UPDATE 1-Qimonda posts 590 mln eur Q1 EBIT loss; cuts capex

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FRANKFURT Jan 22 (Reuters) - Chipmaker Qimonda QI.N posted a worse-than-expected first quarter operating loss of 590 million euros ($855 million) and said it would cut capital expenditure this year in light of a relentless fall in prices.

The company's EBIT (earnings before interest and tax) loss was deeper than the most pessimistic forecast of analysts polled by Reuters, who had predicted an EBIT loss of 369 million euros on average for the October-December quarter.

The company had an EBIT profit of 250 million euros in the year ago first quarter and a EBIT loss of 258 million euros in the fourth quarter.

Qimonda, majority-owned by German chipmaker Infineon (IFXGn.DE), said on Tuesday cost reductions of 20 percent per bit had not been able to compensate for a drop of 40 percent in the quarter for standard DRAM chips used mainly in PCs.

The company said it would cut its planned capital expenditure by 250 million euros to between 400 and 500 million euros this fiscal year to end-September, and put plans for a new factory in Singapore on ice.

Sales at Qimonda, the world's fourth-biggest maker of memory chips, fell 28 percent quarter-on-quarter and 56 percent year-on-year to 513 million euros in the quarter amid chronic and prolonged oversupply in the industry.

The company said it wrote down 122 million euros' worth of inventory and booked 33 million euros in charges related to the discontinuation of a supply contract with Infineon.

"Qimonda has begun to reassess its capacity corridors with foundry partners in light of the relatively low DRAM market price environment," it said in a statement.

DRAM prices have picked up slightly in the past weeks but few observers expect a sustainable improvement.

Samsung (005930.KS), the world's biggest maker of memory chips, has said it expects demand and prices to improve in the second half of the year, as has Nanya (2408.TW), Qimonda's partner in the Inotera Memories (3474.TW) joint venture.

Morgan Stanley analyst Frank Wang last week predicted that DRAM prices would still fall 30 percent this year, after an estimated 85-90 percent collapse in 2007. (Reporting by Georgina Prodhan; editing by Carol Bishopric)