Infineon Preps $1.1B Qimonda Public Stock Offering

Infineon Technologies plans to list its memory chip unit, Qimonda, in the United States in an initial public offering (IPO) that could fetch as much as US$1.1 billion.

The deal is important for the German chip maker as it moves to focus on logic chips instead of dynamic RAM (DRAM). Infineon joins a growing list of companies leaving the volatile DRAM business. Cutthroat competition in the industry over the past several years forced companies often to sell their products at a loss.

While the low prices can benefit users by helping to keep PC prices down, it can also stifle innovation by forcing companies to spend less on research. In fact, new DRAM chips are now developed through industry standards groups, while chip makers have focused their energies on finding other, more profitable chips to produce. About three-quarters of all DRAM chips are used in PCs. The chips retain data as it’s being used.

Qimonda will be listed on the New York Stock Exchange under the stock symbol QI. The two companies are offering 63 million Qimonda shares to the public for between $16 and $18 each. The sale should total about $1 billion to $1.1 billion, they said in a joint statement.

About 33 percent of the proceeds of the sale will go to Infineon, while Qimonda will take the rest. The DRAM maker intends to use money from the stock sale to finance investments in chip factories, equipment and R&D, it said.

The companies appear to have timed the sale well. Prices of double data rate, second-generation DRAM chips have ticked up in recent weeks as PC sales pick up and amid a production shortage. The world’s largest DRAM maker, Samsung Electronics, credited strong DRAM sales for helping its chip division overcome weakness in flash memory during the second quarter.

However, some analysts are warning that the DRAM market may be nearing a peak.

“We believe the DRAM cycle is cresting as memory consumption per [PC] box is reaching its peak level and the incentive for PC vendors to install more memory is diminishing. Moreover, a recent check on the PC food chain leads us to believe that the PC market will continue to perform lower than expected in 2006,” said Timothy Chen, chip analyst for CLSA Asia-Pacific Markets in Taipei, in a Friday research note to clients.

Qimonda became the second-largest DRAM maker in the world by revenue in the first quarter, according to market researcher Gartner.

The company took a 16.6 percent share of global DRAM revenue in the first three months of this year, second only to Samsung, which captured 27.7 percent of the market. Qimonda was fourth in DRAM at the end of 2005, but its sales soared 45 percent quarter on quarter to boost it to second place by the end of the first quarter of this year, Gartner said.

Aside from its own sprawling DRAM operations in Germany, Qimonda runs a joint venture DRAM maker in Taiwan, Inotera Memories, with partner Nanya Technology.

-Dan Nystedt, IDG News Service (Taipei Bureau)

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