Spansion Reduces Reliance on Manufacturing Services

SUNNYVALE, Calif. (Map) - SUNNYVALE, Calif., March 19 /PRNewswire-FirstCall/ -- Spansion Inc. (Nasdaq: SPSN), the world's largest pure-play provider of Flash memory solutions, today announced that its focus on manufacturing excellence is expected to reduce its reliance on foundry and subcontractors by approximately $50 million per quarter in the first half of fiscal 2008 compared to the second half of fiscal 2007.

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Manufacturing efficiencies resulting in increased output in its Austin, Texas Fab25 and Aizu-Wakamatsu, Japan-based SP1 fab are expected to allow Spansion to reduce its dependencies on outside foundry support, particularly for 90nm product. In addition, new testing capabilities are resulting in significant increases in both throughput and yield, specifically on 65nm products including the company's leading-edge MirrorBit(R) technology Flash memory products.

"Last year, Spansion committed to reducing dependencies on external foundry sources and streamlining our own manufacturing and test capabilities, with the ultimate goal being significant cost savings," said Bertrand Cambou, president and CEO, Spansion Inc. "With the exceptional performance of our worldwide manufacturing and engineering teams, we have met that challenge and are committed to continuing to prove our ability to lead in this highly competitive field."

In addition to Spansion's internal manufacturing focus, the company plans to continue its long-term partnership strategy with a select group of subcontractors, such as ChipMOS for wafer sort and SMIC for wafer foundry. The SMIC agreement is expected to result in 65nm, 300mm wafers being produced before the end of fiscal 2008.

Manufacturing Excellence

In Austin, Texas, Spansion's Fab25 continues to exceed the company's expectations in both yield and output on its 90nm products. At the same time, SP1 in Japan has ramped up on 300mm wafers, reaching starts of 2000 wafers per week on 65nm MirrorBit technology Flash memory products. The combination of the two facilities' success will allow Spansion to reduce its reliance on external foundry sources.

SP1 is co-located in Aizu-Wakamatsu, Japan with Spansion's other fab, JV3, and is the first fabrication facility constructed by Spansion since Spansion became an independent company. Plans for SP1 include an aggressive migration plan to 45nm in fiscal 2009, which is expected to provide additional cost efficiencies.

Test Efficiency

Spansion has also been developing new capabilities for wafer-level testing and built-in self test (BIST), designed for integration with 65nm lines. The implementation of these capabilities is expected to result in higher throughput, increased yields and lowered costs. By integrating these leading- edge testing capabilities into its existing facilities, Spansion has reduced its dependencies on external test vendors, which has resulted in cost reductions.

Wafer-level testing streamlines the overall testing process by conducting electrical testing while the die are still in wafer form, reducing the amount of time spent on identifying design or processing problems. Specifically designed to reduce costs associated with testing, BIST reduces both the test cycle duration and the complexity of the test set-up, which directly reduces the need for automated test equipment (ATE). These advanced techniques for testing provide faster, more accurate measurement results, providing an increased return on investment.

About Spansion

Spansion (Nasdaq: SPSN) is a leading Flash memory solutions provider, dedicated to enabling, storing and protecting digital content in wireless, automotive, networking and consumer electronics applications. Spansion, previously a joint venture of AMD and Fujitsu, is the largest company in the world dedicated exclusively to designing, developing, manufacturing, marketing and selling Flash memory solutions. For more information, visit http://www.Spansion.com.

Spansion(R), the Spansion Logo(R), MirrorBit(R), ORNAND(TM), ORNAND2(TM), HD-SIM(TM) and combinations thereof, are trademarks of Spansion LLC. Spansion, the Spansion Logo and MirrorBit are registered in the US and other countries. Other names used are for informational purposes only and may be trademarks of their respective owners.

Cautionary Statement

This release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the expectation of a cost savings of $50 million per quarter in the first half of fiscal 2008 compared to the second half of fiscal 2007 resulting from reduced reliance on foundry and subcontractors, the expectation that new testing capabilities will result in: (i) significant increases in both throughput and yield resulting; (ii) reduced dependencies on external test vendors and need for automated test equipment; (iii) faster, more accurate measurement results; and (iv) an increased return on investment, the anticipation that SMIC will produce 65nm, 300mm wafers being produced before the end of 2008, and the expectation that SP1 will migrate to 45nm during fiscal 2009 and the associated additional cost efficiencies. Investors are cautioned that the forward-looking statements in this release involve risks and uncertainties that could cause actual results to differ materially from the company's current expectations. Risks that the company considers to be the important factors that could cause actual results to differ materially from those set forth in the forward-looking statements include the possibility that demand for the company's Flash memory products will be lower than currently expected; that average selling prices may decline; loss of key intellectual property arrangements creates a greatly increased risk of patent or other intellectual property infringement claims; the high cyclicality of the Flash memory market which has experienced severe downturns; that Spansion may not be effective in expense reduction efforts; the merger with Saifun may not result in benefits that Spansion anticipates as a result of integration or other challenges; that political, economic and military conditions in Israel may adversely affect Saifun's and Spansion's business; the acquisition of Saifun may result in a loss of Saifun's licensees or Spansion's customers; that Spansion may not realize the expected value of Saifun's NROM technology; that OEMs will increasingly choose NAND-based Flash memory products over the company's MirrorBit architecture-based Flash memory products for their applications; that the company has a significant amount of debt, and such debt could subject us to restrictive covenants; that the company may not achieve facilities and capacity implementation schedules as a result of factors such as insufficient cash flows and inadequate external financing; that the company may lose a key customer, or experience a reduction of demand from a key customer; that the company will not successfully develop, introduce and commercialize new products and technologies or to accelerate our product development cycle; that competitors may introduce new memory or other technologies that may make our Flash memory products uncompetitive or obsolete; that the company may experience manufacturing constraints or fail to achieve manufacturing efficiencies; customers' ability to change booked orders may lead to excess inventory; that the company's investments in research and development may not lead to timely improvements in technology; and intellectual property claims or litigation could cause the company to incur substantial costs or pay substantial damages or prohibit sales of its products. The company urges investors to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the company's Annual Report on Form 10-K for the fiscal year ended December 30, 2007. The company assumes no obligation to update any forward-looking statements or information included in this press release.