AMD, Fujitsu Mull Closer Ties on Flash

How do you knock off the No. 1 flash memory creator? Why, join forces with
another partner, of course.

That may be the tack chipmaker AMD and Fujitsu
are taking. According to the Financial Times, the perennial No. 2
U.S. chipmaker and Japanese electronics manufacturer are in talks to create
a separate company in which AMD would market and make flash chips. This
would greatly help AMD in its jostling for position with flash market leader Intel

Sunnyvale, Calif.’s AMD and Fujitsu already enjoy a working relationship in Japan where
they make flash products.

Flash memory is storage used for portable electronics devices such as cell
phones and personal digital assistants (PDAs). Sources told the Times
that AMD would take a 60 percent stake in the company, which would set up
shop in January 2003. Fujitsu would be in the for the remaining 40 percent,
in a partnership the firms estimate could reap $3 billion in sales.

AMD spokesperson Morris Denton would neither confirm or deny the deal, saying: “Our position is that we are pleased with the current FASL relationship, and are always looking for ways to improve the nature of our relationships with our partners … the relationship with Fujitsu is no different in that regard.”

But Gartner’s semiconductor memories principal analyst Richard Gordon told the deal is the “flash’s industry’s worst kept secret.”

“Fujitsu has been under going a major rethink about its participation in the
semiconductor industry in general for some time and I’m sure they are
looking at leveraging the FASL relationship to back out of the flash market,” Gordon explained. “AMD has long been a flash market leader and it would make sense for them to
take the lead in any broadening of the AMD/Fujitsu relationship. As for
competition with Intel, AMD really needs to execute on its mirror bit
technology in 2003 to threaten Intel’s dominance in the cell phone market.”

Thinking longer term, Gordon said both Intel and AMD need to convince the market that NOR-based technologies are a better than NAND-based technologies for combined
code and data storage applications. With cost per bit becoming increasingly
important, that is the biggest challenge for the NOR-based technology

AMD reported weak sales in its
second quarter last July, attributed to the flagging demand for PCs, but noted that flash memory product sales
improved, based on the strength of the high-end mobile phone market. AMD
said consumers are buying feature-rich phones built with flash memory. AMD
said it owed its success there to its AMD MirrorBit

In May, AMD announced the Fab 25 manufacturing facility in Austin, Texas is
in volume production of Flash memory devices
utilizing 170-nanometer technology, but setting up such plants is very
costly. AMD recently estimated that it will cost about $2.2 billion to
outfit production plants of the current flash venture in Japan.

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