Germany's Qimonda seeks state chip deal

Qimonda AG hopes to soon strike a deal to research chip technology with the German state of Saxony, where its main chip factories are located, a company representative said.

Qimonda, one of the world's largest dynamic RAM (DRAM) makers, faces serious financial test in the coming three months without such a deal. Last month, the company announced it will run out of cash in the first quarter of next year unless it can find new investors, a strategic partner, or the DRAM industry takes a turn for the better.

But a rebound in the DRAM industry remains unlikely.

A year-long industry downturn has turned into a nightmare for DRAM makers as global economic woes impact shipments of PCs, where most DRAM goes. Prices for DRAM chips are already sitting at record lows and despite attempts to cut production, won't improve much over the next few months, according to market researcher Gartner.

But government intervention could save Qimonda.

Although the company declined to comment until a deal with the state government is finalized, a representative said alternatives exist in case talks collapse.

"The government has various instruments to support Qimonda," said Ralph Heinrich, a representative for the company.

Qimonda operates an advanced chip factory and a research and development center in Dresden, which is in Saxony. The company employs around 3,200 people there, but has already announced plans for layoffs and the closure of a chip packaging and testing facility. (Watch a slideshow of the most notable layoffs of 2008.)

A number of DRAM makers are seeking help from their governments these days. The Taiwan government has opened a task force to determine how best to aid its DRAM makers, while reports indicate that South Korea may be seeking credit for Hynix Semiconductor. (Read a story about five tech companies that could use a bailout.)

The IDG News Service is a Network World affiliate.