Infineon Technologies is dealing with a significant financial setback due to an ongoing legal battle. The semiconductor giant must pay an additional €753.5 million as part of a settlement related to the bankruptcy of its former memory chip subsidiary, Qimonda. The total cost of the bankruptcy is now over half a billion euros more than previously anticipated.
Old dispute resurfaces
The dispute, which has been ongoing for 14 years, involves claims by Qimonda’s insolvency administrator, Michael Jaffe. Jaffe alleges that the memory chip business transferred to Qimonda was “not valuable” from the start, leading to the company’s insolvency three years later. This claim was confirmed earlier this year by an expert appointed by the Munich I Regional Court. Jaffe, who also oversees the insolvency of Wirecard, has secured €1.2 billion for Qimonda’s creditors.
Infineon had set aside only €221 million for the litigation risk in its 2022/23 financial statements, leaving the rest to impact the current fiscal year’s results. Jaffe had initially demanded up to €3.4 billion plus interest from Infineon. Analyst Juergen Wagner from Stifel described the settlement as “painful but manageable,” noting the unexpectedly high amount. Despite the settlement, it allows Infineon’s management and shareholders to focus on the company’s well-performing core business. However, Infineon’s stock fell by 1.2 percent on the Frankfurt Stock Exchange, making it one of the biggest losers in the DAX index.
An Infineon spokesperson stated that the settlement would not affect the company’s profit forecast for 2023/24, which pertains only to operating segment results. The company also assured that there would be no reductions in dividends or investments due to this settlement.
Historical context and financial impact
Seventeen years ago, Infineon spun off its memory chip business into Qimonda AG and listed it on the New York Stock Exchange. Despite becoming one of the largest memory chip manufacturers globally with up to 13,500 employees, Qimonda never achieved profitability. The company went bankrupt in January 2009, and despite attempts at government assistance, it failed to secure help. Infineon had initially valued the memory chip division at €600 million, but the court-appointed expert determined a negative value in the billions.
The total cost of the Qimonda bankruptcy to Infineon now exceeds €1 billion, according to Jaffe. All legal disputes and claims against Infineon from the insolvency administrator are now resolved. In 2014, Infineon reached an initial settlement with Jaffe, purchasing thousands of Qimonda patents for €260 million.
Jaffe has promised a “substantial” bankruptcy dividend to Qimonda’s creditors, which will be paid out relatively soon. This is a significant development, given that Qimonda, as a holding company at the time of its filing, had neither substantial liquid assets nor easily realizable assets. Preparations for concluding the proceedings are now underway, ensuring that the success will benefit the creditors, although Jaffe did not specify the exact dividend amount.
