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Intel, STMicro ready to launch Numonyx

The new flash memory company is formed with contributions from both chip heavyweights, and will begin life just as the flash memory market turns sour.

The offspring of Intel and STMicroelectronics, Numonyx, is ready to open its doors amid a volatile market for its flash-memory chips.

Numonyx is the combination of Intel's NOR flash memory business and STMicro's NAND business, which will make it the largest provider of NOR flash memory in the world and the largest flash supplier to the mobile phone market, said Brian Harrison, the former head of Intel's flash memory group and the new CEO of Numonyx. "We have a very broad product line that's not typical of a start-up company by any means," he said.

First announced last year, Numonyx is arriving a little later than expected. The credit crunch that's dragged down the stock market in recent months forced Intel and STMicro to alter the financing for the new company, but everything will be set to go as of Monday.

Numonyx will play in both major portions of the flash memory market. Its primary business, roughly 90 percent, consists of NOR flash memory, so named for the logic gates used to create the chip. NOR memory has traditionally been used as the primary storage in mobile phones, but that's changing as NAND memory becomes faster.

NAND is used in memory cards, MP3 players like the iPod, and more and more in mobile phones--the high-growth areas. As a result, Harrison expects Numonyx's NAND business to grow much faster over the coming year, although at only 10 percent of the total, there's a lot of work to be done.

The problem is that at the moment, the flash memory market is in turmoil. Prices are plummeting as flash buyers like Apple pull back their purchases in the face of a slowing economy. Intel is going to miss its earnings targets for the first quarter because the price of flash fell twice as fast as it had planned going into the quarter.

Numonyx CEO Brian Harrison Intel

It's really the NAND market, however, that's facing the severe price crunch, Harrison said. Since Numonyx's primary business involves NOR flash memory, which hasn't seen the same dramatic plunge in pricing, the company is in a better position to endure the price drops.

And the real key to the deal, according to Harrison, is the work that Intel and STMicro have already done on a new type of flash memory called phase-change memory. This technology is still very much in the experimental stage, but phase-change memory effectively doubles the capacity of NAND memory and is almost as fast as RAM, the memory used in PCs. Intel and STMicro showed off phase-change memory prototypes earlier this year.

From Intel's standpoint, the Numonyx deal allows it to shed its NOR flash assets, although the company's 45.1 percent stake in Numonyx means it will have to record a portion of Numonyx's profits or losses on its earnings statements. Intel and Micron Technologies have formed a joint venture called IM Flash Technologies to manufacture NAND flash memory, which Intel wants to use in an increasing number of flash-memory hard drives for PCs and mobile Internet devices.

Intel CEO Paul Otellini has vowed to continue Intel's involvement in the flash memory market, but has promised to make sure the flash business doesn't hurt Intel's bottom line. Flash is going to be an important storage technology over the next decade, as smartphones continue to grow more sophisticated, Apple's iPod business stays healthy, and more and more PC makers experiment with solid-state hard drives.