After disclosing its ninth consecutive quarter of losses on Tuesday (July 22), Infineon Technologies AG said it is optimistic about improving sales in the second half, especially for its high-volume memory business. It also expects to return to overall profitability.

The German chip maker posted sequentially flat sales of 1.47 billion euros for its third fiscal quarter, with a loss of 116 million euros ($131 million). Revenue was up 11 percent from last year, mainly as a result of increased sales in communications. The company shaved 212 million euros from its loss column.

“Although we currently see a more positive market environment, especially for DRAM, last quarter still was very difficult,” said Ulrich Schumacher, Infineon's president and CEO.

Infineon's largest product group, memory, saw fiscal third quarter revenues of 569 million euros, down 7 percent sequentially but up 4 percent year-on-year. The company attributed the decline to an unfavorable euro-dollar exchange rate, a slightly tougher pricing environment and lower licensing fees.

Pro-forma earnings in the memory group were 2 million euros, against a 138 million euro loss in the second quarter, and Infineon credited the gain to improved production efficiency from its 300-mm wafer operation in Dresden — now churning out 6,400 wafer starts per week — and inventories that largely held steady in value.

In its other major groups, Infineon reported flat to steady gains in top-line revenue numbers. But bottom line results were mixed

The Automotive and Industrial group remains a high-margin business for the chip maker, reporting a pro-forma profit of 49 million euros, up from 29 million euros a year ago. Revenues were 351 million euros, down 1 percent sequentially but up 14 percent year-on-year.

The Wireline Communications unit was a drag on revenues, however. Revenues were 119 million euros, up 6 percent sequentially and 17 percent year-on-year. But the pro-forma loss widened to 99 million euros, from 39 million euros in the previous quarter and a loss of 49 million euros year-on-year, the company said.

In general, Infineon said it sees moderate demand growth for its wireless chips, which will be tempered by pricing pressure. In wireline markets, a draw down of capital expenditures will hold back overall growth, although there will be some bright spots, such as Asian demand for chips used in broadband applications. Seasonality will weigh on short-term prospects in automotive, the firm said.

Overall, logic chip sales and profitability will improve in the fiscal fourth quarter, Infineon said. In memory, the company believes a slowly developing corporate upgrade cycle, back-to-school sales and the release of Intel's dual-channel DDR Springdale chip set to be catalysts for improving demand.

“We have seen first signs of a positive market trend in the last quarter and thus look forward with optimism for a stronger improvement of demand both in our logic segments as well as our memory products segment in the second half of calendar year 2003,” Schumacher said. However, he also cautioned that the company wasn't ready to endorse a full-blown recovery and would continue pushing cost cuts.

By: DocMemory
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