said the deal constitutes an expansion of its relationship with Nanya.

In the current Qimonda-Nanya partnership, Inotera operates two 300-millimeter wafer fabrication facilities producing a total of 120,000 wafers per month, Micron said.

Under the agreement, Micron will acquire access to half of the manufacturing capacity of Inotera, with the other half allocated to Nanya. Micron said it will also share its Stack DRAM technology with Inotera for the production of Stack DRAM products for Micron and Nanya.

The stake in Inotera will improve the Boise, Idaho memory chipmaker's economies of scale. "Micron will gain greater scale in DRAM, reduce our operating expenses per wafer and have access to a very cost competitive operation," Micron Chairman and CEO Steve Appleton said in a statement.

The transaction will be completed in two stages, with Micron purchasing half of Qimonda's stake, or about 18 percent of Inotera, for $200 million in cash within approximately the next week--subject to certain government approvals and other customary conditions. The remaining 18 percent stake in Inotera will be acquired upon receipt of Taiwan Federal Trade Commission approval and other customary conditions, Micron said.

Following the acquisition, Qimonda's share of Inotera's capacity will be ramped down over a period of months, according to Micron.

Micron expects to restructure the previously-announced MeiYa joint venture with Nanya. "It is anticipated that both parties will cease future resource commitments to MeiYa and redirect those resources to Inotera," Micron said.

To help fund the purchase price, Micron has obtained $285 million in term loan financing commitments from strategic sources at favorable terms.

This agreement follows an October 9 announcement in which Micron said it would reduce its global workforce by approximately 15 percent during the next two years as it scales back flash memory chip production in Boise, Idaho.

After cutting executive pay last week, Micron Technology is now paring staff as it scales back flash memory chip production.

On the heels of reporting a $344 million fourth-quarter loss last week--when Micron said it was cutting executive pay 20 percent--the Boise, Idaho-based memory chip maker said Thursday that it was restructuring its memory operations.

Micron will reduce its global workforce by approximately 15 percent during the next two years. Most of the workforce cuts will occur in Boise.

"The combination of declining customer demand and product oversupply in the marketplace has driven selling prices for NAND flash memory significantly below manufacturing costs," Micron said in a statement.

As a result, IM Flash Technologies (IMFT), a joint venture between Micron and Intel, will discontinue the supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approximately 35,000 (200 millimeter) wafers per month, Micron said.

NAND flash is used in flash drives for digital cameras and digital music players as well as solid-state drives.

Micron and Intel have other facilities that make NAND flash, including one in Lehi, Utah.

"Micron is in a strong position relative to our competitors...but we are not immune to the difficult global market conditions that are affecting us all," said Micron CEO Steve Appleton in a statement.

Cash restructuring and other related expenses are anticipated to be approximately $60 million and "next year's cash operating margin benefit is expected to exceed $175 million," Micron said.

Last week's red ink was Micron's seventh straight quarterly loss--and it reported a net loss for the entire 2008 fiscal year of $1.6 billion.

The memory chip industry overall is caught in a particularly brutal downward price spiral that is threatening the viability of even the largest players, including companies like Hynix.