Spansion sharpens focus on China, signs deal with SMIC

The deal with SMIC should help Spansion sell flash chips to Chinese consumer electronics manufacturers

Flash memory chipmaker Spansion has sharpened its focus on China, revamping management in the Asia Pacific region and striking a deal to farm out some chip production to Semiconductor Manufacturing International Corp. (SMIC).

Spansion, originally a joint venture between Advanced Micro Devices and Fujitsu before it went public, provides NOR flash memory and its own MirrorBit flash chips to the mobile phone market.

The changes in management structure and the SMIC deal are designed to boost Spansion's sales in China's mobile phone and consumer electronics markets. The management changes include the creation of a new position, president for the Greater China area, which usually includes China, Hong Kong, and Taiwan.

Several multinationals have increased their focus on China's mobile phone market in recent years. Research In Motion said Tuesday its popular BlackBerry handsets will soon be sold in China, an announcement that sent its stock soaring 9.8 percent on the Nasdaq to $124.53 per share, despite the fact that most Chinese buy low-cost mobile phones.

Last month, Hewlett-Packard, the biggest PC vendor, said it won a license from the Chinese government to sell more smartphone models in the country. It's currently allowed to sell only one smartphone, the hp6515 iPaq.

The companies are being lured by China's rapid growth. It boasted 516 million mobile phone subscribers at the end of August, according to the Ministry of Information Industry of the People's Republic of China. The world's largest mobile phone company, China Mobile Communications, counted 350 million subscribers as of the end of September. No other country comes close to those numbers.

The U.S. mobile population is at around 246 million, according to the CTIA, while India, which has a population nearly as big as China's, had 209 million mobile phone users as of the end of September, according to the Telecom Regulatory Authority of India.

Spansion's new Greater China president, Gary Wang, will work with customers, government officials, and partners to focus Spansion's business strategies to the requirements of the China market, the company said.

Spansion had 2006 full-year sales of $2.6 billion.

The agreement with SMIC will allow Spansion to have its MirrorBit flash memory products produced on 12-inch silicon wafers in China, which help reduce costs. The companies expect the deal to help Spansion sell flash chips to Chinese consumer electronics manufacturers.

Spansion began outsourcing production of some of its chips to SMIC's rival, Taiwan Semiconductor Manufacturing Co. (TSMC) last year, but TSMC does not offer production on 12-inch wafers in China. Taiwanese investment regulations prohibit TSMC from producing chips on 12-inch wafers in China. Spansion will continue to contract some manufacturing to TSMC.

SMIC will also be able to manufacture and sell MirrorBit Quad chip products to certain markets in China, according to a memorandum of understanding, Spansion said.