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Probable Infineon-Micron DRAM merger surfaces

Posted: 08 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? Infineon Micron merger? memory market?

While Infineon Technologies and Qimonda AG remain mum on negotiations with Micron, news is already spreading about the possible takeover by Micron Technology.

The uncertainty over the conditions of the probable takeover has resulted unrest among the workers at the joint Infineon and Qimonda campus in Munich, according to Sueddeutsche Zeitung. Quoting unidentified sources or those close to the companies, the paper gave a glimpse of the outcome of the takeover, which appears more likely with Infineon nearing its self-set deadline. The company repeatedly has committed to lower its stake in loss-making DRAM maker to significantly below 50 percent from currently 77.5 percent.

Special trading
The paper suggested that it is highly probable that Micron will get Qimonda for free or for a symbolic price. "Much more interesting than the acquisition price is the question which guarantees the buyer will offer," Sueddeutsche Zeitung said quoting an unnamed insider. Other unnamed employee representatives admitted that against the background of Qimonda's financial situation their negotiation position is weak.

However, since Qimonda's Dresden fab has been highly subsidized by the German government and the Saxony state government, Micron probably will maintain the Dresden production activities to avoid hefty reclaims, the employee staff hope. From their perspective, there are two possible scenarios. First, if Micron is only interested in buying market share, in the long-term drastic job cuts or even the closure of the Dresden production as well as the Munich-based R&D activities would be possible. Second and more likely, the scenario would be that Micron is interested in Qimonda's technology. In this case, the chances to maintain the Munich and Dresden activities are higher.

The paper also quoted a recent Commerzbank study with the conclusion that a merger of Micron and Qimonda would make sense.

This opinion appeared to prevail among analysts. An expert interviewed by EE Times Europe who asked for anonymity said he believes that such move would have a positive effect on the DRAM market. He said Micron would strongly benefit from a takeover, since it could improve its productivity by integrating the Qimonda production sites in Dresden and Richmond. "Micron still produces to a relatively large extent on 200mm lines, while Qimonda is largely equipped with 300mm fabs," he added. "They probably will implant their production processes in Dresden and Richmond, replacing Qimonda's own processes which have proved to be less competitive under a production aspect," he noted.

"Despite producing red numbers at its own, Micron would be strong enough to swallow Qimonda," the expert said, "especially if they get it at a special price of about 10 percent of its book accounting value or even less.

Standing on the same plane
Another favorable factor for the takeover would be the product spectrum. According to the expert, both companies would complement each other almost ideally. "Micron currently has almost no exposure in the video graphics DRAM market where Qimonda is market leader," the expert said.

For this reason, he sees a good chance Qimonda's R&D activities with about 2,500 employees can survive a takeover. Since it is also likely that Micron would integrate Qimonda's current front-end production, he believes that there will be no major bloodshed among the staff. "Qimonda can perhaps be get away with 1,500 to 2,000 layoffs," he added.

From Infineon's perspective, it is almost "unavoidable" to sell off Qimonda at a very low price, he said. "They suffer much harder if they try to get a better deal which would mean that they keep Qimonda," he noted.

The unnamed expert also pointed out that Qimonda's technology partner Elpida apparently distances itself from Qimonda. The Japanese DRAM manufacturer who has said to co-develop future memory chip generations with Qimonda has announced to have completed the development of a 65nm chip shrink. While Qimonda spokesmen said this development does not conflict with the joint technology plans to introduce 4F2 memory cell architecture by 2010, Elpida claimed that it is already in the final stage of developing a 50nm process.

The joint road map with Qimonda was not mentioned in the press release. Instead, the Japanese company said the current chip shrink development would give Elpida "flexibility in making capital spending decisions and choosing manufacturing process compositions." This statement can be interpreted as a cautious removal from the Qimonda cooperation.

The DRAM market expert said he expects the DRAM market to recover during 2009, with only three to four major players. One of them could be Micron, along with Qimonda's capacities. "Thus, Micron would favorably compete with Samsung," he said.

Infineon executives refused to comment on the status of their Qimonda divestment plans.

- Christoph Hammerschmidt
EE Times Europe

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