Micron pays $400M for Qimonda's Inotera stake, shuffles MeiYa resources

By Suzanne Deffree, Managing Editor, News -- 10/13/2008

Tightening its ties with Nanya Technology Corp, Micron Technology Inc has announced plans to acquire  Qimonda AG’s 35.6% ownership stake in Inotera Memories Inc, a Taiwanese DRAM memory manufacturer, for $400 million in cash.

Qimonda's sale was not unexpected given the struggling DRAM maker's current fiscal state and need for cash.  However, the move came just days after Micron announced it would cut 15% of its workforce and said that IM Flash Technologies (IMFT), its joint venture with Intel Corp, will discontinue the supply of NAND from Micron’s Boise, Idaho, facility.  the buy also comes less than two weeks after Micron reported a $1.6 billion loss for its fiscal 2008, noting declining DRAM sales as a factor.

With the Inotera buy Micron will get half of the 120,000 wafers its two 300-mm fabs produce a month. The remaining 60,000 will go to Nanya, which started Inotera in 2002 with Qimonda (then part of Infineon Technologies AG).

Micron and Nanya aren't strangers when it comes to DRAM cooperation. The two memory makers in April formally announced DRAM joint venture MeiYa Technology Corp, which leverages both companies’ manufacturing technology and is located in a Nanya manufacturing facility.

“This new relationship with Inotera will increase Micron’s competitiveness by further leveraging our current MeiYa joint venture with Nanya,” said Steve Appleton, Micron's chairman and CEO, in a statement released Sunday. “Micron will gain greater scale in DRAM, reduce our operating expenses per wafer and have access to a very cost competitive operation.”

To comment on this news, see "Micron in the macro economic environment: How savvy companies play in a recession."

In conjunction with the acquisition, Micron said it anticipates entering into a series of agreements with Nanya to restructure MeiYa, taking into account its new relationship with Nanya in Inotera. For example, as part of its Inotera buy, Micron said it will also share its stack DRAM technology with Inotera and Nanya. Micron said that both it and Nanya expect to cease future resource commitments to MeiYa and redirect those resources to Inotera.

Analysts expect the focus on Inotera to be viewed as positive for Micron. "We estimate it may cost an additonal $1.6 to $2 billion to convert Inotera from trench to stack tecnology and migrate to leading edge 5x nm node, but total cost [is] lower than setting up new 120,000 wafer per month ($4 to $5 billion)," Barclays Capital Analyst Tim Luke said in a research note this morning.*

According to the agreement, Qimonda’s share of Inotera’s capacity will be ramped down over the eight months following the closing. Qimonda said in a seperate statement that it expects to record a one time book loss on its investment in Inotera of approximately $408 million (300 million Euro) as a result of the transaction.*

Micron's Inotera buy will be completed in two stages, with the company purchasing half of Qimonda’s stake for $200 million in cash within the week. The remaining stake in Inotera will be acquired upon receipt of Taiwan Federal Trade Commission approval and other customary conditions.

Micron said it has obtained $285 million in term loan financing commitments from strategic sources at favorable terms to complete the acquisition.

*Editor's note: This story was updated at 10:40 am eastern to include comments from Barclays Capital and Qimonda.

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