Intel flash memory merger given competition green light by Europe

Intel has received permission from European competition regulators to spin off its flash memory business into a joint venture with STMicroelectronics. Intel is still the subject of a European charge of anticompetitive practices in the chip market.

The European Commission has given the Intel / STMicroelectronics joint venture the green light as far as competition law is concerned.

"The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it," said a Commission statement.

Private equity company Francisco Partners will back the new company, which will make flash memory. The market for flash memory is highly competitive. The technology is used in MP3 players, mobile phones and digital cameras, but it could soon replace hard disc drives in computers.

The new Switzerland based company will be six per cent owned by Francisco Partners, which will pay $150 million for its stake. The rest of the company will be owned by Intel and STMicroelectronics, with Intel holding a slightly smaller stake.

The Commission said that it had investigated the markets for both of the main kinds of flash memory. "The Commission found that strong competitors are present for each of these products and customers would be able to continue sourcing their needs from a sufficient number of alternative vendors," it said.

Intel is facing a charge of anti-competitive behaviour from the Commission over its alleged tactics in the market for computer chips, its main business. The Commission produced a Statement of Objections last month detailing what it says are acts designed to prevent competitor Advanced Micro Devices (AMD) gaining a market share.

The Commission said that it believed that Intel had an "overall anti-competitive strategy" whose elements breached the rules of the EC Treaty in three distinct ways.

It said that Intel had offered larger rebates to PC makers who used its chips and not AMD's, that it paid manufacturers to delay products containing AMD chips and that it offered server chips below cost price to selected customers.

The Commission can fine Intel over those allegations if it finds them to be true, or it can order that it change its behaviour. Intel can request an oral hearing in relation to the claims. It denies anti-competitive behaviour.