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Intel ramps up for flash memory amid searing demand

The company plans to invest more than $2 billion over the next few years into flash memory in an effort to capitalize on the exploding semiconductor market.

Intel plans to invest more than $2 billion over the next few years into flash memory and expand its product line in an effort to capitalize on the exploding demand for one of the key components of cell phones and other devices.

The investment in flash will largely be directed at building more factory capacity and at devising ways to increase the overall density of wafers and chips, said Curt Nichols, general manager of the flash products group at Intel. The company today is holding a briefing on its flash strategy at its Santa Clara, Calif. headquarters.

In the future, for instance, Intel will begin to sell flash chips containing its StrataFlash technology, which doubles the density of a memory cell, to the smart phone market. Currently, these more expensive chips largely go into routers and cell base stations. The company will also begin to sell integrated chips for cell phones that will combine flash, a StrongArm processor and a communications chip on one piece of silicon, Nichols added.

Flash memory, which is used in cell phones, set-top boxes and other appliances for storing data and applications, has emerged as one of the fastest growing semiconductor markets in recent years. Flash revenue for the industry as a whole grew from $2 billion in 1998 to $4.5 billion in 1999 to a projected $10 billion this year, according to analysts.

"Wireless is the second biggest consumer of silicon," said Nichols. Intel this week said it shipped its billionth flash memory processor, a milestone that took 12 years to achieve. The next billion likely will be sold in two years, Nichols said. About 65 percent of the company's output goes to cell phones.

The sharp spike in demand has fueled a shortage already crimping the product plans of MP3 makers and others.

"Flash this year will be the limiting factor in how many (cellular) handsets will be produced," said Eric Rothdeutsch, an analyst at Merrill Lynch, earlier this month. "I imagine that the shortage will get a lot worse. We're going to be tight for all of 2001 at least."

"Demand is certainly stronger than supply right now, not just in cell phones but in all applications," Nichols said.

To take advantage of the shortage, Intel is investing in expanding its manufacturing capacity for flash. Flash manufacturing is expanding in factories in Oregon and New Mexico. A facility acquired from Rockwell in Colorado also will be dedicated to flash.

Along with building factories, the company also is beefing up its manufacturing capabilities to squeeze more memory cells onto each wafer. Flash chips will increasingly be made on the 0.18-micron manufacturing process, the same manufacturing technique currently used for making computer processors. By shifting from the 0.25-micron process, Intel effectively is able to double the number of flash chips produced per wafer.

The StrataFlash technology, meanwhile, allows Intel to double the density of flash chips because each memory cell can hold two, rather than one, bits of data. As a result, overall output, in terms of the number of bits produced, will increase.