Qimonda’s Insolvency to Help the Market to Keep Pricing Pressure – Analysts

Qimonda’s Bankruptcy to Help the DRAM Industry

by Anton Shilov
01/26/2009 | 11:27 PM

Even though insolvency of Qimonda is a yet another negative example of the current situation on the dynamic random access memory, it may help the market to at least sustain existing pricing and not proceed with the cost-cutting strategy.


“Other DRAM makers will likely split Qimonda's market share, and since all companies, including Samsung, are in the red, they would not likely cut prices further to grab market share. But demand will likely be even weaker in 2009, so that would be more of the issue,” said Mizuho Investors Securities analyst Yuichi Ishida, Reuters news-agency reports.

Qimonda AG dynamic random access memory maker from Germany on Friday filed an application with the local court in Munich today to open insolvency proceedings. Their goal is to reorganize the companies as part of the ongoing restructuring program. The court has appointed a preliminary insolvency administrator.

Qimonda controls roughly 10% of the global DRAM market, but while the company has been concentrating on making high-end high-performance memory, such as GDDR5 and XDR, for various advanced applications, the firm still did not have enough resources to live through rapidly falling prices on commodity DRAM devices, such as DDR2.

If Qimonda eliminates from the market, or its certain parts, prices on certain components will more or less stabilize, analysts believe, as the supplies will be lower.

“Output cuts have helped the market condition to turn a little bit better and it will probably get better some more toward February, but for the whole of 2009, there is a chance that PC demand will stall. The downturn has bottomed out for now, but it does not look like the market condition will keep getting better,” said Mr. Ishida.

“This will reduce supply growth, helping to stabilize pricing, and helping to mitigate the oversupply-driven downturn,” Nam Hyung Kim, chief analyst for memory at iSuppli, said in a statement.

According to iSuppli, the potential impact of the Qimonda insolvency will come in the graphics and server chip markets, as in the Q3 2008 it accounted for 26% of shipments of graphic DRAMs, which are used to make graphics cards and video game consoles, as well as 15% to 20% of server memory.