Spansion's existing 200mm facilities based in the US and Japan have been running at capacity for a year while construction started in Japan (1Q05) on its first 300mm facility.

That will not be ready for volume production until mid-2006, according to our figures. With NOR Flash demand still robust but prices under continued pressure the company is unable to make an operating profit. This has meant that increasing production and leveraging better economies of sale are the only route to a profitable state.

However, the problem is that to migrate to more advanced technologies of its MirrorBit chip design, Spansion would take a hit on utilisation levels while qualification and ramp gets underway.

TSMC has come to rescue in the form of being Spansion's foundry of choice to produce its older 110nm flash devices. Interestingly, news reports claim that TSMC's Fab 6 would be used for Spansion's needs. However, Fab 6, according to our figures does not have poor utilisation so it could well be another of TSMC's 200mm fabs that gets the business.

The news will also do little for TSMC's wafer ASP's that have been in decline on a long trend line since 2001 due to increased foundry competition and over capacity in the foundry marketplace.

Going forward it would not surprise us that Spansion utilises TSMC new and very large 200mm fab in China in an effort to get back lost profitability as Flash prices could remain under pressure in 2006.

TSMC also wins our "sick quote of the week" award for its comments about the Spansion partnership announcement (see below).

"Spansion is a highly innovative company in a growing market," said TSMC CEO Dr. Rick Tsai. "When combined with TSMC's manufacturing muscle and industry-leading customer partnerships, this combination makes for a powerful win-win relationship."