News

posted on 06 March 2008 17:00

Facing unexpectedly high flash memory price erosion Intel is going to move to higher margin solid state drive (SSD) manufacture.

Intel's CEO Paul Otellini, talking at the annual Intel investor meeting, said that Intel expected a 27 percent decline in NAND flash memory chips for the first quarter of its fiscal year. In fact it was seeing a 53 percent fall. That meant its margins were coming down and the inventory value of its flash chips falling faster than anticipated. Both these things mean it has had to trim its gross margin expectations, from 56 percent to 54 percent.

Intel has a joint venture with Micron Technology to build flash memory chips. There is strong competition in the flash memory fabrication industry as suppliers have ratcheted up manufacturing facilities, scenting booming demand if they can get the unit cost of chips down. Unfortunately for them, consumer spending on devices using flash memory chips is set to fall and they are now over-supplying chips. Market demand is more than satisfied leading to price falls.

Otellini said Intel wouldn't be dragged down by its flash business which represents only a small proportion of its total earnings. The company is going to focus on building chips for solid state drives (SSD) and depend much less on commodity flash markets such as MP3 players and digital cameras.

Otellini said, regarding his company's flash business: " We're going to fix it or make sure it's profitable one way or another."