Intel and Micron Technology are launching a joint venture to produce NAND flash memory, with Apple prepaying $500m (£290m) to secure its place in line for the popular technology, the companies said on Monday.
Intel will own 49 percent of the new company, IM Flash Technologies, with the remaining controlling stake held by Micron. Intel and Micron will each initially contribute $1.2bn to building plants in the US in Idaho, Utah and Virginia, with plans to add another $1.4bn each over the next three years. The joint venture is expected to be finalised by the end of the year.
"The creation of this new company supports Intel's intent to maintain its industry-leading position in non-volatile memory and enables us to rapidly enter a fast-growing portion of the flash market segment," Paul Otellini, Intel's chief executive, said in a statement.
NAND is widely used in digital cameras, photo-snapping phones and portable music players such as Apple's iPod. And the ever-increasing capacity of NAND flash is prompting some industry players to speculate that it will one day replace bulkier mini hard drives.
Apple plans to prepay $500m to Intel and Micron as part of its $1.25bn commitment to prepay for NAND flash memory to five chipmakers. The other three chipmakers are Hynix Semiconductor, Samsung and Toshiba. This prepayment over the next three months will translate into securing NAND memory through 2010, Apple said on Monday.
Apple plans to use the flash memory in its popular iPod.
"We want to be able to produce as many of our wildly popular iPods as the market demands," Steve Jobs, Apple's chief executive, said in a statement.
Apple also is familiar with the problems that can arise from a shortage of components. Six years ago, the computer marker ran short of enough speedy processors for its G4 computers as its supplier faced unexpectedly high demand for the chips. As a result, Apple shipped less than half of the G4 computers it had originally planned to sell.
In 1999, Apple also paid $100m to Samsung to ensure a steady supply of iBook display screens.
Under the long-term agreements with the five chip makers, Apple is banking on the continued popularity of its iPod and NAND flash memory.
IM Flash Technologies will produce NAND chips exclusively for the use of Intel and Micron, rather than serve as a foundry for chip designers.
And while the new company is gearing up for an onslaught of NAND business, the memory market is used to boom-and-bust cycles. Apple's long-term contract, however, should help smooth fluctuations in the chip market.
IM Flash Technologies will concentrate on moving to 72nm and 50nm technology, with initial production slated for early next year.
Dave Baglee, Intel's former Fab 11 manager in New Mexico, and Rod Morgan, Micron's former plant manager in Virginia, will head up the new joint-venture company.
