Spansion and Taiwan's Advanced Semiconductor Engineering Inc. (ASE) have signed a memorandum of understanding to establish a venture to jointly own Spansion's IC-assembly operations in Suzhou, China.

Spansion also ''intensified'' its cost-cutting activities. It imposed salary reductions, cut capital spending, frooze headcount, cut research and development projects and reduced administrative expenses.

Spansion also elected to exit its least profitable business: the 90-nm content delivery line. It monetized the inventory and wrote down related assets, resulting in an approximate $13 million impact to gross profit.

This represents the latest efforts by Spansion to cut costs, amid ongoing losses and a severe NOR glut. And in a strange twist of events, Japan's Toshiba Corp. is in talks to acquire NOR-flash memory leader Spansion, according to Reuters.

To cut costs, Spansion is forming an IC-assembly venture with ASE. Specific terms of the non-binding MOU were not disclosed. Spansion's Suzhou facility is the flagship factory in the company's IC-assembly network, with approximately 1,100 employees.

Upon the completion of this transaction, the joint venture is expected to allow Spansion to reduce its capital expenditures and focus on its NOR flash business.

The joint venture will continue to provide final manufacturing services to Spansion and will also leverage ASE's technology expertise and management resources to serve other companies in this field. Taiwan's ASE is the world's largest IC-assembly house.

"ASE is the world leader in final manufacturing services," said Bertrand Cambou, president and CEO, Spansion (Sunnyvale, Calif.), in a statement. "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."

"This joint venture will enable ASE to expand its role in the rapidly growing flash memory segment," said Jason Chang, chairman and CEO of ASE, in a statement.

Meanwhile, Spansion said sales for the third quarter of 2008 were $631 million, up 3 percent compared to the prior quarter, and up 3 percent compared to the third quarter of 2007.

The company posted a loss of $118.7 million in the quarter, compared to a loss of $100.6 million in the previous period and a loss of $71.6 million a year ago.

In the third quarter Spansion achieved internal qualifications of multiple MirrorBit NOR devices for wireless applications. Due to the delay of certain serial-interface customer qualifications and softness in the Japan handset market, the third quarter revenue from that line was lower than expected.

By: DocMemory
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