UPDATE: Germany's DRAM Bailout Hits a Snag as Qimonda Goes Bankrupt

DRAM maker files for insolvency, while the German government mulls a bigger rescue

PHOTO: NORBERT MILLAUER/AFP/Getty Images

28 January 2009—In the high-stakes and highly subsidized memory-chip industry, rival manufacturers and their governments anxiously await Germany’s next move after Qimonda, a key player in the country’s prized Dresden semiconductor center, declared insolvency last week. An end to Qimonda, the world’s fifth-largest manufacturer of dynamic random-access memory (DRAM) chips, would certainly weaken if not cripple Europe’s largest semiconductor cluster, significantly reducing the region’s clout and competitiveness in the global chip business.

As if the German government didn’t have enough problems bailing out banks and propping up carmakers squeezed by the global financial and economic crisis, now it needs to make a tough call on whether to funnel still more taxpayer money into a financially risky but industrially strategic high-tech business.

Confronted with plunging chip prices and sales, Qimonda sought earlier this month to secure an additional 300 million (US $390 million) in funding on top of the 325 million rescue package agreed to in late December with parent company Infineon Technologies, the Saxony state government, and, reportedly, the state-owned Portuguese bank Caixa Geral de Depósitos. (Qimonda has a plant in Vila do Conde, Portugal, that employs about 1700 people and in 2007 was the country’s largest exporter.) Last week, after failing to clutch a new lifeline, the troubled chipmaker declared bankruptcy.

Plenty is at stake, and it’s not only jobs. (Qimonda employs 12 000 people worldwide, while some 1200 high-tech companies in and around Dresden have more than 44 000 people on their payrolls). There’s also some cutting-edge research being conducted in the region, popularly known as Silicon Saxony. The Nanoelectronic Materials Laboratory (NaMLab), for instance, is a joint venture between Qimonda and the Technical University of Dresden, which has more than 5000 students majoring in fields related to semiconductors and IT.

At this point, it’s anyone’s guess what elected officials in the state government of Saxony, the federal government, and even possibly the European Union will decide. ”Talks are under way,” says a spokesman for the Federal Ministry of Economics and Technology in Berlin, adding that the federal government is determined to find a solution.

Insolvency administrator Michael Jaffé, who has begun to assess Qimonda’s problems, says he and his team will evaluate ”with an open mind” various options for continuing business but made it clear that ”financially strong investors” will be needed to reach a ”sustainable solution.” Where those heavy spenders are going to come from is anything but clear. The Saxony state government and Infineon say they aren’t prepared to commit more than their previous pledges of 150 million and 75 million, respectively, fueling speculation that the federal government may help out.

Meanwhile, as Jaffé sifts through Qimonda’s books, production continues. A company spokesman says that despite the bankruptcy proceedings, the company aims to keep working and fulfill all contracts.

One thing the company’s been working on is developing its next-generation Buried Wordline DRAM technology. But if it doesn’t find a way to dig itself out soon, Qimonda could find that technology buried in the chronicles of good ideas that came too late.

About the Author

John Blau writes about technology from Düsseldorf, Germany. In the October 2008 issue of IEEE Spectrum he reported on Europe’s testing of vehicle-to-vehicle and vehicle-to-infrastructure communications.

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