US' brightest hope for DRAM competitiveness files for insolvency

It has been a hard uphill battle for memory maker Qimonda ever since parent company Infineon began its plan to spin it off in 2006. Today, that battle may have come to a premature end.

If America is ever to regain its footing in the field of microprocessor production outside the CPU, it needs a leg up from international leaders in that field. Three years ago, German memory producer Infineon gambled on producing an innovative DRAM subdivision called Qimonda, with a state-of-the-art production facility in Richmond, Virginia. Infineon would gradually spin off Qimonda, and retain a minority stake as the producer came into its own.

But that spinoff never happened, meaning the division ended up being more than three-fourths owned by a company that has never quite escaped the specter of a severe corruption scandal back in 2005. And long before the general decline in the global economy, the commoditization of memory set forth a seemingly interminable and inescapable track of price declines, which kept heading the wrong direction when consumer demand for DRAM-endowed products rose...and when it fell.

This morning, Qimonda was dealt perhaps the final blow, as negotiations to secure financing from key investors, including a major Portuguese bank and the German region of Saxony itself, fell through. That financing could have given Qimonda the key it needed to break free of the commoditization problem, and to exclusively build DRAM chips using a breakthrough design called buried wordline technology. It's a way of layering the two axes of DRAM signaling in such a way that the word line -- which is usually exposed -- is literally buried beneath the bit line, yet performs the same function. In fact, it might actually use less power, and enable its builder to rapidly transcend lithography nodes from 65 nm all the way down to 30 nm.

That promise seemed brightest only last month, when Infineon announced it would contribute some of its own cash to the Portugal/Saxony deal. It would have made the total deal worth €325 million ($422 million USD) in fresh investments. Getting it done meant making a very tough choice: cutting 40% of its workforce, which included some 1,200 jobs at the 200mm and 300mm facilities in Henrico County outside Richmond.

Local media reports say that Qimonda asked for €300 million more, which may have been the cause of the deal's eventual collapse today.

In a statement to the US Securities and Exchange Commission this morning, Qimonda president and CEO Kin Wah Loh expressed hope that the German court-appointed insolvency administrator would enable the chip maker to continue its current operations, even at reduced capacity...and even continue innovating, if at all possible: "We assume we will be able to continue our business within the context of our restructuring program with the support of the temporary insolvency administrator and our employees. We are especially counting on the excellent relationships with our customers and suppliers, with whom we have made significant progress in developing our Buried Wordline technology during the last months."

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