Flash Moves to Fore

If there was any doubt about the central role that flash memory will play in the tech industry's future, it was put to rest Monday morning when Intel(INTC) and Micron(MU) teamed up to create new flash memory company with a half-a-billion-dollar order already on the books, courtesy of Apple(AAPL).

The size of Apple's advance order raised eyebrows on Wall Street.

Apple, whose iPod nano uses flash memory, clearly wants to secure a supply of the vital component for what has become its most promising business. In the company's most recently reported quarter, iPod sales represented nearly one-third of Apple's total revenue. But according to some analysts, a $500 million order of flash should go beyond any immediate iPod needs.

"It's pretty clear Apple has some interesting plans going forward that have to be bigger than just for an MP3 player," said Thrivevent Financial analyst Jim Grossman, whose firm owns Apple shares. Among the rumors circulating the Internet are everything from a flash-based personal video recorder to an Apple laptop that relies on flash memory instead of a hard drive.

The joint venture between Intel and Micron, dubbed IM Flash Technologies, had been rumored for weeks. Even so, news of the flash newcomer sent ripples across the industry, with shares of flash memory maker SanDisk(SNDK) taking the hardest hit and sinking $9.27, or 16.5%, to $46.93 in recent trading.

The Intel-Micron joint venture could mean both stiffer competition and more litigation for SanDisk, which has never shied away from lawsuits to enforce its patents over key NAND flash memory technology.

Intel already has cross-licensed patents with SanDisk, but Micron is another story. "We do believe very strongly they [Micron] will require a license from us," said SanDisk spokesman Bob Goligoski. "They do not have a license yet."