Summary
Infineon has been looking for a suitor for over a year, and this latest news will not change that. The consolidation that is overdue in the DRAM market is driven by basic economics. Consolidation will result in fewer vendors, starting with the elimination of those at the bottom of the market share ranking. Suppliers Samsung, Hynix, Micron, Elpida, Powerchip, ProMos, Nanya, Infineon, and others will be impacted.
Analysis
Infineon is in a position where the company must make major capital expenditures or stop competing in the DRAM market. A basic market mechanism governs that a company can only continue to compete in this market through continuously increasing capital investments, and these investments muct be supported by certain minimum revenue levels. This is a factor in any undifferentiated semiconductor market. A new Brief: "Why DRAM Vendors MUST Consolidate" spells this out in detail. The Brief's abstract can be found at www.Objective-Analysis.com/Reports. In a nutshell, DRAM vendors whose annual revenues today are below $2.5 billion will be unable to continue to invest sufficient capital to remain in the market. This base level rises over time, forcing weaker vendors out of the market over time.
