Infineon Accelerates Corporate Restructuring

• Further decentralization measures

• Slimming down the company also includes downsizing

• Systematic implementation of the Agenda 5-to-1 corporate strategy

Munich, April 29, 2003 – Infineon Technologies AG (FSE/NYSE: IFX) is introducing a wide-ranging series of measures to force the pace on the corporate restructuring that is already being driven by various programs. A return to the profit zone and sustained success for the company are the paramount corporate objective, explained Dr. Ulrich Schumacher, Infineon’s President and CEO, at a press conference in Munich. As already announced, against the backdrop of a continuing weak market environment Infineon is banking on realizing massive savings, including by the further streamlining of corporate structures as well as through the implementation of the Agenda 5-to-1 program.

Cost-cutting

In summer 2001, Infineon unveiled a radical cost-cutting program in the shape of its Impact initiative, which led to savings amounting to 2.8 billion euros. With the follow-on program Impact², the company aims to optimize its corporate processes and structures. This will produce further cost reductions of 500 million euros, 50 million of which will come in the current fiscal year. The lion’s share of the savings will be financially effective on an EBIT basis in the next fiscal year. A major contribution will be made by the relocation of individual business units as well as by outsourcing of various functions to external service providers.

In light of the continuing tense market situation, Infineon also plans to downsize its workforce. Up to 900 jobs will be reduced, including 500 in various corporate functions, plus another 150 in the Secure Mobile Solutions Group, mostly in Sweden. There will also be cuts through transfer or outsourcing.

Decentralization

By transferring responsibility for the Automotive and Industrial Electronics Group to Villach, Austria, Infineon is taking one more step toward the decentralization of the company. The Group, which posted record results for the sixth quarter in succession, will be controlled from Villach in future. Infineon has already benefited in the past here from the proximity between research and production facilities. With the relocation, the company hopes to shorten distances even further and so be in a position to launch new products onto the market more quickly. Following the move, some 2,400 employees will be working in Villach.

Infineon expects increased efficiency from the decentralization of business units and the strengthening of the regions in line with the Agenda 5-to-1 program. The course that has been embarked upon, namely expanding a powerful regional presence in the USA and Asia, will be continued and is a major cornerstone of this corporate strategy. In Singapore, the foundation stone for a new building of the future Asia headquarters was laid in April. Over 2,000 people will be employed at this location. Infineon will invest over 1.5 billion euros in the key growth market of Asia over the next four years. On America’s East Coast, Infineon is currently planning to establish a new US expansion site besides San Jose, California.

Possible new company headquarters

Infineon is examining the financial benefits of relocating the corporate headquarters outside Germany. The company is currently examining various sites in Asia, the USA and Europe - amongst others Switzerland. Potential savings would be available to Infineon for investments in new technologies and infrastructure.

Location Germany

Infineon has to hold its own in a fiercely competitive global environment and will go wherever the general conditions are most favorable for the task in hand. “Germany will continue to be an attractive location for Infineon not least because of the availability of highly qualified specialists, e.g. in R&D, even if various corporate activities, e.g. administrative functions, can be handled more efficiently abroad and will therefore be relocated,” explained Schumacher. “Our far-reaching measures are designed to ensure the lasting global success of the company, which will also enable us to safeguard our jobs in Germany long-term,” continued Schumacher.

Infineon has steadily expanded its market position in the last several years and has grown faster than the market even during the downturn. In the first half of the current fiscal year, for example, growth was 28 percent. Forecasts for worldwide market growth in the 2003 calendar year are currently running at 11 percent.

However, the continuing weakness of the international high-tech markets over the last two years and the uncertain development of the market confirm Infineon in its decision to restructure the company in order to create structures that will bring lasting success. Infineon also wants to continue to set technological standards and reap considerable rewards from this in terms of market position and costs.

Productivity

On the cost side, Infineon is constantly increasing its productivity and manufacturing efficiency. With the immediate introduction of 110-nanometer technology, the company is cutting the production costs of memory chips by another 30 percent. In the second quarter, Infineon reduced the costs for 256-megabit equivalents from 6.10 to 5.40 US dollars. By the end of the fiscal year (September 2003) the company wants to squeeze costs as low as 4.50 US dollars.

With the early introduction of 300mm production technology, Infineon has already demonstrated its leading position in cost-efficient production. Today Infineon is producing chips more cheaply than with the 200mm technology that is still prevalent across the industry and will be able to realize cost savings of up to 30 percent when its plant in Dresden reaches full capacity. The company is well ahead of schedule in ramping-up its 300mm facility in Dresden which has reached more than 6,000 wafer starts per week.

Solution Business

As outlined in the Agenda 5-to-1 program, Infineon will expand its profitable solution business. For this, the company is also committed to diversification. There are already signs of initial success with special innovations that create new markets. Examples of new applications are:

• Infineon’s entry into the "bioscience" growth business with innovative biochips

• Wearable electronics, e.g. jackets with integral MP3 player

• Radio identification to simplify logistics in checking objects in and out, e.g. in libraries (Vienna main library).

Partnerships

Partnerships, cooperation ventures and acquisitions are vital to the economic and technological success of the company. Infineon will systematically follow the course already embarked upon. Through agreements with the Chinese SMIC and the Taiwanese Winbond, for example, Infineon secures capacities without having to invest in new production facilities. In this way the company increases its profitability and at the same time gains market share. The cooperation model with Nanya provides for joint development and production, so R&D costs will be shared and the company’s presence in Asia strengthened.

“Now the task is to use the restructuring of the company to achieve our primary objective – a return to profitability. All our actions and planning are subordinate to this goal,” commented Schumacher.

Infineon Technologies AG, Munich, Germany, offers semiconductor and system solutions for the automotive and industrial sectors, for applications in the wired communications markets, secure mobile solutions as well as memory products. With a global presence, Infineon operates in the US from San Jose, CA, in the Asia-Pacific region from Singapore and in Japan from Tokyo. In the fiscal year 2002 (ending September), the company achieved sales of Euro 5.21 billion with about 30,400 employees worldwide. Infineon is listed on the DAX index of the Frankfurt Stock Exchange and on the New York Stock Exchange (ticker symbol: IFX). Further information is available at www.infineon.com
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