Infineon lays off 3,000, reorganizes divisions

Infineon is laying off 3,000 employees and reorganizing divisions in an effort to cut costs and return to profitability.
  • Agam Shah (IDG News Service)
  • 28 July, 2008 08:46

German semiconductor company Infineon on Friday said it would lay off 3,000 employees as part of a cost-reduction program to bring the company back to profitability.

The company blamed the layoffs on "adverse foreign exchange rate development and the requirements of the reorganization of the company," saying that headcount reduction was "inevitable."

As part of the cost-reduction program, called IFX 10, Infineon is also looking to cut manufacturing costs and reorganize divisions.

"Within five quarters, we expect to realize at least 200 million euro in annualized savings that should pave the way for continued profitability," said Peter Bauer, Infineon's CEO, in a statement.

Infineon will remove unprofitable product families and reorganize its business into five divisions: automotive, chipcard and security, industrial and multimarket, wireline communications, and wireless solutions, the company said.

The reorganization was originally announced in late May. Infineon's CEO at the time, Wolfgang Ziebart, resigned from his post, citing differences of opinion on the "future strategic orientation" of the company.

The layoffs came during the earnings announcement by Infineon for the third quarter of 2008. The company reported a quarterly revenue of a‚¬1.03 billion, up two percent year-over-year. It reported a net loss of 592 million euro for the third quarter. The loss included 411 million euro in charges related to Qimonda AG, a memory company that was spun off from Infineon in 2006.

Qimonda this week reported a net loss of 401 million euro in the quarter ending June 30, blaming it partly on a decline in average selling prices of chips. Memory makers have been feeling the pinch since late last year, posting losses amid competitive pricing and an oversupply of chips.