By Clint Boulton

Intel and Micron today agreed to form a new company to manufacture NAND flash memory, the storage technology used in iPod digital music players, USB drives and smartphones.

IM Flash Technologies, LLC, will only manufacture products for Micron and Intel, two chipmaking giants with enough capital, intellectual property and personnel to snatch a good portion of the NAND market.

IM Flash Technologies combines Micron`s NAND development acumen with Intel`s multi-level cell technology and Flash memory innovation.

Intel and Micron said in a statement the venture will allow them ``to successfully compete in the NAND flash memory business, an increasingly important and fast-growing market segment.``

That`s no understatement: The venture is already paying dividends.

Apple, whose endorsement of NAND Flash memory has enabled it to sell 30 million iPod digital music players, has agreed to prepay Intel, Micron, Hynix, Samsung Electronics and Toshiba $250 million each for Flash memory products. The $1.25 billion payout is the first step in a deal that Apple will have with the five vendors through 2010.

Intel and Micron make a formidable pairing in the NAND Flash market and could eventually dominate thanks to supporters such as Apple. Investing in NAND was par for the course for a company making the most successful consumer electronic product since the Walkman.

``We want to be able to produce as many of our wildly popular iPods as the market demands,`` said Jobs in a statement.

NAND (define)&BSP; Flash memory is one of two technologies used in memory cards, the other being NOR (define)&BSP;. Best suited to devices requiring a lot of storage, NAND is used in USB Flash drives, MP3 players and provides the image storage for digital cameras.

NOR flash is the preferred technology for flash devices used to store and run code, usually in small capacities. However, NAND flash devices offer faster erase, write and read capabilities over NOR.

Intel nemesis AMD is already blazing a trail in the NOR Flash space through the creation of Spansion LLC with partner Fujitsu.

Spansion today added a 64 megabit Serial Peripheral Interface (SPI) device to its lineup of NOR flash memory products. The device is designed to support embedded applications with large code storage requirements, such as printers.

IM Flash Technologies will be 51 percent owned by Micron and 49 percent owned by Intel. Intel and Micron have agreed to initially contribute approximately $1.2 billion each in cash, notes and assets to IM Flash Technologies.

The parties will each contribute an additional approximately $1.4 billion over the next three years and intend to make additional investments as necessary to support the growth of the operation.

Production will begin next year in manufacturing facilities in Boise, Idaho, Manassas, Va. and Lehi, Utah.

The company will be led by Intel`s Dave Baglee, who previously served as manager of Intel`s Fab 11 in New Mexico, and Micron`s Rod Morgan, who most recently served as manager of Micron`s fabrication facility in Manassas.