Plans To Return To Profit Zone
The company has set up an "Impact(2)" as a follow-up to the Impact cost-cutting initiative launched in summer 2001, which led to savings amounting to EUR2.8bn. Impact(2) will optimise corporate processes and structures for further cost reductions of EUR500mn - with EUR50mn coming in the current fiscal year. The lion's share will be financially effective on an earning before interest and tax (EBIT) basis in the next fiscal year. A major contribution will be made by relocation of individual business units as well as by outsourcing of various functions to external service providers.
Up to 900 jobs to go
Infineon also plans to downsize its workforce with up to 900 jobs going, 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.
The company is also making decentralisation measures such as the transfer of responsibility for the Automotive and Industrial Electronics Group to Villach, Austria. Following the move, some 2400 employees will be working in Villach.
The company is also expanding its regional presence in the USA and Asia. In Singapore, the foundation stone for a new building of the future Asia headquarters was laid in April 2003. More than 2000 people will be employed at this location. Infineon is to invest more than EUR1.5bn in Asia over the next four years. A new expansion on the East Coast, USA, is to add to existing facilities in San Jose, California, on the West.
Infineon is also examining the financial benefits of relocating its corporate headquarters outside Germany with possible sites in Asia, the USA and Europe being considered.
However, "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," says Schumacher.
Process advantage
The company also claims that immediate introduction of 110nm processes are cutting memory production costs by 30%. In its Q2, Infineon reduced the costs for 256Mbit equivalents from $6.10 to $5.40, it reports. By the end of the fiscal year (September 2003), the company wants to squeeze this further to $4.50. Cost savings of up to 30% will also come on-line when Infineon's Dresden 300mm fab reaches full capacity. Dresden has already reached more than 6000 wafer starts per week.
Samples of 256Mbit DRAMs from the new 110nm process have already been successfully validated at Intel and delivered to other strategic partners. The smaller structures allow a reduction in chip size and a production cost advantage per chip of around 30% compared to the current volume process technology used by Infineon. More than 50% more chips are produced per wafer compared with the company's previous 0.14µm DRAM process.
The new process was developed at Infineon's Dresden 200mm wafer facility and is now ready to start its ramp-up to volume on 200mm and 300mm memory process lines. During ramp-up at Dresden, the new process technology will also be transferred to the other facilities of Infineon`s fab cluster, including Richmond, Virginia, the production joint venture with Nanya called Inotera Memories in Taiwan and the company's DRAM foundry partner fabs.
Infineon says it is the first DRAM manufacturer to use 193nm (nanometer) lithography in volume production for its new 0.11µm DRAM technology. Future process generations with smaller feature sizes are planned to use the same lithography. The first products manufactured on the new 0.11µm technology are 256Mbit double data rate (DDR) components. The smaller feature sizes could enable memory densities up to 1Gbit per chip. The components produced on the process will be packaged in environmentally friendly lead-free and halogen-free materials.
Seizing interest advantage
Infineon has also launched a subordinated convertible bond issue through its Dutch subsidiary Infineon Technologies Holding. The transaction size will be approximately EUR700-725mn and is convertible into up to 69mn shares in Infineon Technologies AG, the equivalent cash amount at the company's discretion or an equivalent cash/share combination. The convertible bond has a maturity of seven years and cannot be called for the first three years of the life of the security, callable thereafter subject to a 125% provisional call. The bond will be placed with institutional investors outside the USA.
Infineon says it is issuing the convertible bond to benefit from the attractive financing opportunity available in the current convertible market given the low interest rate and high volatility environment. The proceeds of the issue will be used to strengthen Infineon's financial position and support its long-term strategy.
