Infineon Plans Extensive Cost Reductions in Response to the Ongoing Difficult Market Environment

Jul 26, 2001 | Business & Financial Press

Munich, July 26, 2001 – In light of the continued weakness in the technology sector worldwide, Infineon is planning a comprehensive package of measures to further reduce costs. This package is to encompass extensive savings aimed at further streamlining processes such as procurement, logistics, information technology, and manufacturing in the company’s various business units. After a rapid analysis of the savings potential, further decisions will be made over the next few weeks. In addition, Infineon is planning to introduce short-time work and reduce the size of its workforce worldwide. Altogether, roughly 5,000 jobs will be affected. The overall program named “Impact” should save roughly Euro 1 billion over the next 12 to 18 months and thus help improve significantly the company’s cash position and earnings.

The planned workforce reductions are to be as socially compatible as possible, and specific plans are being prepared at the moment. The reduction of workforce and short-time work are to be implemented on a business-dependent basis and will differ in scope at individual locations and business units. Employees’ representative bodies will be involved in the process in accordance with the prevailing requirements in their respective countries.

Market analysts currently estimate that in 2001 the worldwide semiconductor market will decrease by over US$ 60 billion compared to last year. Compared to previous market forecasts of October 2000 the market will decline by over US$ 100 billion, impacting Infineon’s business severely. “Due to the fact that there are still no clear signs of a recovery in the global semiconductor market, we have informed our supervisory board on July 25 that additional, more extensive steps are now necessary on top of the cost-cutting program we already initiated,” explained Dr. Ulrich Schumacher, President and CEO of Infineon Technologies AG. “Regrettably, a cost-saving program on this scale inevitably means reduction of the workforce worldwide. But the dramatic developments in the market and our business situation leave us no choice.”

Infineon had already announced an initial round of cost-cutting measures comprising the following: a reduction in investments over the current fiscal year by Euro 500 million to Euro 2.3 billion; a reduction of more than Euro 1 billion to Euro 1.5 billion in investments planned for the coming fiscal year; an almost complete hiring freeze; and no replacing of personnel lost through attrition.

Last Monday, Infineon announced an EBIT loss of Euro 598 million for the third quarter and a 30 percent drop in sales compared to the same quarter last year. Infineon also expects to report negative earnings for both the fourth quarter and fiscal year 2001 (ending September 30). There are currently no clear signs of a recovery in the marketplace, and demand is extremely weak in the mobile phone and PC markets. As a result of its extensive cost-reduction program, Infineon will be able to continue to invest in cutting-edge innovations such as 300mm technology and secure important competitive advantages by consistently stepping up productivity.

About Infineon

Infineon Technologies AG, Munich, Germany, offers semiconductor and system solutions for applications in the wired and wireless communications markets, for security systems and smartcards, for the automotive and industrial sectors, 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 2000 (ending September), the company achieved sales of Euro 7.28 billion with about 29,000 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

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