Having ended both its NAND flash and 3D XPoint partnerships with Micron Intel sold its stake in the Intel-Micron Flash Technology wafer fab in Lehi, Utah, to Micron. But Intel has yet to start its own production of 3D XPoint chips and so had a product supply agreement with Micron with pre-agreed prices.
Intel’s reluctance to turn on its own non-volatile memory production is likely to be the main reason for continued engagement between Intel and Micron but that is also related to the cost of producing 3D-Xpoint chips.
Next: Comes in Handy
Back in October 2019 analyst Jim Handy observed that Micron had been writing off $100 million in expenses for each of the previous four quarters stemming from under-utilization of 3D Xpoint production. That write off was set to rise to $150 million in 4Q19, Handy said.
Similarly Intel’s Non-Volatile Solutions Group (NSG) was loss-making or marginally profitable for several previous quarters while other flash memory makers were highly profitable. This suggested to Handy that profits Intel was making on flash memory were being offset by losses on 3D XPoint. Handy was reported saying more recently: “By my estimate Intel lost about $2 billion on 3D XPoint in each of 2017 and 2018, and $1.5 billion in 2019.”
The Micron 8K filing effectively updated the product supply agreement between it and Intel. The filling said: “On March 9, 2020, Micron Technology Inc. (“Micron”) and Intel Corporation (“Intel”) agreed to terminate, effective March 6, 2020, the Product Supply Agreement, dated April 6, 2012, among Micron, Intel, and Micron Semiconductor Asia Pte. Ltd. (the “PSA”). The PSA set forth the terms under which Micron agreed to supply 3D XPoint wafers to Intel at prices determined under a defined formula and in accordance with a negotiated forecast. Contemporaneous with the PSA’s termination, Micron and Intel entered into a new 3D XPoint wafer supply agreement with changes to pricing and forecast terms. The new agreement is not material to Micron and does not change Micron’s previously-communicated outlook that under-utilization charges associated with Micron’s Lehi, Utah fab will average approximately $150 million on a quarterly basis in fiscal year 2020.
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