A new deal between Micron Technology Inc. and Intel Corp. could bring hundreds of jobs to Utah and result in the ramping up of Micron's Lehi facility to full capacity.
The two tech giants said Monday they would form a new company called IM Flash Technologies LLC to manufacture NAND flash memory that is used in many consumer electronics, removable storage and handheld communications devices.
The new venture would manufacture products exclusively for Micron and Intel. However, both of those companies have entered into separate long-term contracts to supply Apple Computer Inc. with "a significant portion" of their share of IM Flash's NAND flash memory output, with Apple to prepay $250 million to each company.
Micron has invested about $1 billion so far in the Lehi plant, which originally was designed for manufacturing but now has 500 workers involved in chip testing.
"If all goes well . . . our test employees will transition to manufacturing NAND flash. . . . We would see a transition over time, and that would mean in 2007 we'll see some additional investment in the facility from a construction perspective — again, if everything goes the way we're envisioning," said Trudy Sullivan, a Micron spokeswoman.
As for whether employees would be added to that 500 and how quickly that would occur, "we're not at the point where we're giving out those details, but it could potentially result in hundreds of jobs," she said. "But that depends on how things play out, and the extent that Lehi participates in the partnership is going to be determined by how competitive the business environment is in Utah as the deal evolves."
Micron, which will own 51 percent of IM Flash, said production will take place initially in manufacturing facilities in Boise; Manassas, Va.; and Lehi. Boise will be the first focus, followed by Manassas and then Lehi, Sullivan said. Initial production from the company is expected early next year.
Intel and Micron have agreed to initially contribute about $1.2 billion each in cash, notes and assets to IM Flash. If certain conditions are met, each would add about $1.4 billion over the next three years "and intend to make additional investments as appropriate to support the growth of the operation," Intel said in announcing the venture.
"If things go the way we hope, there will be some investment in construction and build-out, and then there would be tooling and equipment and that sort of thing," Sullivan said about further Lehi investment, although she said putting a dollar amount on that investment "is a little premature."
"Out of the chute, we know there's a significant opportunity here, and as the deal dynamics continue to evolve, there's potential for us to maximize those investments that have been made in the site and take that to full capacity," she said.
But a figure for capacity "is continuing to be defined," she said.
Micron announced plans for the Lehi plant in March 1995, saying the $1.3 billion plant would employ about 3,500 people. But a downturn in the chip market followed. It had only 500 workers in mid-2000 involved in testing, not fabrication, and much of the 2.3 million square feet on 2,100 acres was dormant.
"This is just such a positive step for Micron and Lehi," Sullivan said Monday. "We're excited about realizing the potential of the Lehi facility and providing opportunities for employees and the community."
Micron continues to look for workers with backgrounds from high school education through doctoral degrees. The company is encouraging people to use www.micron.com for employment opportunities.
Intel has about 350 workers in Riverton, with most involved in payroll, the on-call assistance center and general employee services. Jason Bagley, Intel's government affairs manager for Utah, Arizona and Texas, said Utah's operations will not change.
"We will continue with our current mission and kinds of activities we're involved in," Bagley said. "I really don't see anything changing right now as a result of the announcement."
Steve Appleton, chairman, president and CEO of Boise-based Micron, told The Associated Press Monday that the joint venture with Intel would have happened without Apple's demand for NAND memory chips, since the growth of the flash memory market is outstripping demand for dynamic random access memory, or DRAM, chips that are widely used in personal computers.
"The technology is penetrating markets that are both new to us and to Intel, and we believed the two companies together can be a formidable player in this space," said Appleton. "The NAND market is about a third the size of the DRAM market, but it is growing at 100 to 120 percent per year, while DRAM is growing at 45 to 50 percent per year."
The Micron-Intel venture follows Monday's announcement by the world's largest memory chip maker, Seoul-based Samsung Electronics Co., that it would invest $615.4 million to build a new chip production facility in South Korea to meet rising demand for both NAND and DRAM chips.
The venture tightens ties between the companies after Intel has invested almost $1 billion in Micron, according to Appleton.
Intel has had trouble cracking new markets as CEO Paul Otellini and his predecessor, Craig Barrett, sought to move beyond personal-computer chips. Intel added processors that place mobile phone calls, and after five years of struggling, won its first order for a new model of the chips this year.
Micron is taking on the manufacturing because the company already makes some products, Appleton said. The alliance will help to grow the business quicker than it would have been able to alone. Intel will contribute to design and manufacturing of future products, he said.
"The concern that we had was that in terms of capacity and market share we were quite a ways behind a couple of other players," Appleton said. "It made a lot of sense for us to do something together. We think we will be a significant player within one or two years."
Apple reached the long-term chip agreements to make sure it can produce enough of its best-selling iPods to meet demand, CEO Steve Jobs said in a prepared statement. IPod shipments rose to a record 6.45 million units last quarter, and the company said parts shortages curbed its ability to build enough of the new iPod Nano to meet consumer demand.
Most of the newer iPod models, such as the Shuffle and Nano, use flash instead of a hard drive.
"Shortages would kill their Nano sales, and they can't allow that to happen," said John Lau, an analyst at Jefferies & Co.
"This is a nice way into consumer electronics for Intel, and they're basically saying to Apple, 'We'd love to help you with all those iPods you're selling,' " said Daniel Morgan, who helps manage $5.45 billion including Intel shares at Synovus Investment Advisors in St. Petersburg, Fla. "Once Intel really revs up on something, they can blow anyone out of the water."
Shares of Intel, based in Santa Clara, Calif., fell 5 cents to close at $25.25 in Monday trading on the Nasdaq Stock Market, while Micron's stock rose 2 cents to close at $14.20 on the New York Stock Exchange.
Shares of Apple rose 40 cents to close at $64.96 on the Nasdaq.
Contributing: Associated Press; Bloomberg News