Dresden is one of the great success stories of German reunification. After the fall of the Berlin Wall in 1989, the capital of the East German state of Saxony remade itself as the center of European semiconductor production, becoming home to major facilities operated by U.S. chipmaker Advanced Micro Devices as well as Munich-based Infineon Technologies. When a 1998 Time magazine article dubbed the region “Silicon Saxony,” locals embraced the label and even founded an organization by that name to promote industry interests.
But the mood in Silicon Saxony these days is anything but exuberant. On Dec. 21, Infineon’s separately listed Qimonda unit, the region’s largest private employer, narrowly escaped bankruptcy when it received a rescue package that could total more than $800 million. “We have achieved a breakthrough,” Saxony’s Economic Affairs & Labor Minister Thomas Jurk said in announcing the deal.
The bailout includes a $208 million loan from the Saxony state government as well as $104 million from Infineon, which holds 77 percent of Qimonda’s shares. A further $140 million comes from an unidentified bank in Portugal, where Qimonda is expected to develop a research and development center. In addition, Germany’s federal government and the Saxony state government are offering $390 million in loan guarantees.
Burning Through Cash
It’s a major reprieve for Qimonda’s 3,200 employees in the region and for thousands of other workers at nearby suppliers and research operations. Yet the long-term outlook for Dresden’s high-tech industry remains cloudy. “This may give a chance for Qimonda to sail through the storm but not guarantee the outcome,” Nicolas Gaudois, UBS’s London-based semiconductor analyst, wrote in a research note on Dec. 22.
Qimonda’s New York-listed shares bounced more than 60 percent on the news, to about 49 percent apiece. But the stock is far below its price of more than $8 a year…