Continuing with plans to trim manufacturing expenses, Spansion has joined with Advanced Semiconductor Engineering to establish a joint venture that will see ASE take some responsibility for Spansion Suzhou, the flash maker's China final manufacturing facility.
Spansion, like many companies in the memory realm, has been reorganizing itself for some time now, looking to cut costs as memory ASPs (average selling prices) continue to dip on oversupply brought on by capacity increases and intense competition.
Throughout its reorganization Spansion's eyes have been keenly focused on manufacturing costs and after a $52 million sequential reduction in manufacturing service expenses with foundries and subcontractors, the Sunnyvale, Calif-based company in early June announced 500 job cuts as it looks to further cut costs.
Following the layoffs, Spansion said it would transfer certain manufacturing, test, and assembly assets to third parties and would establish manufacturing and technology partnerships as it refocused its own capital investments.
Specific terms of the Spansion-ASE memorandum of understanding were not disclosed.
Spansion said that upon the completion of the transaction the joint venture is expected to allow it to focus on the wireless and embedded market segments; further diversifying its flash product portfolio; and accelerating the company's flash memory process technology roadmap.
"ASE is the world leader in final manufacturing services," said Bertrand Cambou, Spansion's president and CEO, in a statement today. "Through our partnership with ASE, the Spansion Suzhou facility is expected to serve a broader customer base, which should result in lower costs through greater economies of scale and increased utilization."
The agreement follows with ASE's existing product, manufacturing, and growth strategy, focused on providing outsourced assembly and test services for a wide range of semiconductor companies. As such, the joint venture will continue to provide final manufacturing services to Spansion.
"This joint venture will enable ASE to expand its role in the rapidly growing flash memory segment," Jason Chang, ASE's chairman and CEO, said in the statement. "We are excited to see more and more semiconductor companies adopt the asset-light strategy, which leads to the acceleration of outsourcing demand."
Spansion joins major industry players including Advanced Micro Devices in moving toward an asset-light strategy as manufacturing costs continue to swell. AMD earlier this month announced it would spin its manufacturing operations out into a separate company, with analysts estimating the move will save the chipmaker between $150 million and $200 million per year on process technology R&D.
In a converse cost-saving move, Spansion memory competitor Micron Technology this week announced plans to acquire Qimonda AG's 35.6% ownership stake in Inotera Memories, a Taiwanese DRAM memory manufacturing joint venture with Nanya Technology. While the deal will cost Micron $400 million, it saw the Idaho-based company end an existing joint venture with Nanya that would have cost it $550 million in investments. The deal also gives Micron access to Inotera's 300mm production.
Spansion described its Suzhou facility as "the flagship factory" in its final manufacturing network, with approximately 1,100 employees. Operations at the 10-year-old facility include MCP package development; high-volume manufacturing of MCP, FBGA, and TSOP packages; assembly, test, mark and pack; and customer support.
Spansion said the deal should be finalized by end of year and is subject to a multi-year service agreement.
By Suzanne Deffree, Managing Editor, News - Electronic News