Intel CEO vows to overcome flash price meltdown
Intel now plans to move aggressively into new markets, to help offset the impact of major price drops in the NAND memory chips used in Apple iPods and other CE devices, Intel CEO Paul Otellini said on Wednesday.
The company is also re-assessing its level of investment in NAND, according to Otellini.
"This business will not be a drag on Intel." he said, addressing an investor conference at Intel's headquarters in Santa Clara, CA. "We're going to fix it, or we're going to make sure it's profitable, one way or the other."
Intel first began making NAND flash chips in 2006 through a joint venture with long-time partner Micron Technology, the forth's fourth largest player in NAND for 2007 behind Samsung, Toshiba and Hynix, according to rankings by iSuppli. Intel ranked fifth in revenues from NAND flash.
Earlier this week, Intel lowered its profit predictions for the first quarter, when prices for the NAND chips dropped 53% instead of the 27% the company had originally forecast.
In a letter of warning issued late last month, iSuppli lowered its NAND revenue growth projections for 2008, pointing to reductions in Apple's NAND demand and order forecasts.
Intel is not the only chip supplier expected to be hurt by falling demand for NAND. But where the top three players in NAND saw year-to-year revenue growth from NAND in the low double-digit range, Micron's soared by 189 percent and Intel's by 227 percent, according to iSuppli's numbers.
By the time their deal was announced in late 2005, Intel's partnership with Micron actually revolved around DRAM. Intel had already invested a half billion dollars in Micron in 1998 and another half billion in 2002. When the deal was struck, Intel pledged to pay a combined total of $1.25 billion over the next three months to Samsung, Toshiba, Hynix, Micron and Intel to assure delivery of the NAND memory then anticipated for Apple's iPod.
Out of that $1.25 billion, $250 million was earmarked for Micron and another $250 million for Intel.