Qimonda sees DRAM market balance

Qimonda's Chief Executive Kin Wah Loh speaks at the Reuters Global Technology, Media and Telecoms Summit in Tokyo May 20, 2008.

TOKYO (Reuters) - Germany's Qimonda QI.N, the world's fourth-largest maker of computer memory chips, expects a balance between supply and demand in the DRAM market returning in the second half of the year after a prolonged market slump.

A reduction in capital spending by many chip makers has eased pressure on the supply side, and the loss-making company said stabilizing prices and cuts to operating expenses will help it return to profit as soon as possible.

"We are seeing now the effect of this reduction in supply and that is a good sign," Qimonda Chief Executive Kin Wah Loh told the Reuters Global Technology, Media and Telecoms Summit on Tuesday.

"Good news is that it is going up in the right direction," said Loh, whose company almost doubled its operating loss last quarter due to tumbling prices for standard PC dynamic random access memory (DRAM) chips.

A power outage at a Hynix Semiconductor (000660.KS) plant in China will help reduce supply in the DRAM market, although it seems to be a "small cough," he added. <ID:nSEO71151>

Qimonda, which is 77 percent owned by parent Infineon (IFXGn.DE) after a 2006 spin-off, is allocating 400 million to 600 million euros ($621 million-$931 million) for its capital expenditure this year, and Loh said his company's capex for next year will be about the same level with this year.

New York-listed Qimonda has cut spending by a third of what had been originally planned this year, and put construction of a new, 2 billion euro factory in Singapore on hold until market conditions improve.

But its efforts to move up the tech ladder and diversify into the more profitable non-PC DRAMs could make it one of the early beneficiaries from the next upcycle.

In April, Qimonda and Japan's Elpida Memory 6665.T announced a plan to develop DRAM memory chips, improving their chances of challenging industry leader Samsung Electronics

(005930.KS).

"I think the industry is moving more and more at so called alliance model," Loh said.

"They are very strong with mobile area, we are very strong in graphic area. We seem to compliment each other."

In a highly competitive DRAM market, Qimonda has been looking for a new technology partner since smaller Taiwan rival Nanya Technology (2408.TW), with which Qimonda has developed and manufactured chips, said earlier this year it planned to work with U.S. Micron MU.N in the future.

($1=.6444 Euro)

(Additional reporting by Rhee So-eui and Devidutta Tripathy; Editing by Louise Heavens)