Intel is regrouping its flash memory operation.
The chip maker, which has been conducting a sweeping business review after suffering market share losses to rival Advanced Micro Devices in the recent past, is seeking to streamline its NOR Flash Products Group, one half its Flash Memory Group, by consolidating its NOR manufacturing, research and development and product support into the NOR Group. No layoffs are planned, however, the company said.
The move comes a little more than a week after Intel CEO Paul Otellini on April 27 outlined the business review while pledging to enact sweeping changes—ranging from accelerating its PC processor development cycles to re-evaluating underperforming businesses—in an effort to remake the chip maker in to a more nimble company.
“The driving force behind this [change in NOR] is getting the alignment of the key resources that work on memory inside of Intel,” said Allen Holmes, director of marketing for the NOR Flash Products Group, based in Folsom, Calif. “The outcome is delivering greater efficiency and productivity” to the wider Flash Memory Group.
Thus the NOR Product Group—NOR which is the faster of the two most popular types of nonvolatile memory and is popular in cell phones—gains three chip manufacturing plans or fabs in the reorganization, including one in Israel, one in Ireland and third development fab in Santa Clara, Calif., where Intel is headquartered.
The group also gains test and assembly facilities in China and the Philippines. The manufacturing and test facilities had been part of Intels Technology and Manufacturing Group.
The moves, which are consistent with Otellinis comments, present opportunities in combining manufacturing and its employees with NOR flash memory research and product design and the workers from those groups, Holmes said. He declined to comment on any cost savings, however.
The other half of the Intel Flash Memory Group, the NAND Products Group—a joint venture with Micron Technology—remains unchanged and Brian Harrison, general manager of the Flash Memory Group remains in place, Holmes said.
Streamlining its Flash Memory Group, which has toggled back and forth between profits and losses, is a logical place for Intel to get started with efforts to become more efficient, analysts said.
Flash “is a very competitive business,” said Dean McCarron, principal analyst at Mercury Research.
“While the volumes are consistent with Intels business model, the margins are not. Theres been a quarter or two where theyve pointed at it and said, Things would be better if it werent for this.”
The move may also give the group more flexibility by giving it greater control over its own manufacturing strategy in addition to removing layers between those who manufacture the products and those who design them.
In the meantime, the review, which could still lead to work force reductions or Intel jettisoning underperforming businesses, will touch all aspects of the 100,000-empoloyee company, Otellini said during an April 27 meeting with financial analysts.
Those actions will come in addition to efforts by Intel to refresh PC processor lines more often—in the short term, it will roll out its latest batch of chips starting this summer—and in the long term will reduce the time between chip architecture redesigns from four years to six years to two years.
Intel also said it had cut spending for areas, such as marketing, to the tune of about $1 billion and reduced capital expenditures, which are mainly for manufacturing.
“The result of this … is that youll see a leaner, more agile and more efficient company,” Otellini said at the meeting. “No stone will be left unturned.”
Intel also aims to regain the market-share it has lost, including almost four points of share in the fourth quarter.
To do so, the company intends to accelerate the delivery of its Core Architecture chips—chips based on a new architecture design, which Intel believes will give it an advantage in performance and power consumption versus AMD—and move from 90-nanometer to 65-nanometer production as quickly as possible, this year.
Intel will start by rolling out its Core Architecture-based, dual-core Woodcrest server chip, originally expected in the third quarter, in June. It will follow with its Conroe desktop chip in July and its Merom notebook chip in August.
Otellini said that Intels current plan is to offer more details on the results of its review with its third-quarter earnings report. Although the results of the evaluation arent likely to fully unfold until 2007, he said.
