DRAM maker Qimonda files for bankruptcy

A dynamic RAM glut has kept prices near or below the cost of manufacturing

DRAM maker Qimonda AG filed a bankruptcy petition with the local court in Munich on Friday, seeking time to reorganize its business.

The move came after a financing package involving the German state of Saxony, a Portuguese financial institution and Qimonda's parent company, Infineon Technologies, could not be completed in time, Qimonda said.

Qimonda has been one of the companies hardest hit by a dynamic RAM glut that for a year has kept prices near or below the cost of manufacturing. The economic downturn added to DRAM makers' woes late last year by further eroding demand and making it more difficult to find loans necessary to pay for expensive production-line upgrades.

Late last month, Qimonda became the first DRAM maker globally to receive a government bailout pledge during the current financial crisis. Saxony, Infineon and a financial institution in Portugal agreed to loan Qimonda $422.5 million. But the money has not yet been received, according to Qimonda.

The DRAM industry is the most cutthroat in the chip sector. The chips, used for temporary data storage, mainly go into PCs. So many of them are produced every year that a spot market exists for them, so they can be traded just like other commodities such as oil and wheat. Samsung Electronics, the world's largest DRAM maker, as well as Hynix Semiconductor and several other major companies compete for a slice of the DRAM market, ensuring low costs for consumers but keeping financial pressure on manufacturers.

Industry watchers have been waiting to see if one or more DRAM maker is allowed to fail in the current downturn. Prior to Qimonda's bankruptcy announcement, it had appeared that governments planned to ensure the health of their DRAM makers. In Taiwan, for example, officials have pledged $5.96 billion to help local DRAM companies.

It's unclear how the bankruptcy petition will affect Qimonda in the near term. The company said its operations in Munich and Dresden, Germany, will be affected by the move, but it did not elaborate on how, nor did company representatives respond immediately to phone queries.

Qimonda employs 12,200 people worldwide, including 3,200 in Munich and 2,800 in Dresden.

Infineon owns 77.5% of Qimonda's stock.

Last fall, Micron Corp. announced it was buying a 35.6% stake in Qimonda's Inotera manufacturing arm for $400 million in cash.

"Micron is once again doing its part to consolidate the DRAM market," Objective Analysis analyst Jim Handy said in a report at the time. "The company has a successful track record of acquiring struggling competitors' manufacturing capacity when the market is depressed."

Asked for comment, a Micron spokesman, in an e-mail response, today said: "We're not providing comment on the Qimonda situation at the moment and are referring inquiries to industry analysts."

Computerworld's Lucas Mearian contributed to this report.

Copyright © 2009 IDG Communications, Inc.

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