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Bailout, Taiwanese-Style

It's no secret that the DRAM and NAND flash industries have been in the tank all year courtesy of overcapacity and weakening demand. For the particular parts referenced in the graph below, that's a 71% decline in flash pricing and a 57% decline on the DRAM side.

While the pain associated with these prices has been universal, nowhere has it been more acute than in a handful of Taiwanese DRAM manufacturers and Qimonda (QIM), the Infineon (IFX) memory spinout.

Contract Memory Prices

It's obvious from the data through September 30 in the table below that the Taiwanese group is in trouble.

Taiwan Memory Manufacturers
Company Reports

You'd see the same thing from Qimonda, but they haven't even reported their September quarter. DRAM prices are down another 30% to 50% for the December quarter, so the problems will only be magnified further.

The Taiwanese companies do not have a competitive cost structure due to their lagging process technology, hence the very painful gross margins. They have burned through cash and at the same time leveraged their balance sheets. Much of the debt due within a year cannot be paid off with remaining cash nor is there sufficient cash from rations to do the job or finance future capital spending requirements.
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