Qimonda delays Singapore DRAM plant, slashes capital spending

Qimonda blames a 40 percent drop in DRAM prices for a $866.3 million net loss in its first quarter

German DRAM maker Qimonda put the construction of an advanced semiconductor factory in Singapore on hold and slashed its planned capital spending for 2008 after reporting a steep first-quarter loss.

The company blamed a 40 percent drop in DRAM prices for a €598 million ($866.3 million) net loss in its fiscal first quarter, which ended Dec. 31. Qimonda's sales reached just €513 million during the period, down 56 percent from the €1.17 billion in sales it reported one year earlier.

A massive 73 percent drop in DRAM prices over the course of last year has memory chipmakers scurrying to realign their business strategies. On Tuesday, Qimonda's joint venture partner, Nanya Technology, and their joint venture, Inotera Memories, both posted losses and announced lower spending on new production lines for 2008.

Qimonda had much the same to say. The company cut its proposed capital spending for fiscal 2008 by €250 million down to a range of €400 million to €500 million. Due to the reduction, the construction of a new 300-millimeter (12-inch) memory chip plant in Singapore has been put on hold, Qimonda said in a statement.

The DRAM market took a turn south last year as companies built too many new factories and demand for new PCs armed with Windows Vista failed to meet expectations. The resulting glut sent DRAM chip prices tumbling.

The contract price of 1Gb DDR2 (double data rate, second generation) DRAM chips that run at 667MHz fell to $1.81 each as of Jan. 21, according to DRAMeXchange Technology, which operates a clearinghouse for the chips. The chips were $3 each at the start of October, when the current price slump hit.

Qimonda noted the 40 percent decline in the October-to-December period was one of the strongest declines ever, and that even previously announced measures to cope with the price slide could not compensate for the difficult market environment.

The company also said it is already reassessing its outsourcing strategy. Qimonda has worked with several partners in Asia to contract manufacture its chips and in technology transfer schemes aimed at sharing the cost of research and development. These partners include Semiconductor Manufacturing International (SMIC) of China, as well as Nanya Technology and Winbond Electronics of Taiwan.