Should an Indian investor buy Qimonda?

Fabs

Should an Indian investor buy Qimonda?

If an Indian investor can throw in a billion dollars now for Qimonda, it might be worthwhile if fabs can be built in India for memory production

Pradeep Chakraborty

Tuesday, February 10, 2009

BANGALORE, INDIA: As I was about to call it a day (or evening), I happened to glance at my own article: India needs to rethink its semiconductor strategy? There, I find that a reader has left a beautiful suggestion for the Indian semiconductor industry: BUY QIMONDA! Why not?

Reader Steve Workman says: "An Indian investor must seriously look into Qimonda. If they throw in a billion dollars now, it might be worthwhile if they can build up fabs in India for memory production. If the fabs in India perform well, this might well be a good investment into the mid-term future of the Indian semiconductor industry. Other players will be sure to give India a look-in then."

That is quite a thought!

The other day, a friend was asking me why Qimonda's story had made it to Editor's Choice on CIOL? Well, Qimonda is the major memory company in the news (and not for good ones)! Memory is tricky business, and semiconductors, the mother of all tricky businesses.

And it is a wonder that, so far, Qimonda hasn't been bought over by someone else!

Great! Here is a possible chance for an India investor!

As the reader says, if an investor can throw in a billion dollars into Qimonda, we can very well solve the fab 'puzzle' in one stroke! Memory fabs can be built in India, and the country could look to become a major player in the memory market. And that would be a great investment in the Indian semiconductor industry.

Yes, I agree with Future Horizons' Malcolm Penn that the Indian semiconductor industry, in its current state, needs a very serious re-think!

Consider these points: In the current economic environment, is the interest in developing new business relations with India a top priority? Probably not, at this very point of time!

India is also seen more as a source of resource; and the extra resource is the last thing firms need at the moment. What global firms are looking for are new markets and customers, and these points, along with its infrastructure, have been the areas of Indian weaknesses. Maybe, all of this will change, but definitely not overnight!

This suggestion of investing in Qimonda is indeed a vision. Can the Indian semiconductor industry develop the courage to show and work toward making this kind of a vision a reality?

What should India do to develop products?
I had a very quick word with Anil Gupta, managing director, India Operations, ARM, and asked him: does India have the capability to sustain or even build a product development ecosystem? What needs to be done?

He said: "We need the following for this: Entrepreneurs committed to product development and willing to take that risk; investors willing to take risk on product development companies; consumption, and this will happen as the economy improves any way, and finally, deep enough technical/technological knowledge/know-how to put reasonably competent end products together."

He added that all of this exists in India, and cited examples of companies such as Sukam, Tejas, etc.

Well, there you have it!

Do we have such enterprising entrepreneurs in India who are committed to product development and willing to take that risk? Especially in semiconductors?

Will they even consider buying Qimonda and starting a memory fab in India? Will the investors, if any, be willing to take risk on product development companies, especially, if such a move actually happened?

India, you have taken the early steps, but you still have miles to go!! Here's a possible opportunity in front of you!

Dream big, India!

©CIOL Bureau

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Raki said on 3/21/2009 1:52:42 PM:
Qimondda has only few days to go it seems

to Raki

Ed said on 3/8/2009 3:16:56 PM:
Do not give up hope on India. The semiconductor market is still very young here. Investments in solar have happened. Of course, solar and semi are two different segments. I feel that investments in other semicon related areas would take some more time.

to Ed

Jason said on 3/6/2009 9:44:58 PM:
The indian semiconductor industry really, really needs a serious rethink.

to Jason

Tyey said on 3/5/2009 9:00:52 PM:
India is not ready to do this! Not yet, at least. does it have infra to support such a venture?

to Tyey

Pradeep said on 3/3/2009 5:46:35 PM:
Folks, there wasnt much discussions about fabs in India during the Vision Summit. So, we need to wait and watch for some more time

to Pradeep

Nete said on 3/3/2009 5:41:29 PM:
Even Spansion can be an option. Is anyone interested to look at these companies? Or does India really lack enterprising entterepreneur?

to Nete

Ed said on 2/16/2009 9:51:44 PM:
Thanks for reading the blog :) And no, I have not back peddled :) To be frank, India simply does not have that manufacturing mindset yet! I was at the Vision Summit today, and this point came up all day!

to Ed

The Edge said on 2/14/2009 4:33:27 AM:
Ed, I happened to read your blog and notice that you have already back pedalled a bit. (though the outrageous comment has not provided reasons as to why he/she feels that way.) Ill provide some reasons as to why India should look to invest NOW & not two years later when the markets start to look up? 1) Fabs are shutting down or idling at the moment. In this scenario, equipment vendors will be more than happy to get rid of inventory even at huge losses so as to keep some business going. 2) Onus on product development: This is evolutionary and will come along with experience; akin to a baby crawling before it begins to walk! How about jumping into the foundry business first and playing a minor role in product development for the time being? The role and the direction of development will evolve over a period of time. Just as importantly, one has to be in total control of the full life-cycle of the product. Else, there will be that missing link/experience between optimum design and subsequent efficient manufacturing. 3) Technical know-how: Reverse brain-drain and attracting of expats to move to India is easier during the downturns, when intelligent folks might get laid off and would be available for a lot lesser (if at all) compared to the boom-times. Most importantly India has NOTHING to lose. This can be the first serious foray into the semicon manufacturing sector, if the money goes in now. NOT two years later because by then the set-up costs would be that much higher and personnel/partners/acquisitions would be hard and expensive to come by in a good market scenario. An early start i.e. rightaway will position the semicon manufacturing industry (along with whichever partner/acquisitions) to be ready to make full use of the next peak in the industry. That big name might well be Qimonda or maybe some other innovative company that might have been reduced to a pauper during this downturn. Ed, is it possible to make the comments more readable? The formats go for a toss and makes reading pretty hard. Thanks.

to The Edge

Jasp said on 2/12/2009 2:13:21 AM:
Qimonda has a month or so left to find new investors, before March end. Maybe, memory could just turn be big for India, who knows

to Jasp

Ed said on 2/11/2009 10:31:15 AM:
I must thank The Edge for his/her notes. Yes, I did feel somewhere there was (is?) an opportunity for the Indian investors. Other companies will be (unfortunately) facing this situation, so it could be a time for Indian investors to take a look at investing. Lets see

to Ed

The Edge said on 2/11/2009 4:35:11 AM:
Sorry about your job loss@Qi. Hope something works out for you. Thanks for your insights about the DRAM industry. I know a bit about the semiconductor business and here is my tuppence. The motivation of the article is to kick start semiconductor production in India. The fabs can be for memory or logic products depending on the opportunity that presents itself. Right at the moment, the opportunity, potential and good fit points to Qimonda. What do those guys offer? Proven memory experience, Exciting buried wordline technology, German engineering (though this is a bit of a myth now since the rest have caught up or overtaken) and a decent market share. What do they need? 1) Funding of their operations 2) R&D support 3) Production facilities. 1 & 2 are applicable mostly for their existing facilities in Germany/Portugal, whilst (3) can very well be *that* fab in India. > Production facility in a low-cost location like India will bring down manufacturing costs and improve profitability. > The European locations can be maintained with minimal layoffs since the expertise is already there and the local governments are lining up with lots of dosh. > With money from the investor and the local bodies, the normal operations can be kept running until the new fab is up & running. The location of the fab in India will be important. Bangalore & Pune come to mind. Both will be able to attract Indians abroad to come back. The current time is ripe since the worldwide market is down and therefore, the overseas talent would be quite willing to return to the safe shelter of ones own proverbial backyard to practice their profession. Investors? They would have to be the Tata, Reliance, Mallya or... (in that order). Tata can add this to their existing solar portfolio & widen their area of interest. Beer baron Mallya might be the best suited though since beer & chips always make a great combo (pun intended). His current success with making of a 5-star airline and his clout with the government will make subsidy approvals easier & land clearance faster. Reliance might be able to do the same in Gujarat. If the above fab does become a reality, the gained expertise will be handy, especially if one considers the amount of design houses and fabless companies in India. Mergers, acquisitions and take-overs might well be the order of the day thereafter to protect from being overly DRAM-reliant. One final point would be about the DRAM prices, which are currently at their lowest. The economic crisis is slated to last all through this year and part of next year as well. Therefore, the time spent in the fab construction will not cause much revenue loss. On the contrary, the fab might be hitting full steam just when the markets are zooming up. All said & done, as per the press theres only a few weeks for an investor has to step in to save Qimonda. So, our discussion might be a little late in the day for Qimonda. Nevertheless in this season of yard sales, other big names will be up for grabs soon enough. Thanks & Good luck, Ed. Hope you can get the message across to the folks who can make a difference with their billions.

to The Edge

Ed said on 2/11/2009 12:08:32 AM:
Interesting comment.. and many thanks... Hope you are able to find a new job. Also hope the memory industry is able to get back on track soon enough.

to Ed

Qi said on 2/10/2009 9:49:23 PM:
As someone who worked for Qimonda until last Friday, when the fab in Richmond was closed, I can say that the DRAm business is very cut-throat with very slim margins. If an Indian investor with deep pockets wants to buy Qimonda, they will have to be prepared to wait for a few years and for an upturn in the market to make any money. Check out DRAMEXCHANGE.com to look for spot prices of DRAMS. They are hovering around $1.20 for commodity products (1G DDR2). Production cost depending on volumes is about $2.00. So everyone from Samsung, Elpida, Powechip, Nanya, Micron and Qimonda are loosing money at the moment with no end in sight, because there is more production capacity than demand. If any investor wants to build a DRAM fab in India at the moment, they will have to look at the long term and definitely be willing loose money in the short term. I dont see any Indian investor that is that foolhardy on focused on the long term at this time.

to Qi

scott herzing said on 2/10/2009 3:59:42 AM:
???

to scott herzing