Infineon reports results for the fiscal first quarter 2007

The main highlights of the fiscal first quarter were:

* Infineon group revenues for the quarter were Euro 2.13 billion. Revenues for Infineon excluding Qimonda were Euro 958 million.
* Infineon group EBIT was Euro 216 million. Excluding Qimonda, the EBIT loss was Euro 9 million. Net charges in the fiscal first quarter 2007 were insignificant.
* Infineon group net income was Euro 120 million, resulting in diluted earnings per share of Euro 0.15.
* For the fiscal second quarter 2007, Infineon expects revenues and EBIT for its businesses excluding Qimonda, before charges, to remain at least flat compared to the fiscal first quarter. Following the loss of business as a result of the insolvency of BenQ Mobile’s German subsidiary, Infineon is implementing restructuring measures and currently expects that related charges will be recorded in the second quarter, rather than the first quarter as originally expected. Such charges will be significantly lower than the Euro 30 million originally anticipated.

Munich, Germany, January 29, 2007 – Infineon Technologies AG (FSE/NYSE:IFX) today reported results for the fiscal first quarter 2007. Revenues were Euro 2.13 billion, down seven percent compared to the fiscal fourth quarter 2006. Revenues of Infineon excluding Qimonda decreased to Euro 958 million from Euro 1.06 billion in the prior quarter. As expected, revenues in both the Communication Solutions and the Automotive, Industrial & Multimarket segments declined.

The Infineon group EBIT increased to Euro 216 million in the fiscal first quarter 2007, up from Euro 30 million in the prior quarter. Infineon excluding Qimonda experienced an EBIT loss of Euro 9 million in the quarter. Net charges in the fiscal first quarter 2007 were insignificant. EBIT loss for Infineon excluding Qimonda was Euro 174 million in the prior quarter, including charges of Euro 164 million, mainly resulting from the IPO of Qimonda and the insolvency of BenQ Mobile’s German subsidiary. Before these charges, the fourth quarter 2006 EBIT loss excluding Qimonda would have been Euro 11 million.

Infineon group net income was Euro 120 million in the fiscal first quarter 2007, resulting in diluted earnings per share of Euro 0.15.

“In a challenging operating environment, results for the first quarter came out better than originally expected. For Infineon excluding Qimonda, EBIT remained substantially flat, before charges, despite the sales decline relative to the prior quarter. In a mixed market environment, we should return to revenue growth in Automotive, Industrial & Multimarket in the current quarter and see strong design-win momentum in Communication Solutions, in particular in the baseband business,” said Dr. Wolfgang Ziebart, CEO and President of Infineon Technologies AG. “This lets us look to the coming quarters with full confidence.”

Outlook for the fiscal second quarter 2007

In the fiscal second quarter 2007, Infineon expects revenues and EBIT for its businesses excluding Qimonda, and prior to inclusion of charges, to remain at least flat compared to the fiscal first quarter. The company expects revenues and EBIT in the Automotive, Industrial & Multimarket segment to increase compared to the prior quarter. In the Communication Solutions and Corporate and Eliminations segments, revenues and EBIT before charges are anticipated to remain broadly flat compared to the fiscal first quarter. The company currently expects that charges in connection with the restructuring of its baseband operations following the loss of business as a result of the insolvency of BenQ Mobile’s German subsidiary will be recorded in the second quarter, rather than the first quarter as originally expected, and will be significantly lower than the Euro 30 million originally anticipated. Additional details concerning the outlook can be found in the respective segments’ sections.

Segments’ fiscal first quarter 2007 performance and outlook

Automotive, Industrial & Multimarket (AIM)

In the fiscal first quarter 2007, the Automotive, Industrial & Multimarket segment performed slightly better than originally anticipated. It reported revenues of Euro 710 million, a 4 percent decrease compared to the prior quarter, and EBIT of Euro 55 million.

As anticipated, seasonal effects and weak U.S. car production led to a decline in revenue and EBIT in the automotive business. The industrial & multimarket and security & ASIC businesses in total remained flat as expected.

Automotive, Industrial & Multimarket’s outlook for the fiscal second quarter 2007

In the fiscal second quarter 2007, Infineon expects a return to growth in its Automotive, Industrial & Multimarket segment. The company foresees a slight increase in revenues quarter-on-quarter and an improved EBIT margin.

With improving seasonality, the company anticipates that revenues in its automotive business will increase compared to the fiscal first quarter, despite continued weakness in the U.S. car market. Results in its industrial & multimarket and security & ASIC businesses are expected to remain broadly on the same level as in the previous quarter.

Communication Solutions (COM)

Fiscal first quarter revenues in the Communication Solutions segment were Euro 236 million, a 21 percent decrease from the prior quarter. The EBIT loss in the fiscal first quarter was Euro 57 million.

The decrease in revenues in the segment during the first quarter was in line with expectations, reflecting the anticipated large decline of revenues from BenQ Mobile following the insolvency of its German subsidiary. In addition, the wireless business saw the typical start of the seasonally weaker period. Revenues in the broadband access business remained broadly flat relative to the prior quarter.

Communication Solutions’ outlook for the fiscal second quarter 2007

In the fiscal second quarter 2007, Infineon expects revenues and EBIT of the Communication Solutions segment to remain broadly unchanged compared to the previous quarter. Continued customer ramp-ups in the company’s mobile phone platform business are likely to offset the typical seasonal decline in the wireless business. In the broadband access business, revenues are anticipated to remain stable. Implemented measures for cost reductions in the mobile platform business are likely to contribute to EBIT improvements in the fiscal third quarter 2007.

Qimonda

Qimonda achieved revenues of Euro 1.17 billion in the fiscal first quarter 2007, a decrease of 5 percent quarter over quarter. Fiscal first quarter EBIT after minority interests was Euro 225 million compared to an EBIT of Euro 204 million in the fiscal fourth quarter 2006.

Qimonda’s outlook for the fiscal second quarter 2007

Qimonda expects its bit production to grow between 8 to 12 percent in the fiscal second quarter 2007. The company expects this bit growth to be based on improved productivity as a result of the continued conversion of capacities to 90nm technology and below. Qimonda also expects to maintain its share of bit-shipments to non-PC applications significantly above 50 percent in the next quarter.

Other Operating Segments

Effective May 1, 2006, with the completion of the Qimonda carve-out, the Other Operating Segments primarily consists of revenues that Infineon’s 200-millimeter production facility in Dresden records from the sale of wafers to Qimonda under foundry agreements.

Corporate and Eliminations

Effective May 1, 2006, the Corporate and Eliminations segment reflects intra-group eliminations of the sale of wafers to Qimonda from the Infineon 200-millimeter production facility in Dresden.

The EBIT loss in the fiscal first quarter 2007 was Euro 4 million. Net charges in the fiscal first quarter 2007 were insignificant. EBIT loss in the prior quarter was Euro 121 million, and included charges of Euro 86 million, mainly in connection with the IPO of Qimonda, restructuring measures in some of the company’s production facilities, and impairments of long-lived assets.

Other Operating Segments and Corporate and Eliminations’ outlook for the fiscal second quarter 2007

In the fiscal second quarter 2007, Infineon expects revenues and EBIT in Other Operating Segments and Corporate and Eliminations before charges to remain broadly unchanged relative to the previous quarter. The company currently expects that charges in connection with the restructuring of its baseband operations following the insolvency of BenQ Mobile’s German subsidiary will be recorded in the second quarter, rather than the first quarter as originally expected. The company is still implementing measures aimed at lowering the overall level of charges while maintaining the targeted savings, and currently expects that these charges will be significantly lower than the Euro 30 million originally anticipated. The Corporate and Eliminations segment will continue to reflect intra-group elimination of sales between Infineon and Qimonda.

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 January 29, 2007, 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 fiscal first quarter 2007. In addition, the Infineon Management Board will host a 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 conference calls will be available live and for download on the Infineon web site at http://www.infineon.com.

Additional major business highlights of Infineon’s segments in the fiscal first quarter 2007 can be found in the PDF download.

D I S C L A I M E R

This discussion includes forward-looking statements about our future business. These forward-looking statements include statements relating to future developments in the world semiconductor market, including the market for memory products, Infineon’s future growth, the benefits of research and development alliances and activities, our planned levels of future investment in the expansion and modernization of our production capacity, the introduction of new technology at our facilities, the continuing transitioning of our production processes to smaller structure sizes, cost savings related to such transitioning and other initiatives, our successful development of technology based on industry standards, our ability to offer commercially viable products based on our technology, our ability to achieve our cost savings and growth targets, and the impact of our carve-out of Qimonda, our memory products business, its initial public offering, and any further sales of Qimonda shares or other corporate financing measures in that regard. These forward-looking statements are subject to a number of uncertainties, including trends in demand and prices for semiconductors generally and for our products in particular, the success of our development efforts, both alone and with our partners, the success of our efforts to introduce new production processes at our facilities and the actions of our competitors, the availability of funds for planned expansion efforts, the outcome of antitrust investigations and litigation matters, as well as the other factors mentioned herein 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 November 30, 2006. As a result, our actual results could differ materially from those contained in the forward-looking statements. Infineon does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

Information Number INFXX200701-035

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» News Release including financial data and major business highlights of Infineon’s segments in the first quarter of the 2007 financial year (PDF): www.infineon.com/upload/Document/press_releases/INFXX_200701_035_e.pdf

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Günter Gaugler

Business & Financial Press

Infineon Technologies AG

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