Analysis: For Qimonda there's no business in DRAM business

LONDON — 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. (Stamford, Connecticut), 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."