Infineon reports results for second quarter and first half of the 2006 financial year

• Infineon achieved positive EBIT in the second quarter after four quarters of losses. EBIT increased significantly to Euro 28 million from an EBIT loss of Euro 122 million in the prior quarter, primarily due to a return to positive EBIT in the Memory Products segment and improved EBIT in the Automotive, Industrial and Multimarket segment.
• Second quarter revenues increased strongly to Euro 1.99 billion, up 19 percent sequentially, reflecting significantly higher sales in the Memory Products and the Automotive, Industrial and Multimarket segments.
• Net loss in the second quarter was Euro 26 million compared to a net loss of Euro 183 million in the prior quarter.
• Total revenues for the first half of the 2006 financial year were Euro 3.67 billion, up 7 percent from Euro 3.42 billion in the same period last year. EBIT in the first half of the 2006 financial year was negative Euro 94 million, a decrease from positive Euro 94 million in the same period last year.

Munich, Germany, April 26, 2006 – For the second quarter of the 2006 financial year, Infineon Technologies AG (FSE/NYSE:IFX) reported a 19 percent sequential increase in revenues to Euro 1.99 billion, driven mainly by Memory Products and also by the Automotive, Industrial and Multimarket segment. As expected, revenues in the Communication Solutions segment decreased moderately compared to the prior quarter.

EBIT in the second quarter of the 2006 financial year increased significantly compared to the prior quarter, driven primarily by improved EBIT in the Memory Products segment, which achieved positive EBIT after a loss in the first quarter. The company recorded very strong EBIT increase in the Automotive, Industrial and Multimarket segment that more than offset a small increase of the EBIT loss in the Communication Solutions segment.

“Last quarter, we improved our performance significantly. After four quarters of EBIT losses, we are now EBIT positive again,” said Dr. Wolfgang Ziebart, CEO and President of Infineon Technologies AG.

Outlook for the third quarter of the 2006 financial year

In the third quarter of the 2006 financial year, compared to the very high second quarter level especially in the Automotive, Industrial and Multimarket segment, Infineon expects revenues and EBIT in the two logic segments combined to decline. Infineon continues to expect the conclusion of the carve-out of its Memory Products segment on May 1, 2006. Effective May 1, 2006, Qimonda will start operations. Additional details concerning the outlook can be found in the respective segments' sections.

“The second quarter results demonstrate that both the Memory Products business and the logic business are well-positioned to operate successfully as separate companies in the future,” commented Dr. Wolfgang Ziebart.

Automotive, Industrial and Multimarket

In the second quarter of the 2006 financial year, revenues in the Automotive, Industrial and Multimarket segment increased significantly compared to the previous quarter, reflecting higher than expected demand and improved operating performance in all business units. This was primarily due to higher sales in power semiconductors, in products from the ASIC & Design Solutions business used in computer peripherals and due to very strong demand and improved product mix in the security and chip-card business. EBIT in the Automotive, Industrial and Multimarket segment increased significantly compared to the previous quarter, benefiting from the increased sales with a marked improvement in particular in the EBIT loss of the security and chip-card business. Overall, the segment’s EBIT as a percentage of revenues reached ten percent despite ongoing expenses for the phase-out of production at the Munich-Perlach facility and start-up costs for the new production site in Kulim, Malaysia.

Automotive, Industrial and Multimarket’s outlook for the third quarter of the 2006 financial year

With the last quarter being ahead of expectations and normal seasonality, Infineon anticipates revenues in the Automotive, Industrial and Multimarket segment to normalize in the third quarter of the 2006 financial year and stay within the range of the second quarter. The company expects revenues in its automotive and industrial businesses to reach the second quarter’s high levels. Sales in the security and chip-card business are anticipated to decline slightly to more normal levels compared to the second quarter. In line with more or less flat revenues, the company anticipates the segment’s EBIT to stay within the range of the prior quarter. The EBIT guidance is before taking into account the effect from corporate overhead expenses that will remain with the company’s two logic segments following the legal separation of its Memory Products segment. The exact amounts cannot be quantified at this stage.

Communication Solutions

In the Communication Solutions segment, revenues decreased compared to the previous quarter, primarily due to a decline in demand for baseband components, which was not fully offset by significantly higher revenues in the company’s broadband access business. The EBIT loss increased sequentially due to the sales decline. In its broadband access business, the company reported another increase in operating results in the second quarter.

Communication Solutions’ outlook for the third quarter of the 2006 financial year

In the third quarter of the 2006 financial year, Infineon expects revenues of its Communication Solutions segment to decline compared to the second quarter. On the one hand, the company will no longer benefit from revenues of Fiber Optics products after the Fiber Optics divestiture. On the other hand, the company also expects a return to more normalized revenue levels in broadband access. With operating results driven predominantly by revenue development, the company anticipates the segment’s EBIT loss to increase in the third quarter. The EBIT guidance is before taking into account the effect from corporate overhead expenses that will remain with the company’s two logic segments following the legal separation of its Memory Products segment. The exact amounts cannot be quantified at this stage.

Memory Products

In the second quarter of the 2006 financial year, revenues in the Memory Products segment improved significantly sequentially due to strong growth in bit-shipments and a slight increase in average selling prices. The latter was driven mainly by higher pricing and shipments of DDR2 memories and a higher share of specialty products within the bit-shipments compared to the previous quarter. In the second quarter, Infineon achieved an EBIT turn around from negative Euro 118 million to positive Euro 30 million, resulting from a strong reduction in cost-per-bit as a result of significantly higher bit-shipments and slightly higher average selling prices.

Memory Products’ outlook for the third quarter of the 2006 financial year

In the third quarter of the 2006 financial year, Infineon expects to grow its bit production by approximately 10 percent. The third quarter EBIT will be influenced by benefits from corporate overhead expenses that will remain with the company’s two logic segments following the legal separation of its Memory Products segment, offset in part by the establishment of the Qimonda proprietary corporate infrastructure. The exact amounts cannot be quantified at this stage. The third quarter will also include the dilution gain of approximately Euro 30 million from the Inotera Initial Public Offering in March 2006 as part of non operating income within the segment’s EBIT.

Other Operating Segments

Revenues of the Other Operating Segments increased sequentially in the second quarter of the 2006 financial year, primarily as a result of the first consolidation of ALTIS, the company's joint venture with IBM, at the end of the prior quarter. EBIT remained relatively unchanged when compared to the first quarter.

Corporate and Reconciliation

Sequential EBIT loss of the Corporate and Reconciliation segment increased in the second quarter of the 2006 financial year, primarily due to costs incurred in connection with the carve-out of the company's Memory Products segment and the move to Infineon's new headquarters, Campeon.

In the third quarter of the 2006 financial year, the company expects the EBIT loss of the Corporate and Reconciliation segment to increase compared to the second quarter, due to costs incurred in connection with the carve-out of the company's Memory Products segment.

On March 17, 2006 Inotera Memories, Inc., the company's joint venture with Nanya Technology Corporation, successfully completed an Initial Public Offering on the Taiwanese stock exchange for an issuance price of NT dollar 33 per share. In conjunction with this Initial Public Offering, the company recorded a dilution gain of approximately Euro 30 million, which will be reflected in the non operating income within the Memory Products segment’s EBIT in the third quarter of the 2006 financial year. Infineon's ownership interest after the Initial Public Offering stands at 41.4 percent.

In addition to the dilution gain, the company expects charges in the third quarter, mainly reflecting restructuring of the joint venture ALTIS as already announced by them as well as other items. Overall, the company does not expect a major impact on group results out of the above mentioned events.

For major business highlights of Infineon’s segments in the second quarter of the 2006 financial year, go to http://www.infineon.com/news/.

Analyst and press telephone conferences

Infineon Technologies AG will host a telephone conference (in English only) with analysts and investors on April 26, 2006, 10:00 a.m. Central European Summer Time (CEST), 4:00 a.m. Eastern Daylight Time (U.S. EDT), to discuss operating performance during the second quarter of the 2006 financial year. In addition, the Infineon Management Board will conduct a telephone conference with the media at 11:30 a.m. (CEST), 5:30 a.m. (U.S. EDT). 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.

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 of the world semiconductor market, especially 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 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 planned carve-out of the Memory Product business and any further corporate reorganization 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. As a result, our actual results could differ materially from those contained in the forward-looking statements.

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