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Intel says flash memory will thrive

Because the data-intensive functions in newer cell phones require more memory, an Intel exec says flash memory chips will flourish even if mobile phone sales don't.

Intel said the amount of flash memory in cellular phones is poised to increase, which could help industrywide revenue of flash memory chips even if worldwide mobile phone sales don't surge.

Next-generation cell phones, some of which are referred to as 2.5G phones, have more data-intensive functions such as instant messaging and color screens, Curt Nichols, general manager of Intel's flash memory products group, told investors at a J.P. Morgan conference. The functions increase the amount of memory, or density of memory, per phone, he said.

Because the latest cell phones need more memory for each phone, overall flash memory chip sales could be boosted if the number of new phones sold this year remain constant from last year. More technology-enhanced features require additional chips, so there are still more flash memory chips, overall, sold.

"I'm absolutely bullish about density," Nichols said, referring to the amount of memory in megabits found in each new phone, adding that he sees anecdotal evidence that handset sales, which have been flat at about 400 million units the past two years, may be picking up.

"At the unit level, we need more proof points to say, 'Yeah, we've got it,'" Nichols said, referring to a trend of rising handset sales.

Last year was a dismal year for the flash memory industry, and it was a drag on Intel's earnings, as well as on the results of one of its principal competitors, Advanced Micro Devices, also a large maker flash memory chips.

Both AMD and STMicroelectronics, another large maker of flash memory chips and Europe's biggest chipmaker, said in the last two weeks that they have seen signs of prices stabilizing in the spot market for flash memory chips.

"I see similar signs of price stability," Nichols said.

However, most--about 70 percent--of Intel's flash memory business comes from long-term agreements that Intel has with customers, which include cell phone makers. The remainder comes from sales of flash memory chips into the spot market, where prices are more volatile.

Revenue at Santa Clara, Calif.-based Intel's wireless communications and computing group, which includes sales of flash memory chips, fell 34 percent in the first quarter to $459 million from $695 million, as the group's operating loss widened to $68 million from $19 million. Revenue in the group also declined from the fourth quarter's $518 million.

However, Intel only started ramping up production of its flash memory chips made using 0.13 micron process technology in the first quarter, and it's now shipping those chips in high volumes in the second quarter, Nichols said.

Intel gets more chips per wafer using a 0.13 micron process technology than the preceding 0.18 micron process technology, because the dimensions of the chips are smaller. That results in lower production costs.

Nichols said that by the fourth quarter of 2003, more than 80 percent of Intel's flash memory chip shipments will have the chipmaker's StrataFlash technology, which enables two bits of data to be held in each cell on a memory chip, compared with one bit previously.

Story Copyright  © 2002 Reuters Limited.  All rights reserved.