RMG and Associates

Insightful, timely, and accurate

Semiconductor Technology Consulting

Semiconductor & Patent Expert Consulting

Ron@Maltiel-consulting.com

(408) 446-3040

RMG and AssociatesArticles:

1. Long Term Trend in the NOR and NAND Markets

2. What's next for Spansion? /EETimes

3. Spansion's Chapter 11 signals the erosion of the flash memory market / betanews

 

_____________________________________________________________________________________________________________________________________________

1. Long Term Trends in the NOR and NAND Markets

I believe the article about Spansion's Chapter 11 ... is missing the point of the real reason for the failure of Spansion. The key reason is that in the non volatitle market the NOR is on a shrinking growth rate pace compared to NAND's accelerating growth rate. As a result, the semiconductor companies that focused on NAND have been growing faster and have been more profitable than the ones that focused on NOR. The current global economic upheavl is just accelerating this trend.

This phenomena is mainly due to NOR’s higher cost and smaller memory size relative to NAND at every semiconductor technology node. A similar development took place in the SRAM and DRAM memory market in the past. SRAM and DRAM unit volume used to be equal in size, but as a result of DRAM being cheaper with a larger memory size, its current market size is about 10X the size of SRAM memory (even though SRAM is faster).

This growth trend in the volume of products and applications that use NAND and not NOR has been accelerating for several years. See the article below about the trouble that Intel had in selling NOR memories from May 2007


Barron's Eric Savitz column / May 2007

"Report Plan to Spin of NOR Business IN JV STMicro "Done Deal" Hynix Also Involved"

http://blogs.barrons.com/techtraderdaily/2007/05/09/intel-report-plan-to-spin-off-nor-business-in-jv-with-stmicro-done-deal-hynix-also-involved/

My comment at the time as seen in the link above -

"It would make sense for Intel to pull out of the NOR business, over the next several years NOR volume will drop to 1/10 of NAND volume..."

 

Another example indicating this long term trend impact of NAND on NOR is in What's next for Spansion

While the complete article is below, the relevant points are:

''In the fourth quarter a decline in end-user demand caused NOR unit shipments to plunge,'' Handy said. ''In all prior years NOR unit shipments have followed a cycle, with quarterly increases from Q1-Q4 before a seasonal drop-off in the first quarter. Last year NOR unit shipments collapsed in the fourth quarter to a level not seen since early 2005...

Some designs are even converting to NAND alone. Unless the high-density NOR is sold at a very low price, today's cheap NAND is likely to capture the bulk of the design's flash revenues,'' he said. ''One gigabyte of NAND today sells for only about 10 percent of the price it commanded in the middle of 2007. NAND's price slide is dragging down high-density NOR prices, vacuuming all the profit out of the market for the two leaders.''

 

Ron Maltiel

Providing timely and accurate consulting and business news for the semiconductor industry.

For more information - www.maltiel-consulting.com

 

Top

_____________________________________________________________________________________________________________________________________________

2. What's next for Spansion?

 
SAN JOSE, Calif.

This week, Spansion (Sunnyvale, Calif.), the world's largest NOR flash supplier, filed for bankruptcy amid growing anger among former employees at the company.

Jim Handy, an analyst with Objective Analysis (Los Gatos, Calif.), said that Spansion has three options: 1. A merger with another company; 2. Re-working the company into a new Spansion; 3. Getting additional financing options.

Insiders at Spansion see Micron Technology Inc. and/or Toshiba Corp. eventually buying Spansion, which has a strong IP portfolio in flash memory. For example, Spansion has a new memory technology, dubbed EcoRAM. The new memory device is designed to solve the energy consumption crisis in datacenters.

Other possible suitors could include Japan's Elpida Memory Inc. and Taiwan's Macronix International Co. Ltd., according to other insiders. ''But given the state of market, I would think the interest (in buying Spansion) would wane,'' one source said.

Until then, Spansion ''is simply using the protection offered by U.S. bankruptcy laws to find a better business model that will see it through the current downturn,'' Handy said in a report. ''Spansion tells us that this step allows the company to continue to satisfy their customers' needs while conserving cash.''

There are no plans to dissolve the company. ''Spansion is very careful to reassure that there are no plans for the company to be liquidated,'' Handy said. ''Spansion is the market share leader in NOR, and the loss of the company would be devastating both to the NOR business and to Spansion's customers.''

On the other hand, ''Spansion has eliminated or postponed projects that have no near-term return, directing their focus on the 'here and now' rather than the long term,'' he added.

Spansion itself declined to elaborate on its ''postponed projects.'' The company reiterated that it is still in business. ''We are alive and well and shipping products,'' said Tom Eby, executive vice president of Spansion's Consumer, Set-Top Box and Industrial Division (CSID).

Eby also reiterated what Spansion's new CEO said at the time of the Chapter 11 filing earlier this week. "Given our focus on Spansion's future, management and the board have concluded that chapter 11 provides the most effective means for Spansion to preserve its business, meet its post-petition obligations and maintain customer confidence and continuity while we complete this restructuring," said President and CEO John Kispert, in a statement earlier this week.

But the prospects remain grim for Spansion and other suppliers of NOR flash, including Numonyx, Samsung, SST, and others. Numonyx is the memory spin-off of Intel Corp. and STMicroelectronics Inc.

''In the fourth quarter a decline in end-user demand caused NOR unit shipments to plunge,'' Handy said. ''In all prior years NOR unit shipments have followed a cycle, with quarterly increases from Q1-Q4 before a seasonal drop-off in the first quarter. Last year NOR unit shipments collapsed in the fourth quarter to a level not seen since early 2005.''

There are other issues in NOR. ''Oddly enough, the leading NOR makers are suffering because of an oversupply of a completely different technology: NAND flash,'' Handy said.

''How does NAND compete with NOR? Camera phones are the key market for high-density NOR flash. Camera phones can be designed either to use a large NOR to store both the phone's firmware and the camera's pictures, or to use a small NOR for firmware teamed up with a NAND for pictures,'' he said.

''Some designs are even converting to NAND alone. Unless the high-density NOR is sold at a very low price, today's cheap NAND is likely to capture the bulk of the design's flash revenues,'' he said. ''One gigabyte of NAND today sells for only about 10 percent of the price it commanded in the middle of 2007. NAND's price slide is dragging down high-density NOR prices, vacuuming all the profit out of the market for the two leaders.''

 

 

Top

_____________________________________________________________________________________________________________________________________________

3. Spansion's Chapter 11 signals the erosion of the flash memory market

Another of the US' major brands in chip production is now struggling for a new direction.

By Scott M. Fulton, III | Published March 2, 2009, 4:57 PM

http://www.betanews.com/article/Spansions-Chapter-11-signals-the-erosion-of-the-flash-memory-market/1236031062#talkback

The company that was at one time the world's principal provider of NOR flash memory -- the more non-volatile variety -- had its own plans to go "asset light," to use a now familiar phrase, and to concentrate on licensing its intellectual property to companies with the muscle to do the heavy lifting. It sounds like a plan AMD just executed last month. As it turns out, Spansion had also been planning to license others to produce its designs.

Whether that remains the plan after a few months' time is now completely unknown. This morning, the company's Sunnyvale-based American arm announced it was filing for Chapter 11 bankruptcy protection, a month after its Japanese division applied for similar protection there.

Spansion had been the hopeful spinoff of AMD itself, having gone public in 2005 in a $835 million offering. It had been given one of AMD's crown jewels: Called MirrorBit, it's a technology that enables two bits to be stored by a single cell, rather than the usual one.

It had so much promise going for it, and it would skyrocket to 40% market share for NOR flash by last fall. But it could actually have been higher still, as the company fell behind on shipments of new incarnations of its products starting in the fall of 2006. Though it held a commanding lead in the statistics department, it didn't capture the trust of the device manufacturers who depended on it.

Spansioin MirrorBit NOR flash memory chipA partnership deal with Shanghai-based Semiconductor Manufacturing International Corp. helped Spansion become the world's third largest supplier of flash memory overall. But that association with an independent may also have triggered Spansion's more IP-centric strategy -- the same direction that Transmeta, another long-time associate of AMD, took prior to becoming completely acquired late last year by Novafora.

For "asset-light" companies that create more than they produce to become profitable, they have to win something, typically in court. Last November, Spansion mounted an aggressive defense of its IP, which included suing global flash leader Samsung for patent infringement. Spansion is asking the US International Trade Commission to bar the import of Samsung memory that uses multiple-bit-per-cell technology, in a demonstration that it could do the same for others down the road (Toshiba immediately springs to mind).

But it takes years to achieve victory in the courtroom, and in the meantime, the world's glut of NAND flash memory is putting competitive pressures even on NOR suppliers like Spansion. The company's other IP crown jewel is something called ORNAND, a NAND/NOR hybrid that offers many of NOR's benefits in a form factor that would normally be attractive to small component manufacturers, such as handset and automotve electronics. But it's not a normal market, and as Objective Analysis' Jim Handy writes, in this market, ORNAND isn't very handy for Spansion to have around.

"ORNAND could have done very well in a typical NAND market, one where NAND makers dropped their lower-density product in pursuit of sales of more profitable high-density devices," Handy wrote last month. "The trouble is, there's such a huge NAND glut today that all NAND makers are taking orders for low density parts that they would have otherwise abandoned. It's better to sell an unprofitable part than to leave their fabs idle."

So rather than sell the manufacturing facilities it still has to keep the company afloat, Handy suggests that Spansion consider "un-lightening" itself -- selling off some of its intellectual property that it can't really use in the current market anyway, clearly indicating ORNAND as one candidate. Handy's suggestion came as the company's restructuring had just begun, with the resignation of then-president and CEO Bertrand Cambou.

This was followed immediately by the appointment of John Kispert, formerly head of KLA-Tencor, a producer of metrology tools used in semiconductor fabrication. And very soon after that, the unraveling started taking place: the filing for restructuring in Japan the following week, an announced layoff of 3,000 two weeks later (35% of its workforce), and today's announcement of restructuring in the US.

With a leading supplier of memory now officially restructuring, it may only be a matter of time before other component suppliers in similar situations follow suit. Spansion's move follows last January's announcement by US-based former Infineon affiliate Qimonda that it had filed for insolvency.

Top

_____________________________________________________________________________________________________________________________________________