When Intel and STMicro put their respective NOR flash operations together back in May 2007, we thought they would be sold off as soon as we looked way. The idea was to dump NOR flash, which has largely been superceded by NAND flash, in order to keep focusing on NAND developments. Micron has now bought out the renamed Numonyx NOR business this week for $1.27 billion in new shares.
The aim at the time was to keep Intel in step with Samsung, and not let Samsung get away in its already dominant NAND and DRAM markets.
NOR flash has been used broadly in industrial controllers, PCs and cameras, etc.. but especially in mobile phones. NOR is flash memory which is fully non-sequential in its ability to access memory, while NAND flash is cheaper to make and performs better on sequential tasks such as playing out video or music. But increasingly the major amounts of Flash are used to play out media, and that plays to NAND strengths and cheaper manufacture. The core onboard flash in a SIM tends to be NOR Flash in mobile phones, but data cards tend to be NAND flash.
About two years ago NAND overtook NOR, and between them NAND flash and DRAM take about 86% of the memory chip market. NOR is down to around $4.5 billion and still heading south and expected to be made up of only $4 billion next year. Given that Numonyx has around 34% of the market, that makes the deal worth something just under one times revenue.
Micron will issue 140 million shares to the three Numonyx’s shareholders, plus additional shares if its share price falls too far on the news (which right now it has done). ST will receive around 66.6 million Micron shares and the transfer of the M6 industrial facility in Catania, Italy, in exchange for its 48.6% stake in Numonyx and the cancellation of debt note due to Numonyx.
Given that Intel used Micron technology to get itself into the NAND flash market back in 2005, this looks like little more than shifting of the shopping basket from one arm to the other. Intel did a joint venture in NAND flash with Micron, and then landed a huge deal with Apple for iPod flash supply for them both, and the money helped Micron buy Lexar, a leading Flash controller IP house. The only problem is that Micro shareholders are seeing this as the company being involved in a technology which is falling in market share, and that has reflected on the Micron share price.
The third shareholder in Numonyx is Private Equity group Francisco Partners, which will get $527 million in shares and ST said it would share a facility in Agrate, Italy, for R&D and manufacturing. The deal is expected to close in 3-6 months.