Infineon Gains Market Share

MUNICH -- Infineon Technologies gained market share in all of its business groups in the year 2002 despite a continuing difficult market environment. According to leading market research companies Infineon improved its ranking among the world's largest semiconductor companies, moving up from 8th place in 2001 to 6th. "We have initiated our Agenda 5-to-1 program in response to a changed market. We aim to pursue this strategy systematically over the coming five years as it forms the basis for the long-term success of Infineon," explained Dr. Ulrich Schumacher, President and CEO of Infineon Technologies AG, at the company's third annual general meeting. "To achieve our ambitious objectives we need to win further market share in our target markets and expand our solutions business, which will significantly enhance our profitability." Infineon is systematically implementing its "Agenda 5-to-1" strategy and intends to secure a place among the top four leading semiconductor manufacturers worldwide in the next five years. In each of its business groups, the company plans to be among the top three. Infineon aims for a top two position in profitability, and number one in the semiconductor solutions business. Results for the last fiscal year: Sales in the last fiscal year were down 8 percent compared with the previous fiscal year, falling back to Euro 5.21 billion. The EBIT (Earnings Before Interest and Taxes) posted in fiscal 2002 was a loss of Euro 1.14 billion, compared with a loss of Euro 1.02 billion in the previous year. The net loss amounted to Euro 1.02 billion, compared to a net loss of Euro 591 million in the previous fiscal year. The loss per share (basic and diluted) was Euro 1.47 in fiscal 2002 compared with a loss per share of Euro 0.92 in fiscal 2001. "The revenue decrease resulted from the overall weak demand in the semiconductor market with substantial pricing pressure in all business groups, especially for memory products," said Dr. Schumacher. "Despite the unexpectedly long continuation of adverse market conditions, we improved revenues in all logic segments sequentially quarter by quarter during fiscal year 2002." First quarter results: Infineon achieved revenues of Euro 1.52 billion in the first quarter of the current fiscal, an increase of 10 percent compared to the previous quarter. Quarterly EBIT (Earnings Before Interest and Taxes) was a loss of Euro 31 million and net loss amounted to Euro 40 million. Basic and diluted loss per share for the first quarter of fiscal year 2003 was Euro 0.06. The revenue increase was mainly driven by higher demand for memory products and semiconductors used in mobile phones and the continued strong performance of the automotive & industrial segment, according to Dr. Schumacher. The improved earnings performance was mainly due to further cost reductions in the memory product segment and a shift in sales towards higher margins products. Outlook for the first half of calendar year 2003: "Although we see first signs of a positive market trend it is still too early to speak of a sustained overall market improvement. We look with cautious optimism into the future and expect a further stable development of demand in most segments. But we also expect an ongoing difficult market environment with continued pricing pressure in our wireline communications and secure mobile solutions segments in the first half of calendar year 2003," commented Dr. Schumacher. For its secure mobile solutions segment, Infineon expects increased demand for GSM/GPRS mobile handsets in 2003. The company currently forecasts an increase to 440 million units sold in calendar year 2003. However, during the second quarter the company expects a slight decrease in sales volumes due to seasonally reduced demand after Christmas. For the security and chip card ICs market Infineon expects a seasonal weakness in demand and continued strong pricing pressure for security controllers used in mobile communications (SIM card ICs). However, for the second half of calendar year 2003 Infineon still expects an overall market improvement. Further reductions of approximately 10 percent in capital expenditures for global wireline telecom infrastructure are expected for 2003, according to industry analysts. As the DSL rollout gains momentum, the company expects to benefit from stronger demand for broadband access solutions (ADSL, VDSL), especially in Asia and Japan. Despite strong pricing pressure in the automotive electronics and automotive semiconductor markets, Infineon anticipates that further productivity increases combined with leading product performance in its automotive semiconductor business will enable the company to continuously gain market share. Infineon anticipates that the second quarter of fiscal year 2003 will only see a slight increase of demand for memory products, following robust sales during the first quarter, which included the Christmas season. The development of prices will depend on the market's psychology and end-consumer behavior. A sustained improvement in prices during calendar year 2003 would require stronger demand from the corporate replacement cycle and increased infrastructure investments. Infineon Technologies AG