As part of the deal, SanDisk has committed investment of about $1.25bn to manufacturing equipment, start-up costs, design and development, while Toshiba is funding constructing of the new building.

SanDisk president and CEO Eli Harari expects the new facility, known as Fab 3, to supply the latest technology flash memory wafers in high volumes for the second half of this decade. “The markets for NAND flash memory are already quite large and are continuing to grow at a rapid pace, and are expected to outstrip our existing sources of supply,” he said when launching the joint venture.

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“Our five-year-old partnership with Toshiba has exceeded our best expectations and we are running at full capacity in our existing 200mm fab. This new Fab 3, which is running on 300mm will be welcome capacity when it starts ramping up late in 2005 and into 2006. Our markets are very young and we see tremendous growth in demand for our products which we need to be able to source, to a large extent, from our captive supply,” said Mr Harari.

Flash memory cards have become increasingly pervasive in consumer electronic goods such as multimedia cell phones. “The future output from Fab 3 is expected to become an important element of our strategy to supply the anticipated demand from our OEM [original equipment manufacturer] and consumer customers,” said Mr Harari.

SanDisk spokeswoman Lori Barker says: “We plan to finance part through our own cash and we are working on obtaining operating lease lines for the other part. We expect the [facility] will generate 37,500 wafers per month, of which our allocation will be 50%.”

According to Ms Barker, the facility has available space to expand as demand for flash memory devices grows. Her counterparts at Toshiba say that they expect the market for digital memory devices to double by 2007.