Intel, Micron team to make flash memory

Consumer electronics, such as digital cameras, digital music players and USB drives, could soon be less expensive.

Intel (INTC) and Micron (MU) said Monday that they''ll spend up to $5.2 billion over the next three years on a joint venture to make computer memory for such digital devices.

The venture, called IM Flash Technologies, will focus on a type of memory called NAND flash. NAND is sought after because it can store large amounts of data yet has no moving parts. That makes devices that use it - such as the iPod Nano and nearly every digital camera - less likely to break or skip. NAND also uses little power, which leads to longer battery life.

But NAND is considerably more expensive than other kinds of computer memory, such as hard drives. That''s why it''s not used in electronics that need a lot of memory, such as Apple''s larger iPod music players or most digital video cameras.

That will change when Intel and Micron open factories in Idaho, Utah and Virginia and start shipping NAND in early 2006. Supply will soar and prices will tumble, predicts semiconductor analyst Joseph Unsworth of technology research firm Gartner. The lower prices will make it possible to put NAND in more devices and sell them for less, he says.

Intel and Micron already have landed their first customer. Apple (AAPL) helped get the joint venture started by prepaying for $500 million worth of memory. Apple also has deals with memory-makers Samsung, Toshiba and Hynix.

Intel shares closed down 5 cents at $25.25 Monday. Micron shares closed up 2 cents to $14.20.

The venture "gives Intel an entry into the data-storage market, where it had a hole," says semiconductor analyst Mark DeVoss at researcher iSuppli. Intel specializes in PC processors but has pushed hard into complementary markets.

Micron, a longtime manufacturer of other kinds of computer memory, will benefit from Intel''s marketing savvy and deep pockets, DeVoss says. That''s necessary to take on NAND champ Samsung, which has more than 50% of the market, he says. Micron already makes some NAND but is a minor player. "Their intention was to be much farther along than they are," says semiconductor analyst Jim Handy at Semico Research.

But Unsworth worries about a glut causing prices to fall too much, because several other new NAND plants are in the works. The market for memory is so competitive that it is sometimes sold at a loss.

Micron CEO Steve Appleton says new applications will emerge to gobble up the extra capacity. NAND will go from cellphones and cameras "all the way to a notebook computer," he says