Intel, STMicroelectronics Announce Joint Venture

In a continuing search for profits in the flash memory business, Intel Corp. and STMicroelectronics NV agreed on Tuesday to spin off some of their chip units to create a new semiconductor company.

Intel and ST will share ownership in the venture, which will be based in Switzerland and incorporated in the Netherlands, dedicating about 8,000 employees to making NOR and NAND-type flash chips as well as nascent phase-change memory. All three technologies are forms of nonvolatile memory, capable of storing data even when a device's power is switched off. But phase-change memory could offer faster data transfer and longer durability than flash, because it saves data by changing a type of glass from its crystalline to amorphous state, instead of trapping electrons in semiconductor cells.

The company will compete with Samsung Electronics Co. Ltd., Toshiba Corp. and Spansion Inc. to develop memory products for consumer and industrial products including cell phones, MP3 music players and digital cameras.

The move allows Intel to claim a cash payment of US$432 million for part of its money-losing flash operation. ST will get a $468 million cash payment at close.

Earlier in May, Intel announced it would lay off about 1,000 workers at a flash chip fabrication plant in New Mexico as a cost-saving measure in its migration from 135-nanometer chip features to smaller, more efficient construction with 90nm, 65nm and even 45nm parts. Intel has been losing hundreds of millions of dollars each quarter on the technology.

ST will be the majority owner of the new company, holding a 48.6 percent stake compared to Intel's 45.1 percent and a 6.3 percent holding by Francisco Partners LP, a private equity group in Menlo Park, California. That gives ST leverage, despite being the smaller firm; ST had $9.85 billion in revenue for 2006, far below Intel's $35.4 billion.

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