Intel, STMicroelectronics, and Francisco Partners on Tuesday said they have agreed to create an independent multibillion-dollar semiconductor company focused on making flash memory products for consumer and industrial devices.

The joint company would combine business assets from the three companies that amount to $3.6 billion in annual revenue, the partners said. The assets include research and development, manufacturing, and sales and marketing from Intel and STMicroelectronics.

Flash memory, which has no moving parts and is therefore more reliable and durable than hard disk drives, is used in cellular phones, MP3 players, digital cameras, and other high-tech equipment. While still considerably more expensive than hard disk drives, the cost of flash memory hardware has fallen sufficiently to be an alternative in notebooks, particular those that need to be more rugged for use by mobile workers.

The number of notebooks using some form of flash memory for data storage is expected to soar from a negligible amount today to more than 50% in two years, according to iSuppli. Besides as a primary storage device, flash memory is used in so-called hybrid notebooks for faster boot times and quicker loading of applications.

Under terms of the agreement, STMicroelectronics will sell its flash memory assets, including its NAND and NOR flash resources, to the new company, while Intel will sell its NOR assets and resources. NOR flash is memory that can hold data even when the power is off.

Intel will receive a 45.1% stake in the venture and a $432 million cash payment at close. STMicroelectronics will receive a 48.6% stake and a $468 million cash payment. Private equity firm Francisco Partners will invest $150 million in cash for a 6.3% interest.

At the same time, the partners have arranged commitments for a $1.3 billion loan and $250 million revolving loan. The loans will be underwritten by a consortium of banks. The money will be used for working capital and the payments to Intel and STMicroelectronics. The transaction is expected to close in the second half of this year.

Brian Harrison, VP and general manager of Intel's Flash Memory Group, has been chosen as chief executive, and Mario Licciardello, currently corporate VP of STMicroelectronics' flash group, as chief operating officer. The company will be headquartered in Switzerland, have nine main research and manufacturing locations globally, and employ 8,000 people.