Infineon reports results for the first quarter of the 2009 fiscal year

Neubiberg, Germany – February 6, 2009 – Infineon Technologies AG (FSE/NYSE: IFX) today reported results for the first quarter of the 2009 fiscal year ended December 31, 2008. Infineon prepares its result in accordance with International Financial Reporting Standards (IFRS).

Infineon’s revenues in the first quarter were Euro 830 million, down 28 percent sequentially and 24 percent year-over-year. The sequential decrease reflects a decline in revenues in all of the company’s operating segments due to significantly lower demand as a result of the global economic slow-down and inventory corrections throughout the electronics supply-chain. The company’s Automotive and Wireless Solutions segments were most severely affected. Overall, the company’s revenues were slightly better than forecasted, largely due to the stronger U.S. dollar against the Euro. Excluding effects of currency fluctuations, primarily between the U.S. dollar and the Euro, and acquisitions and divestitures, revenues decreased 32 percent sequentially and 26 percent year-over-year.

Beginning October 1, 2008, Infineon’s Management Board uses Segment Result to assess the operating performance of the company’s reportable segments and as a basis for allocating resources among the segments. Infineon’s combined Segment Result was negative Euro 102 million in the first quarter, compared to positive Euro 59 million in the fourth quarter of the 2008 fiscal year. First quarter Segment Result was better than expected as a result of higher than forecasted revenues and very good progress with cost reductions under the company’s IFX10+ cost-reduction program. For additional details, including a definition and a reconciliation of total Segment Result to “ Operating Income (Loss)” in the condensed consolidated statements of operations, please see the table on page 7 of this release.

Net loss from continuing operations for the first quarter was Euro 116 million, resulting in basic and diluted loss per share from continuing operations of Euro 0.16. For the prior quarter, net loss from continuing operations was Euro 297 million, and basic and diluted loss per share from continuing operations was Euro 0.45.

The loss from discontinued operations, net of tax, was Euro 288 million for the first quarter. This loss consisted of Euro 93 million in connection with the recognition of currency translation effects primarily related to Qimonda’s sale of its interest in Inotera to Micron and of Euro 195 million in provisions and allowances following Qimonda’s filing of an application to open insolvency proceedings. Basic and diluted loss per share from discontinued operations was Euro 0.34.

For the first quarter, Infineon reported group net loss of Euro 404 million, and basic and diluted loss per share of Euro 0.50.

In line with an overall effort to focus on liquidity management, the company reduced its investment in property, plant and equipment and intangible assets, including capitalized development costs to only Euro 40 million for the quarter. In addition, Infineon reduced net working capital by Euro 79 million. Hence, free cash outflow could be contained to negative Euro 22 million for the quarter despite cash outflow in connection with the IFX10+ program of Euro 25 million. The company also repurchased a total nominal amount of Euro 117 million of its convertible and exchangeable bonds during the quarter.

Infineon’s IFX10+ cost-reduction program

In the first quarter of the 2009 fiscal year, Infineon made very good progress with cost reductions under the IFX10+ program, mainly in operating expenses, where the company saved approximately Euro 45 million during the quarter compared to the expense run-rate of the prior quarter. In that context, the company has also made progress with regards to headcount reductions. By the end of December 2008, the company had reached agreements regarding or had already effected separation with respect to approximately 85 percent of the announced workforce reduction.

In response to continuing weak demand worldwide in all of the company’s target markets, Infineon has identified additional savings potential from a combination of measures that have already been implemented or will be implemented shortly. Amongst others, the company has introduced reduced work hours in the company’s German production sites Regensburg and Dresden, has changed its bonus schemes for the 2009 fiscal year and has issued a new and very stringent travel policy. In addition, Infineon exited the employers’ union in November 2008 in order to achieve more flexibility in wage adjustments. Infineon does not expect to incur additional expenses or cash outflows in relation to the additional measures mentioned above. Infineon originally announced expected annualized savings of at least Euro 200 million, and then increased this target in December to at least Euro 250 million. As a result of substantial additional cost reductions and cash savings, including those mentioned above, the company now targets total annual savings of Euro 600 million. These savings include approximately Euro 200 million in operating expenses and Euro 400 million savings related to manufacturing operations. Of the savings in manufacturing operations, Euro 300 million have been designed to offset at least in part the cost impact of lower loading of the manufacturing sites caused by the downturn.

In addition to the savings mentioned above, the company is reducing its 2009 fiscal year budget for investment in property, plant and equipment and intangible assets, including capitalized development costs, to approximately Euro 200 million, compared to the Euro 250 million that was originally budgeted.

Infineon’s outlook for the second quarter of the 2009 fiscal year

The drastic slow-down in world economic demand that started in the first quarter of the 2009 fiscal year is expected to continue to have a severe impact on overall demand levels in the second quarter. In addition, the company anticipates that inventory reductions throughout the entire electronics supply chain will continue. As such, the company has relatively limited visibility with respect to the revenue development, even in the second quarter. Within the limits of that low visibility, the company currently expects revenues from continuing operations for the second quarter to decrease by approximately 10 percent compared to the first quarter. After the significant decrease in demand in the Automotive and Wireless Solutions segments in the first quarter, the company expects these segments to be more resilient in the second quarter compared to the first quarter. By contrast, the three other segments, Industrial & Multimarket, Chip Card & Security and Wireline Communications, are expected to be more severely affected by the continuing slow-down in the second quarter.

Additional savings measures implemented under the IFX10+ program are expected to result in substantial additional cost and cash savings over and above the savings levels realized in the prior quarter. As a consequence of continued sales declines and an aggressive reduction in factory loading in order to reduce inventory, Infineon expects combined Segment Result margin in the second quarter to be within the range of a negative mid-to-high teens percentage. Without the additional measures described above, the impact of lower sales and factory loading on the bottom-line would have been significantly more severe.

Following Qimonda’s insolvency filing, Infineon expects to deconsolidate Qimonda in the second quarter. In this context, the company anticipates that it will recognize accumulated losses related to unrecognized currency translation effects related to Qimonda. As of December 31, 2008, the amount of such accumulated losses totalled approximately Euro 100 million. The recognition of such accumulated losses will not have any impact on Infineon’s shareholders’ equity.

“Despite extremely challenging market conditions, our first quarter results held up reasonably well, largely due to very good progress with our IFX10+ program. We successfully focused on liquidity management, contained cash outflows and lowered our debt”, said Peter Bauer, CEO of Infineon Technologies AG. “In the second quarter, market conditions will unfortunately worsen further. Responding to this challenge, we are reducing our cost and CapEx levels further. We will continue to focus on cash flows by reducing inventory levels and fab loading even further and by managing working capital tightly.“

Qimonda

On January 23, 2009, Qimonda AG and its wholly owned subsidiary Qimonda Dresden oHG filed an application at the Munich Local Court to open insolvency proceedings. Infineon’s beneficial ownership interest in Qimonda is 77.5 percent. Following Qimonda’s insolvency filing, Infineon may be exposed to a number of significant liabilities relating to the Qimonda business, including pending antitrust and securities law claims, potential claims for repayment of governmental subsidies received, and employee-related contingencies. In the first quarter of the 2009 fiscal year, Infineon has increased its provisions and allowances by Euro 195 million. This amount covers those contingencies that management believes are likely to occur and can be estimated with reasonable accuracy at this time. There can be no assurance that such provisions and allowances recorded will be sufficient to cover all liabilities that may ultimately be incurred in relation to these matters. Infineon anticipates that the majority of any potential cash obligations the company may have in connection with these matters would be payable, if at all, in periods after the 2009 fiscal year.

Effective March 31, 2008, Infineon reclassified the assets and liabilities of Qimonda as held for disposal in its condensed consolidated balance sheets. As a consequence, the individual line items in the condensed consolidated statements of operations on page 7 of this release reflect Infineon’s continuing operations without Qimonda. All results relating to Qimonda are reported in the line item “Income (loss) from Discontinued Operations, net of tax”. The net book value of Infineon’s interest in Qimonda in Infineon’s condensed consolidated balance sheet as of December 31, 2008 has been recorded at the estimated fair value less costs to sell.

Segments’ performance for the first quarter of the 2009 fiscal year

In the first quarter, revenues in the Automotive segment decreased significantly compared to the prior quarter due to the worsening global recession, significant production cuts in the automotive markets worldwide and resulting inventory corrections at customers. Automotive Segment Result swung to a loss, mainly due to the significant decline in revenues and the drop in factory loading, which could only be partially offset by savings realized under the IFX10+ program.

Industrial & Multimarket segment’s revenues in the first quarter also decreased significantly sequentially due to the worsening global recession, a significant slow-down in worldwide demand in the consumer, computing and telecom markets and resulting inventory corrections in the supply-chain. Industrial & Multimarket Segment Result remained positive, but decreased significantly compared to the prior quarter, mainly due to the decline in revenues and lower production levels, which could only be partially offset by savings the segment has realized under the IFX10+ cost-reduction program.

Revenues of the Chip Card & Security segment decreased quarter-over-quarter, mostly due to inventory corrections at major customers and seasonal weakness amidst an overall weak demand environment. Chip Card & Security recorded a slightly negative Segment Result compared to positive Segment Result in the prior quarter, mainly due to the decline in revenues which could only be partially offset by the IFX10+ measures.

In the first quarter, revenues in the Wireless Solutions segment decreased significantly on a sequential basis, mainly due to the drastic market slow-down and inventory corrections at customers. In particular, one HSDPA customer reduced demand after its high level of demand in the fourth quarter of the 2008 fiscal year. Wireless Solutions recorded a negative Segment Result, mainly due the significant decline in revenues and an increase in idle cost which could only be partially offset by the measures the segment has implemented under the IFX10+ cost-reduction program.

The Wireline Communications segment’s revenues in the first quarter decreased compared to the prior quarter, mostly due to the decrease in demand reflecting the economic slow-down and inventory corrections in the supply chain. Wireline Communications Segment Result was positive. Compared to the prior quarter, Segment Result increased despite lower revenues, mainly driven by the IFX10+ measures.

Major business highlights of Infineon’s segments in the first quarter of the 2009 fiscal year can be found in this document after the financial tables.

All figures are preliminary and unaudited.

Analyst and press telephone conferences

Infineon Technologies AG will conduct a telephone conference (in English only) with analysts and investors on February 6, 2009, at 10:00 a.m. Central European Time (CET), 4:00 a.m. Eastern Standard Time (U.S. EST), to discuss operating performance during the first quarter of the 2009 fiscal year. In addition, the Infineon Management Board will host a press telephone conference with the media at 11:30 a.m. (CET), 5:30 a.m. (U.S. EST). It can be followed in German and English over the Internet. Both conferences will be available live and for download on the Infineon web site at http://corporate.infineon.com.

IFX financial and trade fair calendar (*preliminary date)

- Feb 12, 2009; 2009 Annual General Meeting of Shareholders
- Feb 17, 2009; Analyst Presentation at the Mobile World Congress in Barcelona
- Apr 30, 2009*; Earnings Release for the Second Quarter of the 2009 Fiscal Year
- Jul 29, 2009*; Earnings Release for the Third Quarter of the 2009 Fiscal Year
- Nov 19, 2009*; Earnings Release for the Fourth Quarter and Full 2009 Fiscal Year

New in the IFX podcast section at www.infineon.com/podcast

- IP multimedia subsystem (IMS)
- One chip – 100 million mobile phones

DISCLAIMER

This press release includes forward-looking statements about the future of Infineon’s business and the industry in which we operate. These include statements relating to general economic conditions, future developments in the world semiconductor market (including the market for memory products), our ability to manage our costs and to achieve our savings and growth targets, the resolution of Qimonda’s insolvency proceedings and the liabilities we may face as a result of Qimonda’s insolvency, the benefits of research and development alliances and activities, our planned levels of future investment, the introduction of new technology at our facilities, the continuing transitioning of our production processes to smaller structure sizes, and our continuing ability to offer commercially viable products.

These forward-looking statements are subject to a number of uncertainties, including broader economic developments, trends in demand and prices for semiconductors generally and for our products in particular, the success of our development efforts, both alone and with partners, the success of our efforts to introduce new production processes at our facilities, the actions of competitors, the availability of funds, the outcome of antitrust investigations and litigation matters, and actions by Qimonda and its creditors and other interested parties, as well as the other factors mentioned in this press release and those described in the “Risk Factors” section of the annual report of Infineon on Form 20-F filed with the U.S. Securities and Exchange Commission on December 29th, 2008.

As a result, Infineon’s actual results could differ materially from those contained in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements. Infineon does not undertake any obligation to publicly update or revise any forward-looking statements in light of developments which differ from those anticipated.

Infineon Technologies AG, Neubiberg, Germany, offers semiconductor and system solutions addressing three central challenges to modern society: energy efficiency, communications, and security. In the 2008 fiscal year (ending September), the company reported sales of Euro 4.3 billion with approximately 29,100 employees worldwide in continuing operations. With a global presence, Infineon operates through its subsidiaries in the U.S. from Milpitas, CA, in the Asia-Pacific region from Singapore, and in Japan from Tokyo. Infineon is listed on the Frankfurt Stock Exchange and on the New York Stock Exchange (ticker symbol: IFX).