MUNICH, Germany — The insolvency of German DRAM manufacturer Qimonda continues to exercise the minds of industry executives about the viability of the Dresden 'Silicon Saxony' model and the standing of Europe in the global chip industry in general.

Time is not on the side of the company and its workers: if no investor is found by the end of March, breaking up the assets seems unavoidable.

The insolvency of the chip vendor has pained Europe’s chip sector over the past weeks. Even for hard-nosed optimists, the industry’s deep-rooted problems have been highlighted by the downfall of the once-hailed Infineon subsidiary.

Analysts said there was no single factor that drove Qimonda into the abyss. Rather, it was a combination of at least three factors, each representing a danger by itself.

The first one is the current oversupply in the DRAM market, which has led to massive price pressures. The second is the downturn in the global economy and the third the continuing financial crisis.

In Qimonda’s case, the last has had an additional impact: it dried up the company’s ability to invest in innovation and production equipment that would have enabled it to keep pace with rivals.

The case has triggered fierce discussion and debate. While some hailed Qimonda’s collapse as a relief for the suffering DRAM market, others have focused on the continuing difficult situation for the industry.

"This is good news for the DRAM industry," commented Andrew Norwood, European research vice president at analyst company Gartner Inc. (Stamford, Connecticut). The fact that a state-supported bail-out plan for Qimonda in December 2008 could not be completed suggests that the situation is deteriorating, he pointed out.

Norwood was also skeptical about Qimonda’s declared aim to "restructure key business units within the context of the insolvency regime." He said: "Key business units? They only do one thing."

Norwood highlighted that the DRAM industry has been oversupplied for years and DRAM vendors had lost $12 billion in 2008. "When even Samsung makes a loss that tells you things are bad. And for the last six to nine months the DRAM vendors have been hanging on hoping another of the vendors would fail first."

The Gartner analyst also contrasted the political support for DRAM makers on offer in Germany and in Taiwan. "Why would a country want a DRAM company? In Germany Qimonda has Dresden as a legacy but DRAMs would be made in Asia. Would packaging and assembly be done in Germany? No, that will be done in Asia. In Taiwan a supported DRAM company also supports the test and assembly companies and the PC, notebook and netbook companies. So it leverages many jobs for each DRAM job."