Struggling maker of dynamic random access memory, Qimonda AG, said on Friday that as it continues talks with potential investors, it would start to cut down production of memory in Dresden, Germany.

“Various investors have signaled their interest, but as yet there are no binding offers on the table. As anticipated, it will not be possible to reach a conclusive solution by the end of March. Talks with potential investors regarding a solution to keep Qimonda in operation will continue beyond the end of March 2009,” said preliminary insolvency administrator Dr. Michael Jaffé today after a meeting with the creditors committee.

The employees of the insolvent Qimonda AG and Qimonda Dresden OHG will be able to claim compensation by means of statutory insolvency payments until the end of March 2009. By the end of March, the bankruptcy court in Munich will also have received the preliminary insolvency administrator's report on the basis of which the court will make a decision on whether to open insolvency proceedings.

From April 1, 2009 – the expected opening date for insolvency proceedings – the company would have to cover all wage and salary payments itself. Continuing production at full cost on the same scale as before can be ruled out, however, due to the sustained price decline in the chip industry and the enormous losses that would result. For this reason, production in Dresden will gradually be ramped down and put into “standby mode” by March 31, 2009. This will allow production to be resumed at any time, should it be possible to successfully conclude negotiations with potential investors.

A transfer company is to be formed to keep open the option of continuing production and business operations whilst preserving the interests of both employees and creditors. From April 1, 2009, employees at German sites are to be offered reassignment to the transfer company, as soon as financing has been secured. Talks with the works council regarding details of future employment in the transfer company and other possible personnel measures, are to be concluded in the near future.

It is also planned that a core team led by the insolvency administrator will continue to work within the company in order to maintain the leading Buried Wordline Technology and oversee the investor process.

“Ramping down production, maintaining the Buried Wordline Technology and reassigning employees to the transfer company are vital prerequisites which enable us to pursue a potential solution with the aim of preserving as many jobs as possible” said Dr. Jaffé.

Since petitioning for insolvency on January23, the memory chip manufacturer has drastically cut costs and, by concentrating on the competitive Buried Wordline Technology, laid the necessary foundations for long-lasting future operations.

No final decisions have been reached as yet with regard to the future structure of the company. This also applies to a decision over whether parts of the business which are able to continue operations will be retained by Qimonda or transferred to a new company belonging to new investors. In the latter case, or if no investors can be found to finance Qimonda's continued operation, Qimonda AG, which would legally be dissolved with the opening of insolvency proceedings, would most likely be liquidated.

Tags: Qimonda, Business