After quietly taking an equity stake in two-year-old startup flash memory manufacturer Spansion, IBM now plans to augment its own still emerging, futuristic "racetrack" memory with flash memory dubbed MirrorBit.

IBM envisions its highly non-volatile, endlessly rewritable racetrack memory (RM) technology as capable of storing 3,500 movies on a single handheld MP3 player within the next decade. Now, under a cross-licensing deal officially announced today, IBM will work with the world's #1 producer of NOR flash memory, Spansion, to produce RM.

Together, the two will co-develop RM, a magnetic medium with no moving parts, and MirrorBit, a "charge trapping" technology designed to increase the density of a flash memory array while keeping costs down on manufacturing.

As a particular target, the two companies are honing in on China, where Spansion employs more than 1,300 people at design centers in Beijing and Suzhou, a manufacturing plant in Suzhou, and three sales and marketing offices.

Already in use by the top ten automotive OEMs, MirrorBit is also utilized in embedded systems ranging from gaming machines and wireless devices to telecom networking equipment.

Sunnyvale, CA-based Spansion now claims to be on track for $2 billion in annual sales, more than $500 million in quarterly sales from MirrorBit-based products under its belt for each of the past two quarters.

As of mid-January of 2008, Spansion's stock price had fallen to $3 per share, from a previous level of $15 per share in January of 2007. But in the quarter ending March 30, Spansion completed the buyout of Saifun Semiconductors, an IP licensing company which previously owned MirrorBit. The start-up also fulfilled the first sales from a new silicon manufacturing plant in Japan.

Meanwhile, in reporting its results for the first quarter of this year on April 16, Spansion noted that IBM had taken an equity stake in the company and engaged in a co-licensing deal. In a conference call on that day, Spansion CEO and President Bertrand F. Cambou called the co-licensing pact "the first step in what we envision will be a long-term strategic partnership between the two enterprises." IBM itself has yet to officially announce that element of their deal.

According to financial blogger Omer Pelman, Spansion's charge trapping technology has caused the start-up to gain market share in the past two years over both Intel and STMicron, two companies which recently offloaded their NAND memory production to a joint venture called Numonyx.

"Spansion lost some money doing this, but you should see the other guy. Intel, with 22 percent market share, made a Q3 operating loss of $140 million on sales of $553 million," according to Pelman.

"With some investment, [Spansion] can take the fab to 4,000 wafers per week and get a 34 percent cost advantage over Numonyx et al," Pelman predicted in mid-January.

For its own part, IBM's RM is designed to bring together the best capabilities from flash and magnetic storage technologies. RM uses a nanotechnology dubbed "spintronics" that takes advantage of the "spin" of electrons. Essentially, data runs around a "track" on a silicon wafer.

How does Spansion's MirrorBit work? According to a statement on Spansion's Web site, "The MirrorBit cell doubles the density of a flash memory array by storing two physically distinct quantities of charge on opposite sides of the memory cell - a feat made possible by the non-conducting nature of the storage medium. In this two-bit cell, each bit serves as a binary unit of data (either 1 or 0) that is mapped directly to the memory array. Reading or writing a bit on one side of a memory cell occurs independently of the data that is stored on the opposite side of the cell.

"The end result," Spansion continues, "is a technology that requires 40 percent fewer critical manufacturing steps than floating-gate NOR and consequently provides industry leading price-performance for flash memory."