Freescale's Novel Chip Takes Baby Steps

SAN FRANCISCO -- It's been nearly two years since Freescale took bragging rights by being the first company to commercialize a novel type of memory technology dubbed MRAM.

Now Freescale is finally announcing a customer for the technology.

The chipmaker plans to announce Monday that Siemens(SI Quote - Cramer on SI - Stock Picks) is using MRAM chips in touch-sensitive displays used for operating factory equipment.

The deal is a vote of confidence in MRAM, which has been touted as a potential alternative to technology like flash memory.

But it also raises questions about how viable of a business MRAM really is: After 20 months on the market, and 10 years in the labs prior to that, Freescale's effort appears to be showing limited payoff.

Its only other MRAM customer announcement involved Angstrom Aerospace's use of the technology on board a Japanese research satellite -- not exactly a high-volume market.

David Bondurant, Freescale's MRAM product manager, says the company currently has 45 customers purchasing MRAM products and is making significant progress.

Because MRAM is such a novel technology, he says, it takes time for potential customers to become familiar and comfortable with it. And the products MRAM is best suited for have lengthy design and qualification periods.

"These things don't happen in just a month," Bondurant says.

MRAM, or Magnetoresistive Random Access Memory, combines the best traits of various existing memory technologies. It offers the speed of SRAM memory, but is able to retain data even without power, similar to flash memory made by companies like Spansion(SPSN Quote - Cramer on SPSN - Stock Picks).

But the technology is also significantly more expensive than other types of memory, and markets that can justify the extra costs are not abundant.

"Its attributes have no value in mainstream memory usage," says Mark DeVoss, a memory analyst at industry research firm iSuppli.

"What [Freescale's] marketing department needs to do is find out who needs and who will pay for the attributes their products have over the other memory alternatives," DeVoss explains.

Freescale is currently hawking MRAM as an alternative to the specialized SRAM memory made by companies like Cypress Semiconductor(CY Quote - Cramer on CY - Stock Picks) (which pulled the plug on its own MRAM efforts in 2005). The main markets for MRAM are in industrial applications, like Siemens' factory displays, as well as in computer storage systems.

Freescale is also developing versions of MRAM chips for use in automobiles and hopes to eventually integrate MRAM in its embedded microcontroller chips.

"We would expect this year to double the number of products or more, so that we serve more of the non-volatile memory market," says Freescale's Bondurant. "Every time we do that, we open up the opportunity to sell to more customers."

Whether the Siemens deal is a sign that MRAM is poised to steal market share from SRAM and flash memory-makers or simply underscores Freescale's uphill battle remains to be seen.