Spansion tightens belt on manufacturing, expands partnerships

Today's move follows Spansion's recent 500 position elimination, part of its continuing effort to lower manufacturing service expenses.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 6/19/2008

Spansion Inc today said it plans to transfer certain manufacturing, test, and assembly assets to third parties and will establish manufacturing and technology partnerships as it refocuses its own capital investments.

Spansion did not disclose further details on the assets or the third parties, nor did the company disclose with what companies it would be establishing partnerships with. Spansion did not return calls requesting additional comment to Electronic News by press time.

The announcement comes after the Sunnyvale, Calif-based company earlier this month announced it would eliminate 500 positions in a move that includes planned consolidations, attrition, and a reduction in regular, contract, and temporary workers in manufacturing, engineering, management, and administrative support functions, as the flash maker continues its effort to improve overall costs and productivity. At that time, Spansion claimed that with better factory utilization it has been able to reduce its workforce and lower costs while maintaining its focus on next-generation technology development and serving its customers. That continuing effort led to a $52 million sequential reduction in manufacturing service expenses with foundries and subcontractors in Spansion’s fiscal Q1.

Today’s announcement sees Spansion broadening its corporate strategy to create “strategic alliances,” with plans to focus its own capital investments on the accelerated development of its MirrorBit flash memory technology; the development of unspecified value-added, high-margin solutions; and its 300-mm SP1 flash memory manufacturing facility in Aizu-Wakamatsu, Japan.

Spansion made no mention of its other fabs in its statement, but did state, however, that it began this strategy in September 2006 when the company entered into an agreement to divest its JV1 and JV2 manufacturing facilities to Fujitsu. That transaction resulted in approximately $150 million in cash to Spansion.

"The plan to partner through strategic alliances is a deliberate program to focus investments and resources on strategic, differentiated, and value- added business opportunities," said Bertrand Cambou, CEO of Spansion, in the statement. "At the same time, we can focus our investments and support the right mix of assets to maintain and increase our competitive advantage."

The partnerships are initially anticipated to cover development of new technologies; final test and assembly; and mature and trailing-edge wafer manufacturing.

As part of the strategy, Spansion said in its statement today that it plans to continue to partner with foundries for the production of high-volume commodity products, allowing it to benefit from the scale of much larger players. That message conflicts somewhat with statements the company made in March, suggesting it would cut back on its work with fab partners, with Cambou reminding at the time that Spansion in 2007 “committed to reducing dependencies on external foundry sources.” Spansion currently has foundry relationships with TSMC and SMIC.