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Restructuring: Will it resurrect Qimonda?

Posted: 27 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Qimonda protection bankruptcy? DRAM?

Qimonda has applied for bankruptcy protection while it makes one more attempt to restructure its business. But analysts reckon that this time Qimonda may not come back from the dead.

When the news of the insolvency application was put to Andrew Norwood, a European research vice president at analyst company Gartner Inc., he said: "This is very good news for the DRAM industry," while acknowledging it was probably bad news for Qimonda workers and for DRAM buyers, who may see DRAM prices move up in response to the news.

The fact that a state-supported bail-out plan for Qimonda, agreed late in December 2008 could not be completed suggests that the situation is deteriorating. Norwood was skeptical about Qimonda's declared aim to "restructure key business units within the context of the insolvency regime." He said: "Key business units? They only do one thing."

"The DRAM industry has been oversupplied for years and DRAM vendors lost $12 billion in 2008. When even Samsung makes a loss that tells you things are bad. And for the last six to nine months the DRAM vendors have been hanging on hoping another of the vendors would fail first."

Qimonda managed to sell its stake in Inotera to Micron in 2008 for $400 million. But the company has also been trying to sell itself complete and has failed to do so, said Norwood. "Basically the fabs are in the wrong places, Dresden, Germany and Richmond, Virginia, are not very attractive to Taiwanese players."

Norwood said that Qimonda has been pinning its hopes on its buried wordline technology (BWT), a different way of organizing the DRAM chip interconnection that could produce area savings and therefore cost advantages. "It's very interesting on paper, but it has only just gone into production so there is no track record of success."

Norwood said the key to Qimonda's future was to watch what statements come from Taiwan DRAM vendors who are also in trouble and have been looking for government bail-outs. "We have to see what comes out of Taiwan in terms of FUDfear uncertainty and doubt."

"Ironically Qimonda could be saved if the DRAM spot price doubles in the next couple of weeks, which it could," Norwood added. "The spot market is driven by sentiment rather than a real supply and demand equation. A single press release can cause the [DRAM] spot market to double or triple and the contract market does move in response."

However, Norwood agreed that with semiconductor purchasing having more or less come to a standstill, due to the lack of general economic demand, DRAM buyers were unlikely to get spooked by the closure of a single DRAM company in the near future.

"People have stopped buying semiconductors and are building from inventory. Of course eventually they will have to start ordering to match supply chain purchases to the number of chips going into electronic products, but it will be at lower levels until consumer demand returns," said Norwood.

Norwood contrasted the political support for DRAM makers on offer in Germany and in Taiwan. "Why would a country want a DRAM company. In Germany Qimonda has Dresden as a legacy but DRAMs would be made in Asia. Would packaging and assembly be done in Germany? No, that will be done in Asia. In Taiwan a supported DRAM company also supports the test and assembly companies and the PC, notebook and netbook companies. So it leverages many jobs for each DRAM job."

"All Germany gets for supporting a DRAM company is a few taxes. Taiwan gets much more bang for its buck."

- Peter Clarke
EE Times Europe





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