Intel, ST forge flash memory joint venture

An expected move by STMicroelectronics NV and Intel Corp. to create a flash memory joint venture has been announced with an assist from private equity firm Francisco Partners LP.

The move is due to see 8,000 employees move to a new, but as yet unnamed, Swiss-headquartered joint-venture in NOR and NAND flash memory that will also encompass developments in chalcogenide phase-change memory.

For Intel and STMicroelectronics, flash memory mainly includes the NOR variety of non-volatile memory, often used for program storage in mobile equipment. Intel has a NAND flash memory joint-venture with Micron Technology Inc. called IM Flash Technologies Inc.

The new company would combine R&D, manufacturing and marketing assets drawn from Intel and STMicroelectronics businesses, which last year generated approximately $3.6 billion in combined annual revenue.

Under the terms of the agreement, STMicroelectronics will sell its flash memory assets, including its share in a China joint-venture with Hynix Semiconductor Inc. and other NOR resources, to the new company while Intel will sell its NOR assets and resources.

Pie shares
In return Intel gets a 45.1 percent equity ownership stake and a $432 million cash payment at close. STMicroelectronics is due to receive a 48.6 percent equity ownership stake and a $468 million cash payment at close. At the same time Francisco Partners will invest $150 million in cash for convertible preferred stock representing a 6.3 percent ownership interest, subject to adjustment in certain circumstances.

"The new company will be positioned to service customers with all of the elements necessary to deliver current and next-generation non-volatile memory technologies, while allowing ST to redefine its participation in flash memory," said Carlo Bozotti, STMicroelectronics’ president and CEO, and non-executive chairman designate of the new company, in a statement.

"The new memory company will have the people, scale and technology leadership to meet the needs of customers requiring leading-edge products in this highly competitive marketplace," said Paul Otellini, Intel president and CEO, in the same statement.

"From the outset, the company will be a leading supplier of flash memory solutions for wireless communications," said Brian Harrison, named to become the CEO of the new company at the close of the transaction and currently VP and general manager of Intel’s Flash Memory Group.

"We will be able to offer customers complete solutions with NOR- and NAND-based technologies, which we believe will provide significant opportunities for growth and the potential to develop products for many new application areas and geographic regions." The transaction is subject to regulatory approvals and customary closing conditions and is expected to occur in the second half of 2007.

Swiss headquarters
The new company, to be managed by Brian Harrison as CEO-designate and Mario Licciardello, currently corporate VP of ST’s Flash Memories Group, as COO-designate, will be headquartered in Switzerland and incorporated in the Netherlands with nine main research and manufacturing locations around the world and approximately 8,000 employees.

The integration of STMicroelectronics’ and Intel’s parallel research programs on phase-change memory is also expected to bring the benefits of advanced flash memory technology to potential customers more quickly and efficiently.