Intel to restructure NOR flash business

Fab 28 facility in Kiryat Gat to be completed in the middle of 2008.

intel chip 88 298 (photo credit: Courtesy of Intel)
intel chip 88 298
(photo credit: Courtesy of Intel)
Intel Corp. will announce Tuesday a joint venture with STMicroelectronics and private investors in a move that would involve reorganization of its NOR flash memory business, including its Kiryat Gat facility, The Jerusalem Post has learned. NOR flash memory chips, which Intel produces at the Kiryat Gat facility, are used to store programs on cell phones and home electronics. The world's largest chipmaker is making the move, which is designed to focus on high volume manufacturing, in order to stay competitive in the flash market, a source at Intel told the Post. Both Intel and STM are expected to sell their NOR flash businesses to a private firm, and the three entities would hold equal stakes in the combined business. The private group would invest $3 billion into the venture, the source said. Intel's NOR flash business was separated from the technology manufacturing group last year amid speculation that the company was preparing for a move such as the one to be announced, although Intel at the time claimed it was due to the differing natures of the two businesses. Intel, which first came to Israel in 1974, currently employs approximately 7,000 workers at its facilities throughout the country. The company is in the process of building a new $3.5 billion Fab 28 facility in Kiryat Gat to be completed in the middle of 2008. Intel CEO Paul Otellini was expected to announce the move to employees via a video conference call after the close of trading Monday, at 5 p.m. (NYC time), according to an internal memo cited by the source. Intel Israel spokesperson Koby Bachar commented that the company "does not speculate on speculation." The announcement would confirm speculation by research analysts that such a move was pending. "Given our recent industry channel checks and STMicroelectonics' announcement yesterday that it would be reorganizing its product segments to 'prepare the company for strategic repositioning in flash memory,' we believe the divesting of its NOR flash memory business is imminent," WR Hambrecht & Co. analyst Daniel Amir had written in a December 14 report to clients. "We anticipate a three party deal - Intel, STMicroelectronics and a private equity with none having a majority stake." Amir further noted that the combined technology resources of the new entity would provide the marketplace with "much-needed second source for high-density flash and will create the largest NOR flash memory supplier." Amir's comments closely followed those a week earlier by American Technology Research analyst Doug Freedman who anticipated a similar deal. "Although the cash value to Intel would not be significant, it would benefit from reducing headcount by approximately 5,000 employees and separate a low-profitability business that has not been a primary objective over the last couple of years," Freedman wrote in his research note.