UPDATE 2-Qimonda doubles EBIT loss in Q1; slashes capex

(Adds CEO comments from interview)

By Georgina Prodhan and Jens Hack

FRANKFURT Jan 22 (Reuters) - Memory chipmaker Qimonda QI.N almost doubled its operating loss last quarter and said on Tuesday it would slash capital expenditure this year in light of a relentless fall in prices for standard DRAM chips for PCs.

The company's EBIT (earnings before interest and tax) loss of 590 million euros ($855 million) was deeper than the most pessimistic of analysts polled by Reuters had forecast for the October-December period.

They had predicted an EBIT loss of 369 million euros on average after a loss of 258 million in the previous quarter and a profit of 250 million a year earlier.

The world's fourth-biggest maker of memory chips, still 77 percent owned by German chipmaker Infineon (IFXGn.DE) after a 2006 spin-off, said DRAM prices and demand had been stronger in past weeks but could not say whether the trend was sustainable.

Chief Executive Kin Wah Loh declined to corroborate the opinion of industry leader Samsung (005930.KS) that prices and demand would pick up dramatically in the second half of the year, saying he did not have that kind of visibility.

Qimonda said it had been unable to compensate for a 40 percent drop in DRAM prices during the last quarter with improvements in efficiency that included cost reductions of 20 percent per bit of memory capacity produced.

"I've never seen such a DRAM cycle, and I've seen four now," industry veteran Loh told Reuters in a telephone interview.

The company said it also 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 said it would now cut capital expenditure by a third of what had been originally planned this year to between 400 and 500 million euros, and put construction of a new, 2 billion euro factory in Singapore on ice until market conditions improve.

Loh said about half the capex savings in the fiscal year to end-September would come from not building the Singapore fab and the rest from small savings gleaned wherever possible.

"We have to make sure that every cent we spend is not wasted," he said. "We're deep-diving with a big microscope."

NO BUYERS FOR INFINEON STAKE

Qimonda's sales in the quarter fell 28 percent quarter-on-quarter and 56 percent year-on-year to 513 million euros, also lower than the lowest estimate in the Reuters poll.

Loh emphasised that oversupply, not weak demand, was to blame, and said he was not worried about the possibility of losing market share as a result of cutting back expenditure while Samsung for one keeps its capex unchanged.

"We have about 15 percent market share. We think a sustainable business model is about 12-16 percent so cutting back market share and preserving cash is the right way at the moment," he said.

Loh said Qimonda was not feeling any effects of cautious U.S. consumer spending in light of a feared recession there, saying that the biggest consumers were not necessarily in the United States any more but in Asia and also in Europe.

Demand for PCs was healthy and the upcoming Beijing Olympics were spurring demand for replacement TVs, he said.

Qimonda said it would also reassess the amount of chips it buys from foundry partners SMIC (0981.HK) and Winbond (2344.TW).

Executives declined to be more specific than saying Qimonda would likely reduce the proportion of chips it buys in from foundries and joint-venture partners -- currently more than half -- if market conditions did not improve.

Loh added that Qimonda had not been approached by any strategic or financial investors to buy all or part of Infineon's stake in the company. "No," he answered when asked. (Editing by Gary Hill)