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Infineon Technologies Ag Business Information, Profile, and History

company products security percent

St.-Martin-Strasse 53
81669 Munich
Germany

Company Perspectives:

We create and maximize value for our customers, shareholders, and employees by: Designing, manufacturing, and marketing the industry's most advanced semiconductor solutions and services; building upon our core competencies and our technological strength, we strive to offer our customers the industry's most comprehensive range of converging communications, Internet, and automotive solutions, comprising broadband and access, wireless, security, and storage; attracting and retaining the best talents worldwide by offering them a challenging creative environment and world-class rewards; never Stop Thinking.

History of Infineon Technologies Ag

During Infineon Technologies AG's short life as an independent company, it has become the fourth largest DRAM manufacturer in the world, the second largest semiconductor manufacturer in Europe, and one of the top ten semiconductor manufacturers in the world. With 33,800 employees, Infineon has 16 manufacturing sites and 29 research and development sites in Europe, Asia, and the United States. The company's three major areas of work include communications; memory; and automotive, which includes semiconductors that go into cars. Infineon's communications products and services encompass fixed-line communications, wireless communications, and security and chip card integrated circuits (ICs). The company stated earnings of nearly EUR 5.7 billion (US$5.2 billion) for the fiscal year ending September 30, 2001.

Infineon's Leap to Independence

Infineon Technologies AG, the former Siemens Semiconductor, was founded on April 1, 1999, as a wholly owned spinoff of Siemens AG. The split followed the harsh price erosion in DRAMs, with Siemens Semiconductor posting a US$674 million pre-tax income loss for its 1998 fiscal year. As reported in the March 22, 1999 issue of Electronic News, Siemens Chairman Heinrich von Pierer, stated in November 1998 that the DRAM downturn "entails losses we simply cannot sustain. It is not fair to our stockholders."

The Electronic Buyers' News on May 24, 1999 reported, "Infineon's operating losses amounted to approximately US$56.7 million in the six months ended March 31, 1999. The German company also reported that its semiconductor division lost about US$464.6 million for the full fiscal year ended September." The need to reduce the risks associated with such dramatic earnings charts is understandable when following the market trends for semiconductors. By the end of 2001, Siemens had reduced its ownership of Infineon shares to 41.3 percent.

As explained to potential investors in Infineon's annual report, the semiconductor industry is cyclical, with recurring bouts of "economic downturns that involve periods of production overcapacity, oversupply, lower prices, and lower revenue." The outlining of risk factors explained that sales for semiconductor products grew more than 40 percent in 1995, decreased by 9 percent in 1996, increased by 4 percent in 1997, and increased by 8 percent in 1998. In 1999, the increase was 19 percent that leapt to 37 percent in 2000, during which time Infineon posted a revenue growth of 72 percent. Unfortunately, the semiconductor market came to "the most far-reaching collapse in the semiconductor industry" in the fiscal year 2001.

Volatile nature aside, one of the immediate advantages of becoming independent was that Infineon could gain many new customers outside of Siemens, although the parent company remained a major customer. This expansion of the customer base was Infineon's first major success as an independent company. The president and CEO of Siemens Semiconductors, Ulrich Schumacher, retained his position at the new company.

A Harrowing Ride

During Infineon's first year as a public company, it led the world market in producing chips for chip cards, with a 34 percent share, and was cited by Electronics Weekly on November 10, 1999, as "one of the most impressive performers in a strong year for its parent Siemens." In fact, Electronic Engineering Times on January 24, 2000 noted, "The chipmaker posted profits totaling US$70 million in its first fiscal year after a loss of US$800 million for the former Siemens AG unit the previous year."

Other markets that were established in 2000 included mobile communications, Internet access, electronic banking, electronic and mobile commerce, as well as innovative security and authentication systems, including biometric systems, such as fingertip sensors. Other sophisticated products were emerging with advanced encryption technologies and state-of-the-art security memory products and controllers, along with Infineon's first Bluetooth chipset. An international consortium of computer and communications companies for delivery was developing the Bluetooth open system standard over short-range wireless modems. However, this unbelievably profitable ride up the charts came to a screeching halt at the end of 2000 before beginning its lurching descent down the other side.

In a letter to shareholders on the company Web site, CEO and President, Ulrich Schumacher, stated that the market collapse for semiconductors in 2001 had to do with the significant decline in price and demand for memory products and communications markets that usually drive growth. Because of slow growth in the communications market, demand for security and chip card ICs were also down. The end result was that Infineon's total revenues dropped 22 percent to EUR 5.7 billion in the 2001 fiscal year, compared to record revenues of EUR 7.3 billion in the 2000 fiscal year. The loss per share in 2001 was EUR 0.92, in stark contrast to the profit per share in 2000 of EUR 1.83.

Schumacher explained that intensive price wars among memory products manufacturers led to "a shakeout among DRAM manufacturers," which was accompanied by increased pressure on prices for communications products in the second half of the year. The reduced demand for mobile communications alone resulted in an 18 percent drop in revenues for the Infineon's Wireless Communications. Fortunately, the security and chip card ICs had an increase in revenues of 57 percent, the automotive and industrial revenues increased 25 percent, and the wireline communications increased by 15 percent.

Infineon wisely developed a set of measures called "Impact" to streamline the business and cut costs to maintain the strength and productivity of the company during downtimes. The goal of the program was to gain cash savings, including capital expenditures, of more than 1.5 billion Euro by the end of the 2002 fiscal year. About 70 percent of the savings were not related to personnel, although the streamlined work environment made it necessary to cut 2,400 jobs by the end of 2001. A second public offering in July 2001 netted Infineon EUR 1.5 billion, and the company received more than EUR 650 million by divesting its infrared components business and selling its interest in an opto-semiconductor joint venture. Having stabilized somewhat financially, the company has expanded its role in the less volatile markets for specialty-developed memory products and high-performance chips.

Infineon's Strategic Objective

As stated in the company's annual report, Infineon planned to achieve profitable growth by targeting fast-growing areas of the semiconductor industry and build upon its position as a leading innovator in the semiconductor industry. The company planned to attain this objective by focusing its diverse technologies--in particular its strengths in mixed-signal, radio-frequency, embedded digital signal processing, embedded control, power, DRAM and embedded DRAM--on key applications in communications systems for wireless and wireline transmission of speech and data, as well as in automotive and industrial electronic systems. Its aim was to provide innovative products and services and to fully exploit and, as appropriate, expand its world-class manufacturing facilities. By doing so, the company aimed to enable its customers to be successful in their own markets. By working with industry leaders among its customers, Infineon believed it developed the knowledge and experience required to continue to be at the forefront of the semiconductor industry.

Memory Products

The DRAM (Dynamic Random Access Memory) manufacturing accounted for 30 percent to 40 percent of the company's revenue. "Besides the standard DRAMs that are used in PCs, we focus on high performance DRAMs," explained Joachim W. Binder, Infineon's senior manager of Investor Relations and Financial Communications. "These are special DRAMs for graphics applications, workstations, and networking, and focus more on performance than on cost, and have a higher clock frequency."

Infineon was the first company to use 300-millimeter (mm) wafers for DRAM production instead of the standard 200mm. This bigger wafer size is more efficient, and requires a new fabrication process to produce. Binder notes that while the larger wafers are not faster, they have 2.5 times the area, so are able to process more chips per wafer. "Since we are the first to do this for DRAM," Binder states, "we claim to be the leader here."

This shift to larger wafers required new equipment and new plants. The company has built up its 300mm fabrication plants while continuing to run its 200mm fabrication plants, but will eventually convert the 200mm DRAM fabs to logic products. New plants being built have been 300mm fabs.

Rambus Patent Suit

In the midst of Infineon's early prosperity in 2000, Rambus, Inc. filed suit against the company in Virginia and Germany, alleging that Infineon's SDRAM (Synchronous Dynamic Random Access Memory) infringed upon its patent rights. An important part of Infineon's DRAM portfolio, SDRAM is a type of DRAM IC, along with DDR DRAM. Rambus sought an injunction against Infineon's production of SDRAM and DDR DRAM. Infineon denied the claims and filed counterclaims, stating that the patents relied on by Rambus were invalid. Court proceedings began in December 2000 in Germany and early 2001 in the United States.

The district court in the U.S. proceedings dismissed Rambus' claims against Infineon in two separate decisions in April and May 2001, awarding Infineon US$3.5 million, which was later reduced to US$350,000, according to Virginia state law. After post-trial motions, the judge awarded Infineon another US$7.1 million for attorney fees and legal costs and granted an injunction to bar Rambus from asserting against Infineon's SDRAM and DDR DRAM products that comply with JEDEC (the Solid State Technology Association standards for the semiconductor industry) or any current or future U.S. patent directed to specific technologies described in the standards.

In 2002 the case was still active in German courts and unbound by the decision of the U.S. trial court. If Infineon were barred from producing SDRAM and DDR DRAM, it would be greatly affected financially, as the company would have to stop producing these products or enter into licensing agreements with Rambus. Groups that would be affected include all of the memory products. Infineon licenses RDRAM from Rambus, which was not in dispute.

Wireless Communications

Infineon Wireless Communications have designed, developed, manufactured, and marketed semiconductors and system solutions for wireless applications, including cellular telephone systems, short-range wireless systems, such as cordless telephone systems and Bluetooth radios, and devices used with global positioning systems (GPS). (Bluetooth is an open-systems standard for the delivery of data over a short-range wireless modem.) Infineon calculated that GPS would be an important market for ICs, as U.S. regulations will require that all mobile telephones users in the United States be able to pinpoint their locations via GPS.

The world market for semiconductors used in digital cellular telephone systems and pagers was about US$6.5 billion in 2000 with about a 40 percent reduction in production and sales in 2001. The worldwide market for radio frequency and baseband semiconductors for digital cordless telephone systems has grown steadily and was estimated to be about US$450 million in 2000.

Wireline Communications

Infineon Wireline Communications have designed, developed, manufactured, and marketed semiconductors and fiber-optic components for communication access, such as WANs (Wide Area Networks), MANs (Metropolitan Area Networks), and LANs (Local Area Networks). The company had a 6 percent share of the worldwide sales of wireline communications ICs in 2000. These products included ISDN (Integrated Services Digital Network) chipsets, coders/decoders (known as codecs), and subscriber line interface circuits (SLICs) used in telephony-based products.

Other important Infineon products are high-speed optical network components and modules. Infineon specializes in 10- to 40-gigabit-per-second optical networking for fiber-optic networks. Infineon also has held a leading position in the broadband access technologies market and has said it plans to develop products using advanced versions of DSL (Digital Subscriber Line) technology. The demand for ever-increasing bandwidth has focused Infineon's research and development on the convergence of voice and data networks in a single infrastructure, increased investment in network access and WAN/MAN infrastructure, and the emergence of the optical transponder that allows integrated opto-electrical conversion. (Opto-electrical components function by reacting to or creating light signals.)

Security and Chip Card ICs

Infineon has also been the market leader worldwide in the manufacturing of chip card and security integrated circuits (ICs) that go into plastic cards, as well as manufactured and marketed security controllers, security memories, and other semiconductor and system solutions used in specific security features. The company's 2001 annual report stated that it was the world's largest manufacturer of chip card ICs, with 43 percent of the market share in 1999 and 34 percent in 2000. The company's market is driven by the trend toward increased security in telecommunications, banking, health services, electronic commerce, and Internet communications.

The use of chip cards and security ICs has been more prevalent in Europe than in Asia and the United States. The bulk of the market has been comprised of security controllers, which were complete computer systems on a chip that can be used for access control, encryption, and copy protection. The rest of the market was made up of security memories that combine memory with security logic functions to provide secure data storage, access, and communication.

Infineon's security and chip card IC products encompass chip card ICs including security controllers and security memory ICs for cards and the terminals that read them, and key applications that include mobile communication, credit/debit cards, prepaid telephone cards, and health insurance cards. Infineon's MultiMediaCard is a solid-state secure storage device that combines high-capacity memories with small size. This card can provide data storage for mobile telephones, personal digital assistants, digital cameras, and music players.

Infineon makes security ICs for use in security systems, secure data communications, and electronic commerce, and developed FingerTIP IC, a biometric sensor that can register and identify fingerprints, and can replace personal identification numbers and passwords for mobile telephones and notebook computers. A recent development used in tracking parcels and baggage are the identification system ICs that use standard and security ICs, permitting convenient, contactless identification of goods through radio-frequency devices. However, the biggest revenue from the chip card and security IC business has come from thin SIM cards (Subscriber Identification Modules) that go into cellular handsets.

Automotive and Industrial

Infineon's Automotive and Industrial group has developed, manufactured, and marketed semiconductors and systems solutions for automobiles and industry. Automotive applications comprised about 55 percent of this group's sales in 2000, with the balance serving industrial applications. Infineon had 7 percent of the automotive market in 2000--not including radio--that made the company the largest supplier of automotive electronics in Europe and the second largest worldwide. In industrial applications, the company focused on power management and supply, and drives and power distribution.

The five basic product classes included in automotive and industrial are: (1) automotive sensors, (2) microcontrollers, (3) automotive power ICs, (4) power management and supply, and (5) industrial ICs. Infineon's primary automotive products include semiconductors for power train applications that perform functions, such as engine and transmission control, and safety and vehicle dynamics that manage the operation of airbags, antilock braking systems, electronic stability, and power steering systems. Other automotive applications include body and convenience systems used in light modules (door locks, power windows, mirror control), and electrical power distribution systems, and infotainment, such as those used in dashboards, navigation/telematics, and car radios.

The industrial applications for semiconductors has been fragmented in terms of suppliers and customers, and characterized by many standardized and application-specific products. These products have been applied in many industries, such as factory automation, power supply, and consumer products. The range of semiconductor products has been based on about 1,500 different chip types to about 1,100 customers for use in industrial automation and control systems. These products encompassed power modules, discrete semiconductors, and controllers.

Some of the industrial product applications include uninterruptible power supplies, such as power backbones used for Internet servers, and switched-mode power supplies for PCs. Other industrial uses are battery chargers for mobile phones, notebook computers, and other handheld devices, as well as drives for machine tools motor controls, pumps, fans and heating, ventilation, air-conditioning systems, and transportation. Infineon also supplies semiconductors for Industrial automation, meters, and sensors, and other industrial applications, such as power distribution systems and medical equipment.

Growth through Partnerships

Infineon has had major partnerships with IBM and Toshiba for memory products, and with Cisco, JDS Uniphase, and Nortel for fiber optics. The company partnered with Nokia in the development of radio frequency (RF) transceivers, and with Motorola and Hitachi in the development of automotive electronics. Sony has also been a partner with Infineon in the area of contactless security applications. Infineon has stakes of 20 percent or more in 60 to 80 subsidiaries worldwide.

With IBM, Infineon developed the first 1-megabit and 4-megabit DRAMs, and has since issued the first 512-megabit DRAMs. Infineon was the first company to bring 256- and 512-megabit DRAM to the market. Infineon also worked with Toshiba on nonvolatile memories.

Binder has said that these partnerships are beneficial. In the fall of 2001, one publication suggested that Infineon was seeking a DRAM partner and cited examples of semiconductor companies that have found acquisitions to be advantageous. Talks with Toshiba about joining Infineon in a joint venture did not come to fruition. However, Electronics Weekly on March 13, 2002 reported that Infineon "has completed talks with two Taiwanese DRAM manufacturers, Mosel Vitelic and Winbond, who signed agreements to help the company in the upcoming market recovery."

Dr. Ulrich Schumacher, president and CEO of Infineon stated, "Infineon considers these co-operations as a major step to prepare for the upcoming market recovery, and will pave the way for further augmenting of our position in the consolidating DRAM industry." Infineon will lease its DRAM technology to Winbond in 2003, thereby gaining exclusive access to standard DRAM chips that were manufactured using this technology.

"Infineon has benefited from the increased demand for memory for PCs and mobile devices, as well as the use of cellular handsets," Binder explained, "as well as the increase in bandwidth for optical networks." As the semiconductor markets become ever more diverse, Infineon plans to continue to provide innovative solutions through its products.

Principal Competitors:Philips Semiconductors; Samsung Electronics; STMicroelectronics; Motorola; Micron Technology; Applied Micro Circuits Corporation; Broadcom Corporation; PMC-Sierra; GlobeSpanVirata; Toshiba; Texas Instruments.

Chronology

  • Key Dates:
  • 1999: Infineon Technologies AG splits from Siemens AG.
  • 2000: Infineon is listed as an IPO on the Frankfurt and New York Stock Exchanges; Rambus, Inc. files suit against Infineon for patent rights infringement.
  • 2001: U.S. District Court dismisses Rambus' case against Infineon, and a secondary public offering nets EUR 1.5 billion.
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