Oct. 13, 2008 - Qimonda's sale of its stake in its memory JV with Nanya to Micron represents a shakeout for all three parties, in aspect of finance, manufacturing, technology, and strategy. Here's a quick rundown of who gains what.

Details of the transactions essentially are:

- Qimonda sells its 35.6% stake in Inotera Memories, its JV with Nanya Technology, to Micron for $400M in cash (~€296M), half of that paid within a week -- suggesting the German chipmaker's liquidity urgency -- and the other half based on meeting unspecified transaction conditions. Micron will come up with $285M of that total from term-loan financing. Qimonda's share of Inotera's capacity will be ramped down over eight months.

- Qimonda will ramp down manufacturing at its 200mm facility in Richmond, VA, by Jan. 2009, marking its complete exit from 200mm production. It also is shutting down its Dresden backend component and module manufacturing activities by March 2009. About 3000 workers, mainly in Munich, Dresden, and Raleigh, will be laid off. Total cost of all the restructuring moves, slated to be complete by 3Q09: ~€450M (US ~$611M).

- Inotera currently operates two 300mm wafer fabs with 120,000 wafers/month capacity; Micron will acquire access to half that total, and also will provide its stack capacitor technology for DRAM manufacturing. Resources being committed to the two firms' recently formed MeiYa JV, which was to initially ramp production sometime in 2009 utilizing Nanya's to-be-upgraded 200mm facility in Taiwan, fueled by $550M from each partner by the end of 2009 -- are expected to be redirected Inotera.

So who wins (or loses) in these moves? According to Qimonda and Micron PR, "Micron will gain greater scale in DRAM, reduce our operating expenses per wafer, and have access to a very cost competitive operation," said Steve Appleton, Micron chairman/CEO, in a statement. For Qimonda, the deal gives it a badly needed cash infusion, reduces its manufacturing footprint, and streamlines its operational and personnel structures, noted CEO Kin Wah Loh (read: costs, costs, costs).

Jim Handy, analyst with Objective Analysis, points out in a report that Micron is once again helping to consolidate the DRAM market by acquiring a struggling competitors' manufacturing capacity, with "some much-needed 300mm capacity." Manufacturing costs for a 300mm plant are roughly 30% less than a 200mm facility, he points out, and with DRAM prices still at or below cost, memory firms "need to shed themselves of their 200mm capacity as soon as they can" -- which is exactly what Micron did a week ago by shutting off NAND output at its Boise site for its IM Flash JV with Intel. Handy also notes it's a shrewd move to shutter 200mm ops and snatch up 300mm operations "at bargain-basement prices" vs. the more popular alternative of upgrading 200mm production to 300mm. "The $400 million that Micron is paying for 60,000 wafer starts in Inotera's 300mm line is significantly less expensive than the $550 million the company had planned to invest in the MeiYa JV for an output we estimate to be roughly half that size," he writes.

Speaking of Nanya, that company now takes on Micron as a partner much as it had with Qimonda before: supply capital and manufacturing competence in exchange for technology, Handy notes. Micron will take on a bigger ownership (50% vs. Qimonda's 35.6%), and also contribute its stacked capacitor technology, vs. Qimonda's trench cell process which was pioneered in the 1990s by IBM, Siemens, and Toshiba but has lost its support base due mainly to consolidations (Qimonda is what's left of the Siemens side). Nanya was the only other company supporting trench, through this Qimonda partnership; Qimonda already had said it would use buried wordline technology to the 30nm node through a deal with Elpida, utilizing aspects of both trench and stacked capacitor designs, Handy notes.

And what happens to Qimonda now? Clearly the need for cash so quickly speaks to the urgency of their problems in the marketplace. "In similar deals in the past Micron has been able to trade their depressed equity for a share of an unprofitable business," and after the biz is turned around both sides make out profitably, he writes. But the quick partial payout here suggests Qimonda could not wait for such a return to grow -- which also forced Micron to come up with $285M in term loan financing to close this deal, no small feat in today's financial climate.