AMD and Fujitsu Form Chip Venture

AMD Inc. and Fujitsu Ltd. of Japan said Monday they are forming a joint venture to combine their flash-memory-chip operations into a single company to challenge Intel Corp.’s dominance in the $6-billion global market.

AMD will own 60% of the new Sunnyvale, Calif.-based company, called FASL, and Fujitsu will own 40%, AMD Chief Executive Hector Ruiz said.

“Our goal at AMD along with Fujitsu is to achieve a position of leadership in the flash-memory marketplace,” Ruiz said. The new company “will be a strong No. 2 in the market,” he said.

The joint venture “formally consolidates the second- and third-place vendors in the market behind Intel,” said Richard Gordon, analyst with market research firm Gartner Dataquest. “The new company will be more coordinated and more focused perhaps on R&D; and manufacturing, and the cost structure may be improved because of economy of scale.”

The two firms have collaborated since 1993 to develop flash memory, but this deal will formally combine their operations.

Flash memory chips are widely used in cellular phones, digital cameras and personal digital assistants, because they retain data such as phone numbers and photos even when devices are turned off.

Intel last year commanded one-third of the $6-billion global flash-memory market, according to Gartner. AMD was No. 2 with about $700 million in revenue, and Fujitsu was third with $650 million. Europe’s ST Microelectronics was fourth with $600 million and Japan’s Sharp Corp. fifth at $400 million.

The flash-memory-chip market was $7 billion in 2001. The top five were the same companies, but Intel gained share last year, to 33% of the market from 27% in 2001, while AMD lost ground -- to 11.7% from 15.7%. Fujitsu lost market share, to 10.8% from 12%.

The new company will employ 7,000, all of whom are expected to come from the existing AMD and Fujitsu workforce, including 800 workers in AMD’s Sunnyvale headquarters.

AMD fell 4 cents to $6.18 in New York Stock Exchange trading.