Japanese electronics giant Toshiba is dropping out of the memory chip market, selling its US semiconductor plant to Micron Technology and giving up on a potential alliance with German chipmaker Infineon.

Toshiba's chip business is making huge losses, largely thanks to the ailing DRAM market.

DRAM memory chips have become commoditised in recent years, with massive oversupply as Asian manufacturers moved into the market after a drought in the mid-90s.

The mess in the chip sector has been a key part of Toshiba's current travails, characterised by its president, Tadashi Okamoto, as the company's "most severe situation since the founding of our company" 126 years ago.

For the first six months of this financial year from April to September, it lost 123bn yen ($965m).

Getting out

The exact terms of the deal with Micron, the second biggest DRAM producer in the world, have yet to be determined, Toshiba said.

But it made clear that it will be taking a 40bn yen charge to cover the restructuring, and that Micron will be taking the US subsidiary Dominion off its hands completely.

The Japanese company is not getting out of the chip business. It will continue to build more specialised semiconductors, but the scrapping of commodity DRAM work will cut fixed costs on memory operations by half.

As for Infineon, it said it was still open to possible deals with other chipmakers - so long as its cash position remained unaffected.

"Following intensive talks, Infineon and Toshiba both agreed that none of the options discussed would be feasible strategies for both companies," Infineon said in a statement.

And the deal may have implications for another major chip tie-up as well.

Hynix, the world number three DRAM manufacturer, has been trying to seal a merger with Micron to solve its own deep financial troubles.

Fears that Micron could side with Toshiba instead have weighed on Hynix shares for days. But the company insists the deal is still on track despite the Toshiba sell-off.