Advanced Micro Devices and Fujitsu have made a grab for the number two spot in the flash memory market by agreeing to expand their ten year old manufacturing joint venture into a full-fledged company with its own R&D and marketing operations. The move raises questions about AMD's longer term strategy, and spinning off the flash business remains an option.
The expanded joint venture, dubbed FASL LLC, will be split 60:40 between AMD and Fujitsu. The operation will begin its life with assets worth upwards of $2.5 billion, although it will also inherit some liabilities too. A brand name for the company will be decided later this year.
AMD and Fujitsu will be sole distributors of the joint venture's products, with AMD responsible for the US and Europe, Fujitsu handling Japan, and Asia-Pacific split between the two companies.
Hector Ruiz, AMD's president and CEO, predicted that combining the two businesses would improve their overall profitability, as it would expand efficiencies beyond those already achieved in manufacturing.
However, Mr Ruiz would not give any detailed comments on the financial implications of the combination. Neither would he comment on longer-term plans, such as the potential for AMD to increase its holding. He said, "There are no plans to effect any kind of spin off of this company."
Mr Ruiz also deflected suggestions that moving AMD's flash R&D into a separate company was swimming against the market tide. Intel has been making great play of its abilities to combine logic and flash, for example in products targeted at the wireless market. AMD has its own line of processors targeted at wireless and other flash hungry applications.
Mr Ruiz argued that Intel's strategy was inwards looking, focusing on pushing its technology as a package. AMD, by implication, will be better placed to push integration of its flash products with processors from a variety of vendors.
The move will prompt questions over where AMD sees its long-term future. Earlier this year AMD signed a deal with IBM, which will see the companies collaborate on process technology for 65nm and 45nm products. Despite Mr Ruiz' comments, a complete spin-off of the flash business has to be an option, leaving AMD with a microprocessor business that is closely tied to IBM's own developments in this area.
You can download a FREE technology report at www.dmfreereports.com