Memory Glut Claims Its First Big Victim
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The oversupply of memory on the world market has been talked about at length and now the other shoe has dropped, in the form of a vendor taking a big hit.
Qimonda, the memory manufacturing subsidiary of Infineon, announced on Tuesday it will shut its only U.S. plant, killing around 1,500 jobs in the process. In response to this, DRAM prices spiked as much as 21 percent on the Asian market.
The insolvent German memory chip maker also said it faced liquidation if it cannot find investors with deep pockets. Qimonda filed for insolvency in January after it said a 325 million euro (US$418 million) rescue attempt by a group of banks and the state of Saxony in Germany, where Infineon is based, had not come in time.
Qimonda had previously announced the closure of a smaller facility in the U.S. last year. This would be its last remaining U.S. office, but it has manufacturing around the world, according to Glen Haley, a spokesman for the company.
He added that 40 percent of Qimonda's business came from the U.S., mostly OEMs, and the company would continue to meet OEM demands.
Mike Feibus, president of TechKnowledge Solutions, said he thinks the spike on the Asian markets was an overreaction. Qimonda held between five and 10 percent of the market, but lost that share fast.
"Typically, things tend to sway on a big announcement like that," Feibus told InternetNews.com. "This isn't going to do nearly enough to change the oversupply situation."
Indeed, market researcher IDC recently issued a report stating that the DRAM market would fall 12.1 percent in 2008 due to oversupply.
Infineon makes a wide range of integrated circuits (IC), including the 3G chip in the iPhone. Qimonda was spun out as a separate business in 2006, and Feibus wouldn't be surprised if more IC firms ditch the money-losing DRAM business.
"Somebody was bound to topple," said Feibus. "Most of the remaining suppliers are in it for the long haul. They have been doing things like partnering up to make it more sustainable, but it's a tough business in good time, never mind now. It wouldn't shock me, especially in this climate, if other companies decide that the DRAM business is a luxury they can't afford."