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Intel May Move Optane Production to China, No Plans to Boost NAND

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Intel may move its Optane production to Fab 68 in China after its deal with Micron unwinds — and, of course, likely assuming that the ongoing Chinese trade war is resolved by then.

For years, Micron and Intel have operated a joint flash foundry, IM Flash, in Lehi, Utah. Intel is selling its stake in the foundry to Micron, which will kick off a 12-month period during which Micron will Optane to Intel at prearranged prices. After October 2020, the two companies will have to come to a new arrangement for Optane purchases, or Intel will need to have ramped its own manufacturing elsewhere. We know that Intel is developing third-generation Optane at its Rio Rancho facility in New Mexico, but not where it might build the memory thereafter. Anandtech thinks the smart money is on Fab 68 in China, both because this is where Intel is already building its 3D NAND in bulk and because the company has said it wants to ramp Optane production.

During its analyst day last week, Intel CEO Bob Swan announced his company wouldn’t be expanding its own 3D NAND production in the near future, though it will continue to roll out higher layer 3D NAND designs, allowing for more capacity to be built on existing lines.

Intel Analyst Day, 2019

Intel doesn’t expect to be profitable in NAND this year (this is unsurprising, given the NAND market’s meteoric price declines), and ramping Optane sales is also expected to be difficult, given how much of a gap has opened between NAND and Intel’s latest memory technology. There have been questions raised about how successful the Optane push will be, given the supposedly limited performance benefits from adapting Optane DC Persistent Memory. It’s possible that rearchitecting applications to take more specific advantage of Optane’s capabilities may yet yield better results, but this is unknown as yet.

The trade issues with China will undoubtedly be another factor in Intel’s decision-making. The assumption on Wall Street through Monday morning was that the US and China would settle this dispute relatively amicably. The Dow fell 2.45 percent on Monday, down more than 600 points as investors reacted to continuing problems between the two nations. This issue could still be resolved long before Fab 68 is ready to build Optane, but it takes a significant amount of time to ramp a fab for volume production. If the trade issues between the US and China keep tariffs in place, it could be extremely difficult for Optane to establish itself in-market, particularly given that it already carries a price premium over NAND.

All of this raises difficult questions for Intel, which will have to decide which foundry to use for future Optane expansion plans without knowing exactly what the status quo with China may be. It’s already quite difficult to ramp a new memory type as a NAND or DRAM competitor given the scale factor these technologies already enjoy. Doing so during a price decline is even harder, because DRAM and NAND prices are falling due to overcapacity, while Intel can’t leverage the same conditions to cut the price of Optane. Launching a new memory technology during a price downturn when a 10-25 percent tariff might be levied on the final goods makes the situation tougher still. While the tariff levied might be the same in percentage terms, the more-expensive memory ends up with a larger price increase in actual dollars. Server purchases and server companies are much less impacted by cost than your average consumer, but that doesn’t mean the price of hardware doesn’t matter, particularly when attempting to debut a new technology in new market segments that requires software support to reach its full potential.

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