Infineon Gets Out of DRAM Business
April 2, 2006 12:04 PM
CEO Dr. Wolfgang Ziebart (left) of Infineon Technologies AG and Kin Wah Loh, CEO-designate of Qimonda AG
Organic looking "Q" meaning growth
Infineon's long winded time in the DRAM business has given way to a new company called Qimonda
The DRAM business is volatile -- much like the memory itself. Prices often swing in both directions widely and according to many in the business, ramps in either direction are difficult to predict. Interestingly, the bigger a company is in the DRAM business, the greater the difficulties. Over the past several years, DRAM companies have come under fire from the public as well as the law. DRAM companies ranging from Elpida, Hynix, Infineon, Micron to Samsung and a host of
others have been accused of DRAM price fixing
in which said companies jointly agreed to participate in cartel-like business practices. Of course, such actions don't go unnoticed.
Previously, Infineon was given a fine of $300 million for its illegal business activities -- a miniscule amount compared to the $24 billion industry that Infineon was in. However, according to financial reports, Infineon previously made $150 million of net profit on $3.2 billion in sales revenue. Considering its actions, losing roughly two year's worth of net income for questionable business tactics is just not worth it -- as the saying goes, crime doesn't pay.
Infineon's jump out of the DRAM business was not without foreshadowing. Besides the accusations of its price fixing, Infineon was also in a drawn out court battle with DRAM IP company Rambus. After roughly $5 million of legal expenses, Infineon agreed to settle with Rambus. Later, Infineon took Rambus back into court with claims that Rambus had destroyed important documents. The courts tossed Infineon’s claims and dismissed the case as unsubstantial. Just last week, Siemens, the largest stakeholder in Infineon, sold all of its shares for a whopping $1.4 billion. Insider trading issues not withstanding, Infineon is now splitting itself.
The new company, named Qimonda, will be taking over the DRAM business that was once under Infineon. Infineon itself will concentrate on other technologies that it says is not as volatile and unpredictable as DRAM. In the past, other memory companies have done similar things.
In the split, Qimonda will take over several manufacturing facilities related to DRAM manufacturing, including those in Dresden Germany, as well as a facility in Richmond, Virginia. Along with manufacturing facilities, Qimonda will also inherit a Infineon's stake in Taiwanese memory maker Inotera which is a joint-venture between Infineon and Nanya.
Kin Wah Loh, Qimonda's designated CEO says that the new company is confident about its position in the DRAM industry. Qimonda will become the 4th largest memory company in the world after the split with Infineon. Previously, Loh was head of Infineon's memory business. Although several bids were up for the buyout of Qimonda, both Infineon and its new CEO are confident that the new company will be profitable on its own.
In Chinese, Qi roughly translates to "life force", and Monda is Latin for "world."
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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