SanDisk, Samsung renew flash memory pacts

In the midst of a tight market for flash memory, SanDisk and Samsung Electronics have renewed two key agreements that both companies expect will strengthen their positions.

In the first of the two deals, SanDisk and Samsung announced on Wednesday an agreement to renew the cross-licensing of certain semiconductor patents. The agreement means that each company has the right to use each other's patents in producing cell flash memory and flash storage systems, such as solid-state drives. It does not include patents related to 3-D memory, a new technology that could eventually replace traditional flash memory in portable devices.

Both companies also signed a flash memory agreement that guarantees a specific portion of Samsung's flash memory chip output to SanDisk.

The deals will "enable both parties to focus on the growth markets at hand," Eli Harari, chairman and chief executive officer of SanDisk, said in a statement. "We are excited about our opportunities in mobile, computing and consumer flash storage markets. Furthermore, continued access to Samsung's flash capacity under competitive terms gives us greater flexibility in managing our future capital expenditures for captive capacity."

Samsung also expressed faith in the agreement. "The renewal agreements enable Samsung and SanDisk to each focus their energies on restoring flash market growth," Oh-Hyun Kwon, president of the semiconductor business at Samsung, said in a statement. "It is clear that these renewal agreements are aimed at strengthening the on-going business relationship between Samsung and SanDisk, and we are pleased that the two companies have worked hard to achieve a significantly improved balance on the patent license."

The new agreements go into effect when the current cross-license and supply agreements expire on August 14 and will run for seven years from that date.

SanDisk and Samsung have a checkered history together. Last year, Samsung had pursued a buyout of SanDisk but eventually withdrew the offer when the two companies couldn't agree on terms. Both companies are battling for a slice of the growing market for solid-state drives. SanDisk is pursuing the consumer Netbook segment, while Samsung is focused on the server arena. SSDs use flash memory for storage to provide greater speed and efficiency over mechanical hard disks.

SanDisk has been under intense pressure because of slower consumer spending and a dour market for flash memory. In February, the company reported a loss of $1.86 billion for its fiscal 2008 fourth quarter. But Samsung's latest results have been strong, thanks to cost cutting and its hot mobile phone business. In April, the company reported a first-quarter profit of $349 million versus a loss of $550 million in the year-ago quarter.