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Intel to expand flash memory efforts

The chipmaker, which slipped from first to fourth place in the flash memory market last year, has a burning ambition to be No. 1 again. And soon.

Intel wants to be No. 1 again, and in a flash.

The Santa Clara, Calif.-based chipmaker, which slipped from first to fourth place in the flash memory market last year, is revamping its strategy and will try to regain its footing by manufacturing a wider variety of flash for a more disparate range of customers, according to Peter van Deventer, director of the flash products group at Intel.

The new strategy will also put the company in direct competition with the current market leader, Samsung, as Intel will start to manufacture an inexpensive type of flash more suited for storing data on memory cards, Samsung's specialty in this area.

At the moment, Intel specializes in the more reliable, but more expensive, type of flash that's used for storing software code. Samsung also is promoting its chips for code storage.

"We will be able to secure a majority of the marketplace with our technology," van Deventer said. "We see a path to having a significant portion of the data market."

Last year wasn't exactly a banner one in flash for Intel. Expecting large shortages, the company kicked off 2003 by raising prices of flash chips by up to 40 percent. The shortages didn't materialize, however, and cell phone customers defected. Nokia was one of them, van Deventer acknowledged.

Intel also failed to anticipate the popularity of NAND flash, the less expensive and more familiar version of flash memory for storing data. NAND flash sits inside MP3 players and portable flash cards like Sony's Memory Stick. Shipments of products using this technology more than doubled in 2003, lifting the fortunes of NAND manufacturers like Samsung and Toshiba.

Intel makes NOR flash, used to preserve data like operating systems and applications that need to be kept in a pristine state. (NAND and NOR refer to how the chips characterize data.). NOR flash shipments grew, but not nearly as fast. To make matters worse, Intel even lost its lead in NOR when AMD and Fujitsu, formerly the second- and third-place NOR makers, merged their flash memory operations.

Then in December, Ron Smith, the Intel executive who ran the flash group, retired suddenly from the company.

"It all hit in the same year," Van Deventer said.

Product potpourri
To kick-start the recovery, Intel will first begin to produce chips on its 90-nanometer manufacturing processes. Shifting from 130-nanometer manufacturing to 90-nanometer manufacturing will cut the size of chips by around 50 percent, thereby cutting costs. (A nanometer is one-billionth of a meter, and the 130- and 90-nanometer measurements refer to the average size of features on the chips.)

Samples of 90-nanometer chips will start to come out in April, and mass production will begin in the third quarter. These initial chips will only hold one bit of information per memory cell.

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Chips made on the process that can hold two bits per memory cell, so-called StrataFlash chips, will appear in sample form during 2004 as well, van Deventer said.

During this period, Intel will also work to expand its NOR customer base. Over the years, the company too narrowly restricted its target audience to the point where the vast majority of Intel flash customers are now cell phone makers, he said. Now, the company will once again try to get business with networking equipment makers and PC manufacturers.

The NAND/NOR competition will get under way in 2004, and then get more intense over the succeeding years. Van Deventer wouldn't provide details on how Intel would cut the costs of its NOR chips to compete better in terms of price, but said that the company would release a NOR product that would go up against NAND chips that can store 16 to 32 bits of data. This is the low end of the NAND market.

Simultaneously, Intel will work to develop an alternative technology that will provide for even cheaper data storage. The company for years has tinkered with ovonics, a technology that involves storing data in CD-like material. Intel has also licensed technology from Nanosys which owns patents for an inorganic molecule that can be used to store data.

"I believe we can take half of the NAND market," van Deventer said.

Chip packaging will play a pivotal part in the expansion effort. In its multichip packages, designed in part by Tessera, Intel can insert four memory chips, which can independently store code or data, into a single package. Ideally, this sort of bundling would convince customers that are already buying Intel code flash to pick up Intel chips for data storage.

Smart phones will remain one of the key battlegrounds. The amount of memory in phones continues to double every 15 months. In Japan, for instance, the average has about 512 megabits of memory--and that figure is expected to soar to 1.3 gigabits in 2006. Entry-level phones could see memory balloon from 32 megabits to 70 megabits.

By 2007, the total flash market is expected to be worth some $18 billion, and Intel plans to participate in most segments of it. At the moment, the flash market is about $12 billion, but Intel participates in only about one-third of it.

"And (Intel CEO) Craig Barrett doesn't get excited about $4 billion," van Deventer said.