Qimonda to wind down DRAM plants by end of March

Qimonda will cease chip production by the end of March as it continues to seek ways to avoid liquidation.

Embattled German DRAM maker Qimonda will cease chip production by the end of March as it continues to seek ways to avoid liquidation.

The company remains in talks with potential investors on a way to continue operations, but there are no binding offers on the table and it will not be possible to reach an agreement by the end of March, Qimonda said in a statement.

"Continuing production at full cost on the same scale as before can be ruled out ... due to the sustained price decline in the chip industry and the enormous losses that would result," the company said.

Insolvency proceedings are expected to start April 1 for Qimonda. Once started, Qimonda would legally be dissolved and "most likely liquidated," the company said.

Most DRAM makers have been suffering from a chip glut that started nearly two years ago and sent chip prices well below the cost of production.

The global spot market for DRAM continues to suffer from weak demand and oversupply, according to market researcher Gartner.

DRAM chip prices have fallen for the past three weeks, with average spot prices down 4.5 percent last week, compared to the previous week, to US$0.97, Gartner said. The figure is just higher than the 52-week low of $0.80. Around three-fourths of all DRAM goes into PCs.

"Global memory revenue is forecast to fall by 15.6 percent to $40.5 billion in 2009," said Brady Wang, memory chip analyst at Gartner. DRAM and flash memory account for more than 90 percent of memory revenue.

"All memory markets will post double-digit declines in 2009 due to the global recession and weak demand in the application market," he said.

Employees at Qimonda's German facilities will be offered reassignment to a transfer company Qimonda plans to form to keep business options open.

Qimonda said a team led by the German insolvency administrator will continue to work on business and investment issues beyond the end of March. Qimonda executives will also continue to seek help from government leaders in areas where the company operates, including from Germany, Portugal and the European Union.

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Dan Nystedt

IDG News Service

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