IFX 1st Quarter Results
MUNICH, Germany--(BUSINESS WIRE)--Jan. 20, 2003--Infineon
Technologies AG (FSE/NYSE:IFX)
-- First quarter revenues were Euro 1.52 billion - up 10 percent
sequentially and up 47 percent year-on-year
-- Revenue increase was mainly driven by increased demand for
memory products and chips used in mobile communications
-- Another record sales quarter of the automotive & industrial
segment
-- First quarter EBIT was a loss of Euro 31 million, a strong
improvement from a loss of Euro 292 million sequentially and
from a loss of Euro 564 million year-on-year
-- Memory Products group achieved profitability through improved
sales, significant cost reductions and productivity increases
-- Best industry cost position in the DRAM market
-- Continued solid cash position
Infineon Technologies AG (FSE/NYSE:IFX), one of the world's
leading semiconductor manufacturers, today announced results for its
first quarter in fiscal year 2003, ended December 31, 2002. The
company had revenues of Euro 1.52 billion, an increase of 10 percent
sequentially and 47 percent year-on-year. 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. The revenue increase also reflects
the first time consolidation of a full quarter of revenues of Ericsson
Microelectronics, which Infineon acquired in September 2002.
Dr. Ulrich Schumacher, President and CEO of Infineon Technologies
AG commented: "Our focus on technology and cost leadership resulted in
further market share gains. We improved our revenue performance
sequentially and year-on-year and achieved profitability in our memory
products group by improved pricing, product mix and by significantly
reducing the fully loaded costs of our memory chips."
Quarterly EBIT (earnings before interest and taxes) was a loss of
Euro 31 million, a strong improvement from a loss of Euro 292 million
in the previous quarter, which included exceptional effects of 119
million Euro, and from a loss of Euro 564 million in the first quarter
of the last fiscal year. 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.
Net loss amounted to Euro 40 million compared to a net loss of
Euro 506 million in the previous quarter, which included a non-cash
charge of Euro 275 million to establish a deferred tax valuation
allowance. The first quarter tax expense continues to reflect a
valuation allowance for tax losses incurred in certain tax
jurisdictions according to US GAAP. Basic and diluted loss per share
for the first quarter of fiscal year 2003 was Euro 0.06, improving
from a loss per share of Euro 0.72 in the previous quarter and Euro
0.48 year-on-year.
Expenditures for Research and Development in the first quarter
totaled Euro 265 million, or 17 percent of sales, down from Euro 292
million sequentially. The reduction is principally due to in-process
research and development charges in the previous quarter of Euro 37
million. "With our continued investment in R&D and advanced
manufacturing processes we have significantly improved our
productivity and reduced production costs, particularly for memory
products," said Dr. Schumacher.
SG&A expenses totaled Euro 172 million or 11 percent of total
revenues, compared to Euro 163 million or 12 percent of total revenues
in the previous quarter.
Infineon's gross cash position, representing cash and cash
equivalents, marketable securities, and restricted cash, amounted to
Euro 1.6 billion, down sequentially from Euro 2 billion. The decrease
in gross cash was mainly due to investments for 300mm volume
production and for the introduction of the next shrink to 0.11 micron
technology, the build-up of inventories, principally in memory
products, and a volume related increase in accounts receivable.
Revenues outside Europe constituted 54 percent of total revenues,
up from 53 percent in the previous quarter, reflecting Infineon's
increased market penetration in Asia and Japan. As of December 31,
2002, Infineon had approximately 30,900 employees worldwide, including
about 5,400 engaged in research and development.
Business Group Performance
Effective November 1, 2002, Infineon merged its Wireless Solutions
and Security and Chip Card ICs groups into a single group called
Secure Mobile Solutions. Infineon believes that combining the
operations of the two groups will enable it to better address the
continuing convergence of the markets for security and mobile
applications, for example in future generations of mobile phones. The
merger also reflects the company's increased focus on providing
integrated solutions under its recently announced "Agenda 5-to-1"
corporate strategy. The integration of these two business groups is
reflected in the following discussions and in the attached financial
results tables, which have been reclassified for all earlier periods
to reflect the new reporting structure.
The Automotive & Industrial group's first quarter revenues reached
another all-time high of Euro 334 million, an increase of 4 percent
sequentially and of 22 percent year-on-year. The increase resulted
principally from stronger volume sales in power management & supply
products as well as automotive power applications. EBIT improved
sequentially to Euro 44 million compared to Euro 38 million in the
previous quarter and to Euro 20 million year-on-year. The EBIT
improvement was mainly due to continued cost reductions and
productivity increases and was achieved in the face of significant
pricing pressure in the automotive electronics market.
Infineon further penetrated the market for next generation engine
management with improved sales of its 32bit TriCore microcontroller
technology and also gained further market share for power management &
supply applications, particularly in Asia. A successful restructuring
of the sensors business has already improved that segment's sales,
especially sales of magnetic and pressure sensors.
Wireline Communications revenues improved slightly to Euro 106
million in the fourth quarter, up 1 percent from the previous quarter,
and up 28 percent year-on-year. The sequential revenue increase was
due principally to improved sales of Ethernet over VDSL access
technology in the Asian markets. EBIT improved to a loss of Euro 42
million from a loss of Euro 45 million in the previous quarter, and
improved significantly from a loss of Euro 85 million year-on-year.
The year-on-year improvement was principally driven by significantly
improved sales volumes and cost savings.
Infineon further strengthened its position in the Asian markets as
the leading vendor of next generation high-speed VDSL broadband access
technology despite a continuing difficult market environment. Further
reductions by global carriers in infrastructure investments negatively
affected the market for wireline communication products, in particular
hampering a recovery in demand for fiber optics and optical networking
products. Infineon is the first vendor to introduce 10G XPAK
transceivers for the fiber optics market, and expects the first sales
of these products in the third quarter of this fiscal year.
Secure Mobile Solutions' first quarter revenues were Euro 412
million, up 11 percent from the previous quarter and up 44 percent
compared to the first quarter of last year. The revenues increase was
mainly driven by the stronger Christmas business for mobile phones. It
also included the full quarter revenues from Ericsson
Microelectronics, acquired in September 2002. EBIT amounted to a loss
of Euro 28 million, compared to a loss of Euro 22 million in the
previous quarter but improved from a loss of Euro 60 million
year-on-year. The quarterly loss was mainly due to lower sales volumes
and strong pricing pressure for chip card ICs, as well as integration
costs and operating losses totaling Euro 34 million for the acquired
Ericsson Microelectronics business. EBIT also included
acquisition-related charges of Euro 5 million, compared to Euro 39
million in the prior quarter.
Infineon strengthened its position in the market for next
generation mobile solutions with the introduction of a complete EDGE
platform integrating the multimedia-capable baseband IC S-GOLD, the
RF-chip SMARTi DC+ and a power management chip. The company announced
a comprehensive alliance with Agere Systems for the development of
fast wireless network solutions solutions (WLAN, IEEE 802.11a/b/g)
including the cross licensing of intellectual property and a mutual
supply agreement.
Infineon also received the Sesames Award, which honors the best
technological innovation at the Cartes 2002 exhibition for one of its
own microcontrollers for contactless chip card applications and
another one that was jointly developed with Sony. The company
strengthened its position as a supplier for the "Trusted Platform
Module Alliance" with the design-in at an additional leading OEM.
The Memory Products group's first quarter revenues were Euro 542
million, a strong increase of 24 percent sequentially and of 89
percent over revenues for the first quarter of the last fiscal year,
mainly driven by improved demand. Sales also benefited from the access
to recently established capacity co-operations, such as Winbond. EBIT
improved significantly both sequentially and on a year-on-year basis
to Euro 29 million, up from a loss of Euro 204 million in the previous
quarter and up from a loss of Euro 375 million in the first quarter of
the last fiscal year. The strong earnings improvement and return to
profitability was primarily due to increased sales volumes,
significantly improved manufacturing costs, and a better product mix.
Infineon further strengthened its world leadership for 300mm
production by achieving the cost cross-over with regard to 200mm
production (i.e., volume production on 300mm wafers became more cost
efficient than on 200mm wafers) in its 300mm facility in Dresden.
Volume production on 300mm has now reached more than 5,000 wafer
starts per week and the company is well advanced in its conversion to
0.14-micron technology. Infineon has expanded its manufacturing
partnership-network by entering into an agreement with Semiconductor
Manufacturing International Corporation (SMIC) in China. Under the
terms of the agreement, Infineon will provide its 0.14-micron DRAM
trench technology to SMIC and SMIC will manufacture DRAM products
exclusively for Infineon using this technology. Following the ramp-up
of the SMIC facility, the cooperation will enable Infineon to increase
its overall capacity by around 20,000 wafer starts per month by 2005.
Infineon has also qualified its 512Mbit DDR components in 0.14-micron
at all leading customers.
Infineon has decided to withdraw from the ProMOS joint venture in
Hsinchu, Taiwan, due to repeated material breaches of contract by
Mosel Vitelic. As of January 1, 2003, Infineon has discontinued its
purchase of products from ProMOS. This withdrawal is not expected to
affect Infineon's leading DRAM market position due to its other
existing cooperations with Taiwanese partners and cost and
productivity improvements.
In the Other operating segment, first quarter revenues were Euro
119 million, down 13 percent sequentially and up 27 percent
year-on-year. EBIT improved to Euro 6 million compared to a loss of
Euro 5 million in the previous quarter and a positive EBIT of Euro 15
million in the first quarter of fiscal year 2002.
In Corporate and Reconciliation, EBIT improved to a loss of Euro
40 million, from a loss of Euro 54 million in the prior quarter and
from Euro 79 million a year ago, principally due to reduced idle
capacity costs resulting from improved utilization.
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 following a deterioration of approximately 37 percent in
2002, according to industry analysts. Restricted enterprise and
carrier spending for network equipment is expected to continue to
affect Infineon's fiber optics and optical networking businesses.
However, as the DSL rollout gains momentum, the company expects to
benefit from stronger demand for broadband access (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 expects the strongest growth
to be in power semiconductors and in power management and supply
products.
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.
"We are among the first who returned to profitability in the
memory market. Our continued investment in technology for 300mm
production is beginning to pay off. We are confident that our
successful shrink roadmap combined with the expansion of our strategic
manufacturing cooperations will enable us to gain further market share
and establish Infineon as a top three player in the global DRAM market
in the foreseeable future," said Dr. Schumacher.
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