Here is the full article from tomorrow's Investors Business Daily:
Internet & Technology
Monday, September 9, 2002
After Fizzling In '01, Flash Memory Poised For Big Sales Bounce
BY JAMES DETAR
INVESTOR'S BUSINESS DAILY
The rivalry between Intel Corp. (INTC) and Advanced Micro Devices Inc. (AMD) often hits the headlines.
Most of the focus is on personal computer processors, where Intel ranks No. 1 and AMD No. 2. But the two companies also compete in flash memory chips. And AMD's moving to take the lead in that fast-growing market.
It's a good time for AMD to get aggressive, analysts say. After dipping last year, flash sales are expected to rebound sharply.
"We expect sales for the next couple of quarters to grow at an annualized rate of 235%," said Jim Handy, an analyst with Semico Research Corp.
Electronics makers prize flash chips. They store data even after a user turns the device off.
Dynamic random access memories, or DRAMs, are still the most popular memory chips. But data stored in them vanishes when the power is switched off. So flash is ideal for storing telephone numbers and other data in cell phones.
Between them, Intel and AMD make about 55% of the world's flash memories. Some $1.1 billion, or 28%, of AMD's $3.9 billion 2001 revenue came from flash memory sales. Semico estimates that by 2006 flash memory sales overall will exceed those of DRAMs.
Now, in a bid to boost its flash sales and take market share from Intel, AMD is putting on a full-court press.
First, it unveiled a new type of flash chip in May called MirrorBit. MirrorBit devices combine complementary chip designs onto one chip - similar to the system-on-chip idea touted by processor makers.
Making Life Tougher?
And in July, AMD bought a portion of a tiny Israeli flash chipmaker called Saifun Semiconductors Ltd. The purchase gives AMD access to Saifun's chip designs.
"With this agreement, we're adding some key intellectual property," said Kevin Plouse, head of marketing for AMD's memory group. The Saifun designs will be used in future MirrorBit chips, he says.
The moves could make life tougher for Intel, says Alan Niebel, an analyst at Web-Feet Research Inc. in Monterey, Calif.
With Saifun's help, AMD could develop high-density flash chips, he says. That's key, since device makers are constantly seeking more memory. Higher-density chips can store more information in the same amount of space.
"After having invested a few million in Saifun, AMD has a portion of equity in the company," Niebel said. "And instead of being adversaries, they become collaborators to work on higher-density designs."
Saifun quietly sued AMD last spring, claiming AMD was illegally using its chip designs. The new accord ends that suit, Plouse says.
He says once AMD got a good look at Saifun's designs, it realized it was getting a bargain.
"We saw they had an edge on us" in chip designs, Plouse said.
The best move was to become allies with the start-up, he says. "Why fight it?"
AMD, Saifun and AMD's manufacturing partner Fujitsu Ltd. will now try to turn Saifun's flash design into a leading industry standard. Plouse expects the first chips from the pact to come out in 2004.
AMD formed its joint venture with Fujitsu nearly a decade ago to keep costs down. They call the venture Fujitsu AMD Semiconductor Ltd., or FASL. The two companies split the chips made by FASL, and each sells to its own customers.
According to AMD, the FASL partnership was the world's biggest seller of flash chips from 1997 until 2000, when Intel took the lead.
The business may be No. 2 in flash production now, but still has plenty of big key customers. Volkswagen AG, for example, is a long-time AMD flash customer.
Volkswagen, the biggest carmaker in Europe, uses AMD flash chips in transmissions and other parts. In addition to Volkswagens, it makes Audi, Bentley, Rolls-Royce, Lamborghini and other cars.
AMD plans to use much the same strategy in the flash arena as it's used to gain market share in PC processors. That means undercutting Intel's prices.
AMD had less than 10% of PC processor sales in the late 1990s, but its share grew to about 22% in 2001. Intel has taken back market share this year, analysts say. Still, they estimate AMD sells about 18% of all PC processors.
Faster And Cheaper
It's difficult to compete with Intel's manufacturing might.
But AMD has built a couple of world-class flash chip plants with Fujitsu.
"We see the market, we know what we're doing, and we have already established MirrorBit" as a leading flash product, Plouse said.
Some analysts are optimistic. With Saifun's designs, AMD and Fujitsu can make chips faster and cheaper than Intel can, Niebel says.
"They can produce this at significant cost reduction compared to Intel," Niebel said. "They can produce 30% more devices than Intel in the same amount of time." |
