Wednesday, March 04, 2009

Will Economy Spur the Rise of "Asset Light" Companies?

Scott M. Fulton, III, writing for, did an interesting piece on chipmaker Spansion, and its recent decision to file for Chapter 11 Bankruptcy. Spansion's filing comes hot on the heels of chipmaker Qimonda announcing bankruptcy as well. Many analysts predict that, with the current glut of chips and gloomy economic outlook, a good number of memory companies will be forced to consolidate or disappear.

On average, companies in the semiconductor spaces tend to be very IP-centric. Spansion was such a company, and claimed to hold key patents relating to "MirrorBit" technology (enabling two bits to be stored on a single cell, instead of one) and other chip technologies, inherited from its AMD predecessor. Recognizing that IP licensing could be more profitable than running the actual business, Spansion is contemplating joining the ranks of a newly-minted category of "asset light" companies.

From the article:

The company that was at one time the world's principal provider of NOR flash memory -- the more non-volatile variety -- had its own plans to go "asset light," to use a now familiar phrase, and to concentrate on licensing its intellectual property to companies with the muscle to do the heavy lifting. It sounds like a plan AMD just executed last month. As it turns out, Spansion had also been planning to license others to produce its designs.

Whether that remains the plan after a few months' time is now completely unknown. This morning, the company's Sunnyvale-based American arm announced it was filing for Chapter 11 bankruptcy protection, a month after its Japanese division applied for similar protection there.

* * *

For "asset-light" companies that create more than they produce to become profitable, they have to win something, typically in court. Last November, Spansion
mounted an aggressive defense
of its IP, which included suing global flash leader Samsung for patent infringement. Spansion is asking the US International Trade Commission to bar the import of Samsung memory that uses multiple-bit-per-cell technology, in a demonstration that it could do the same for others down the road (Toshiba immediately springs to mind).

But it takes years to achieve victory in the courtroom, and in the meantime, the world's glut of NAND flash memory is putting competitive pressures even on NOR suppliers like Spansion . . . With a leading supplier of memory now officially restructuring, it may only be a matter of time before other component suppliers in similar situations follow suit.

Read the full article here (link)

Hat tip: Phillip Brooks

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