Tuesday, November 22, 2005

INTEL has become a NAND flash play

Second class CPU maker INTEL made news by annoucing a joint venture with Micron to produce NAND flash memory. There are two types of flash memory, NOR and NAND. Both INTEL and AMD's Spansion are NOR makers. NOR is used to run program code. NAND is used on devices such as Apple's iPod to store data in blocks. Companies like Samsung are big NAND producers. NAND has become increasingly in demand due to the popularity of devices such as iPod.

It's not surprising that NAND has vastly surpassed NOR in the number of bits, simply because there are more data than program code. However, it should be noted that NOR has a much higher price per megabit and probably higher profit margin. AMD has announced that Spansion is enjoying a 1.4:1 book/order ratio in Q3 due to increasing demand for its advanced mirror-bit technology. AMD is also the first to develop 90nm NOR flash and is moving to 65nm next year. AMD has a clear lead in NOR flash.

So basically, INTEL has become a NAND flash play too. BusinessWeek's Olga Kharif noticed this and wrote an article titled Intel Switches Its Chip Bets. However, as most analysts, she can't draw logically sound conclusions based on the totality of the situation.

First, INTEL doing NAND can't lead to any conclusion that INTEL is moving away from NOR. INTEL might have just see NAND as an oppurtunity and grab the chance to diversify itself into NAND.

Second, even if INTEL is indeed moving away from NOR, then that is great news for Spansion, which will enjoy more of the NOR market.

Third, it is well known that the NOR flash suffered a 40% price drop in Q4 2004 because INTEL initiated a vicious price war to hurt AMD, which caused AMD to lose money in Q4 2004 after many quarters of profitability. In a more healthy competitive envrionment with pricing based on demand, Spansion will do much better.

AMD survived the NOR price war and Spansion is ready to prosper on itself through IPO. AMD will continue to lead in server, desktop and mobile CPU markets, while INTEL is trying desperately to play catch up.

Craig Barret said: If you are one generation behind you are dead.

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