Annual Report 2023

Infineon Technologies AG

www.infineon.com

2 Infineon key data
3 Infineon at a glance
4 Management Board and Supervisory Board
4 Letter to shareholders
10 The Management Board
12 Report of the Supervisory Board to the Annual General Meeting

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Infineon key data1

Fiscal year from 1 October to		2023	2022
30 September	€ in millions	in % of revenue	€ in millions	in % of revenue	Change in %
Revenue by segment	16,309		14,218		15
Automotive	8,242	51	6,516	45	26
Green Industrial Power	2,205	13	1,790	13	23
Power & Sensor Systems	3,798	23	4,070	29	(7)
Connected Secure Systems	2,046	13	1,822	13	12
Other Operating Segments	18	0	20	0	(10)
Corporate and Eliminations	–	–	–	–	–
Selected results of operations key data
Gross profit/Gross margin	7,413	45.5	6,131	43.1	21
Research and development expenses	(1,985)	12.2	(1,798)	12.6	(10)
Selling, general and administrative expenses	(1,599)	9.8	(1,565)	11.0	(2)
Operating profit	3,948		2,845		39
Profit (loss) for the period	3,137		2,179		44
Segment Result/ Segment Result Margin	4,399	27.0	3,378	23.8	30
Basic earnings per share in €	2.38		1.65		44
Diluted earnings per share in €	2.38		1.65		44
Adjusted earnings per share in € – diluted 2	2.65		1.97		35
Dividend per share in € 3	0.35		0.32		9

Fiscal year from 1 October to	2023	2022
30 September	€ in millions	€ in millions	Change in %
Selected liquidity key data
Cash flows from operating activities from continuing operations	3,962	3,986	(1)
Cash flows from investing activities	(2,264)	(2,441)	7
Cash flows from financing activities	(1,301)	(1,869)	30
Free Cash Flow 4	1,158	1,648	(30)
Adjusted Free Cash Flow 5	1,638
Adjusted Free Cash Flow as percentage of revenue	10.0%
Depreciation and amortization	1,754	1,664	5
Investments 4	2,994	2,310	30
€ in millions (unless otherwise stated)	As of 30 Sep tember 2023	As of 30 Sep tember 2022	Change in %
Gross cash position 4	3,590	3,717	(3)
Net cash position 4	(1,143)	(1,945)	41
Selected financial condition key data
Total assets	28,439	26,912	6
Total equity	17,044	14,944	14
Equity ratio 6	59.9%	55.5%	440 bp
Return on Capital Employed (RoCE) 4	16.6%	12.6%	400 bp
Market capitalization 7	40,879	29,574	38
Infineon employees (in total figures)	58,590	56,194	4

1 Percentage changes of more than +/– 99.5% are shown as "+++" or "–––" in the tables in the Annual Report.

2 See the chapter "Review of results of operations" for definition. p. 52

3 A dividend per share of €0.35 for the 2023 fiscal year will be proposed to the Annual General Meeting on 23 February 2024.

4 See the chapter "Internal management system" for definition p. 37 ff.

5 See the chapter "Review of liquidity" for definition. p. 55 f.

6 Equity ratio = Total equity/Total assets.

7 The calculation is based on unrounded figures. Own shares were not taken into consideration for the calculation of market capitalization.

Dividend of 35 cents per share planned Revenue €16.309 bn + 15% Segment Result and Margin €4.399 bn 27.0% 58,590 employees

Infineon at a glance

Infineon Technologies AG is a world leader in semiconductor solutions that make life easier, safer and greener. Microelectronics from Infineon is the key to a better future. In the 2023 fiscal year (ending 30 September), the Company reported revenue of approximately €16.3 billion with some 58,600 employees worldwide. Infineon is listed on the Frankfurt Stock Exchange (ticker symbol: IFX) and in the USA on the over-the-counter market OTCQX International Premier (ticker symbol: IFNNY).

Letter to shareholders

Neubiberg, November 2023

Infineon can look back on a remarkable 2023 fiscal year. On the one hand, electromobility and renewable energy and the applications associated with them have ensured a continuing high level of demand. On the other hand, demand for consumer applications, such as PCs and smartphones, has fallen in the wake of the Covid pandemic. In this challenging market environment, your company has set new records for both revenue and profitability. Our revenue rose to €16.3 billion, and we achieved a Segment Result Margin of 27.0 percent.

Both figures exceeded our original annual forecast and are an initial confirmation on the more ambitious course we have adopted as a company. A year ago, we raised our long-term financial targets through the semiconductor cycle. Now we have proven that we are also delivering at this higher level of expectation.

In our target markets, we are expecting strong growth drivers to continue and we are anticipating big opportunities for Infineon. We want to grow and be sustainably profitable, advance at a rapid rate, and make full use of strategic investments to lay the important groundwork for Infineon's future.

I would like to express my gratitude to all the 58,600 people working for Infineon for their exceptional commitment in the past fiscal year. I would also like to thank you, our shareholders, for your continuing confidence in our company. At our forthcoming Annual General Meeting, we will propose an increase in the dividend payment to €0.35 per share. Thus, we would like to ensure that you participate appropriately in Infineon's success while at the same time retaining the financial headroom we need for the future development of your company.

Jochen Hanebeck Chief Executive Officer Following the last Annual General Meeting, the Supervisory Board elected a new Chairman. On behalf of the Management Board, I would like to express my sincere thanks to the long-standing Chairman, Dr. Wolfgang Eder, for the good working relation we have enjoyed over the past few years. Particular highlights include reorganizing the Management Board team, setting higher financial targets and preparing for the expansion of our manufacturing facilities on our site in Dresden (Germany). Dr. Wolfgang Eder was always a trusted guide and support to the Management Board.

With Dr. Herbert Diess, his successor as Chairman of the Supervisory Board, Infineon has gained a proven expert in the major topics affecting the future of our business. Our working relation with Dr. Herbert Diess is also respectful, constructive and built on trust, which is very important to Infineon maintaining its successful course.

Having successfully established the Management Board position for Digital Transformation, our colleague Constanze Hufenbecher decided not to renew her expiring contract and has handed over the baton to Elke Reichart on 1 November 2023. Constanze Hufenbecher contributed significantly to the good progress made by Infineon in the areas of digitalization and sustainability. She has laid important foundations with the Digital Agenda and the Sustainability Strategy. Moreover, she established a culture of cross-departmental collaboration at Infineon. I would like to express my sincere personal gratitude for her achievements.

Digitalization is a crucial lever for our company. I am very much looking forward to working together with Elke Reichart. She will bring new perspectives and impetus to the Management Board team and use her extensive experience to help lead Infineon into an even more successful future.

We are driving decarbonization and digitalization with our partners

Efforts to tackle the climate crisis are being intensified worldwide. At the same time, we are seeing rapid development in the area of digitalization. Semiconductors are essential in order to overcome the energy challenges of our time and help shape the digital transformation. They are the building blocks of technological progress and the engine of sustainable global development. At Infineon, we are actively doing everything possible to drive forward decarbonization and digitalization. We are a global leader in power systems and IoT. Together with our partners, we enable gamechanging solutions in three growth areas: green and efficient energy, clean and safe mobility, and a smart and secure IoT.

Five core applications are particularly strong drivers for our business: electromobility, renewable energy, automated driving, data centers – propelled by the ever-increasing use of artificial intelligence – and IoT. These applications will account for around 60 percent of our expected revenue growth over the coming years. So that Infineon can make the most of these major growth opportunities, we are setting the course and laying the groundwork early on.

Investments in manufacturing capacities and security of supply will set Infineon up for long-term growth

Our manufacturing strategy is based on clear principles. We focus on expanding our in-house manufacturing in those areas in which added value for our customers and differentiation for Infineon is created. This is the case, for example, for power semiconductors and sensors. However, in the case of highly integrated digital products such as microcontrollers and connectivity and security components, we prefer to work together with contract manufacturers, as the design and software are the main sources of differentiation in those areas. We also pursue this strategy when making our investment decisions.

The groundbreaking ceremony for our "Smart Power Fab" at the Dresden site took place at the beginning of May 2023. This factory will link our two major growth areas, decarbonization and digitalization. We are strengthening our manufacturing base for both analog mixed-signal technologies and power semiconductors. Analog mixedsignal components are used in power supply systems (such as those in energy-efficient chargers), in small motor control units for cars, in data centers and in IoT applications. The interaction between power semiconductors and analog mixed-signal components makes particularly energy-efficient and intelligent system solutions possible. We therefore want to use our in-house manufacturing to create some of these products in the future, from both a differentiation and a resilience perspective.

The great importance of the project for Infineon, the region, Germany and Europe has become clear, not least due to visits to the Dresden site by high-ranking politicians – especially the President of the European Commission and the German Federal Chancellor – and the resulting high level of media interest. Support provided by the German Federal Government as funding body and the European Chips Act is giving our project a tailwind. The additional capacity provided by the fab will enable us to meet increasing demand from our customers in the second half of the decade and will reinforce our position as a world-leading supplier of power systems.

Silicon chips of the type we make in Dresden will be the technically appropriate and economically viable solution in many applications in the long term. Compound semiconductors based on silicon carbide (SiC) and gallium nitride (GaN) expand the options presented by silicon-based solutions. They enable particularly efficient, fast-switching and compact system solutions that consume less power. We see rising demand for these, especially for use in electric cars, charging stations and solar systems.

We want to lead the way across the whole range of power semiconductors – for silicon chips as well as for technologies based on SiC and GaN. We are therefore constantly expanding our portfolio for different application areas. We are also increasing our manufacturing capacity for both types of technology, while adopting an entrepreneurial and long-term approach.

In August 2023, we therefore announced that we would be significantly increasing the scope of the ongoing expansion of our manufacturing facilities on our Kulim site (Malaysia). In a second expansion phase, we want to build the world's largest and most competitive SiC power semiconductor factory based on 200-millimeter manufacturing technology there. Together with the planned conversion to 200-millimeter production of our existing SiC manufacturing lines at the sites in Villach (Austria) and Kulim, this investment offers Infineon annual revenue potential of around €7 billion by the end of the decade.

Our investment decision is backed by numerous long-term agreements with highprofile customers in the automotive sector and in the field of renewable energy. Additional design wins worth €5 billion and associated advance payments of around €1 billion are evidence of the great confidence our customers place in Infineon as a reliable partner and driver of innovation.

In the global competition for the leading position in SiC technologies, certain strengths differentiate Infineon from its competitors. First of all, the trench architecture we use in chip manufacture has advantages in terms of performance and productivity. Second, we offer all markets the most comprehensive product and packaging portfolio. Third, we score with our excellent systems understanding and first-class access to customers.

However, we see few opportunities for differentiation in manufacturing the SiC base material used in chip production, so this we buy in. We ensure access to this material through a broad and regionally diversified supplier network. Infineon's own laserbased cold split technology enables particularly efficient use of the base material.

Your company has all the key factors at its disposal for sustainable success with SiC solutions. We are therefore very well placed to benefit from similar economies of scale with SiC as has previously been the case with silicon – both in manufacturing and in research and development. We are very confident that we will be able to achieve a market share in SiC of 30 percent by the end of the decade.

So that we are equipped to handle the expected increase in demand for semiconductors from our customers and are able to deliver in the long term, we are not only boosting our in-house manufacturing but also increasing the supply of semiconductors we purchase from contract manufacturers. Especially against the backdrop of geopolitical uncertainty, we want to make our supply chain even more resilient in the future.

Together with Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest silicon contract manufacturer based in Taiwan, and the companies Bosch and NXP Semiconductors, we want to invest in a joint company. As we and our partners announced in August, the European Semiconductor Manufacturing Company (ESMC) in Dresden is to build an ultra-modern fab for semiconductors with small feature sizes of 12 to 28 nanometers. TSMC is to operate the fab for the entity. The project is planned under the framework of the European Chips Act.

The planned fab is an ideal complement to our own manufacturing landscape. Whereas the projects in Dresden and Kulim mentioned above are designed to expand capacity for power semiconductors and analog mixed-signal technologies, our participation in ESMC secures us access to capacity for our automotive microcontrollers and IoT semiconductors, further improving our ability to meet growing demand.

This investment will bring the first FinFET fab to Europe. FinFET is a transistor technology used in state-of-the-art digital chips. Even more transistors can be housed on the smallest three-dimensional structures. As a result, the semiconductors are even more powerful and energy-efficient. FinFET technology is becoming increasingly important for our high-performance microcontrollers. With this fab, we are ensuring Infineon will have direct access to this technology in Europe, and we are strengthening the European semiconductor ecosystem in the long term.

We are continuing to enhance our competence in power systems and IoT with targeted acquisitions

In addition to SiC, GaN is developing into a key material for power semiconductors. It has advantages especially at higher switching frequencies. In particular, for applications such as mobile charging, power supplies for data centers, solar inverters for private households, and onboard chargers for electric vehicles, GaN is on the brink of a breakthrough and promises very strong market growth. We therefore want to continue to enhance our technical skills in the field of GaN.

In October 2023, we completed the acquisition of the company GaN Systems. The company, which is headquartered in Ottawa (Canada), brings with it a broad portfolio of GaN-based solutions for power conversion as well as first-class application know-how. We are delighted that the team from GaN Systems, comprising more than 200 employees, is now part of Infineon.

The strengths of both companies in terms of intellectual property and application understanding ideally complement each other. Together, we now have over 450 GaN experts, as well as more than 350 GaN patent families and a large number of highly promising customer projects in the pipeline. This puts our company in an outstanding position, opening up huge opportunities in various high-growth markets. This will significantly accelerate our development roadmap for GaN solutions and further strengthen our leading position in power systems.

Another exciting key topic for Infineon is artificial intelligence (AI). Machine learning is being used in more and more IoT applications and enables new functionalities.

In May 2023, we acquired the company Imagimob. The startup, based in Stockholm (Sweden), is a leading platform provider for machine learning solutions for energyefficient edge devices. Imagimob's platform enables a variety of applications, such as audio event detection, voice control, gesture recognition, predictive maintenance, signal classification and material detection.

With this acquisition, we are strengthening our position as a provider of machine learning solutions, complementing our range of embedded AI solutions. This will enable us to transfer the capabilities of machine learning, which have until now been used mainly in large server farms, to our microcontrollers.

Artificial intelligence also offers Infineon huge growth potential in the area of power systems. More and more data are being recorded, processed, stored and linked. To make the data usable for different applications, the major cloud computing providers are increasingly employing generative AI. As the example of ChatGPT shows, large language models (LLMs) have the potential to take digitalization to a completely new level.

In the coming years, AI will be used in more and more application areas. The volume of data to be processed and the computing power required as a result will mean a significant increase in the quantity and value of the semiconductors needed in the data center servers. Energy-efficient power stages help reduce power losses and cooling efforts This allows operators to significantly reduce their costs – and avoid CO2. Demand is growing strongly. We offer highly energy-efficient power solutions for the entire supply chain, from the grid to the central processor (GPU), making a broader use of AI possible. Green computing is an ideal application area for Infineon. This is a good example of how decarbonization and digitalization are closely linked with one another.

Networks, data centers, servers and the IT infrastructure form the backbone of digitalization. Another crucial element of the IoT is wireless connectivity between end devices. In October 2023, we acquired the company 3db Access, a move designed to enhance our skills in this area as well. The startup based in Zurich (Switzerland) is a pioneer in energy-efficient ultra-wideband (UWB) technology. UWB technology can be used to precisely determine positions and distances while being robustly protected

against signal interference. This makes it extremely attractive for many IoT applications. These include secure access to vehicles and buildings, indoor navigation and presence detection of people in rooms. UWB complements our connectivity technologies (Wi-Fi, Bluetooth®/ Bluetooth® Low Energy and NFC) and offers Infineon additional opportunities in an interesting growth market.

Besides the targeted enhancement of our technological skills through acquisitions, we are rapidly advancing with the company's research and development activities. The focus here is the benefit provided to customers. Our aim is to roll out differentiating solutions at an even faster rate. It is therefore crucial that we recognize product and customer requirements at an early stage and that we understand our customers' systems. Our "from product thinking to system understanding" approach, which we have applied for many years, has proved its worth. Given the growing number of applications served by Infineon, this approach is now more important than ever.

Particularly in application areas that are new to Infineon, we work closely together with key customers on development. Our teams develop new solutions in tandem with customers in an iterative process. By exchanging ideas directly, they learn to understand customer and market requirements even better and more quickly and can therefore offer tailor-made system solutions within a short period of time.

We are making Infineon CO2-neutral by 2030

At Infineon, as a leading manufacturer of semiconductors, our objective is not only to be a technological leader but also a pioneer in sustainability. Infineon will become CO2-neutral by the end of the 2030 fiscal year. Our target includes all direct emissions (scope 1) as well as indirect emissions from purchased electricity and heat (scope 2). By the end of the 2025 fiscal year, we want to have reduced our emissions by 70 percent compared with 2019. To achieve these targets, we are working in particular on avoiding direct emissions.

Here we are making good progress. At the end of the 2023 fiscal year, our scope 1 and scope 2 emissions were around 56.8 percent below the emissions of the base year 2019. The installation of new PFC abatement systems in our frontend manufacturing in Kulim (Malaysia) has already enabled us to reduce our scope 1 emissions by 21 percent. In the past fiscal year, we also launched a similar project at our site in Austin (Texas, USA). This means that we will have equipped all our prime manufacturing facilities with highly efficient PFC abatement systems. The new manufacturing facilities referred to above will of course be equipped with such systems right from the start, so that they are in line with our CO2 neutrality goal.

In addition to avoiding direct emissions, other key levers for reducing CO2 are energy conservation and the use of green electricity. In the 2023 fiscal year, we were able to use green electricity to meet over three quarters of our electricity requirements.

We are continuing to develop our corporate culture

Infineon is seeing strong growth. Over the past few years, our business has become bigger and, at the same time, more complex. We therefore make adjustments in the company, adapt our processes and, last but not least, continue to develop our corporate culture. Crucial to our success is not only what we do but how we do it.

When I assumed my role as CEO, we launched the SPIRIT project. This is designed to deliberately promote three behaviors in the company. We set ourselves ambitious targets at all levels. We are accountable for our results and clarify our responsibilities. We make timely decisions that are implemented consistently.

Whether you are setting ambitious targets or clarifying responsibilities, you need to begin at the corporate level. We therefore made a decision in the summer that, in the future, we would combine accountability with functional management roles across the Group. This will make us significantly faster, because it will reduce the complexity in our organization and create strong global functions – with local teams, where this is expedient. Furthermore, we promote a sense of responsibility and purposefulness as elements of our corporate culture. All this makes us even more attractive as an employer.

A challenging market environment in the 2024 fiscal year

At the beginning of the 2024 fiscal year, we are operating in an environment that continues to present challenges. The mobility of the future and renewable energies are currently the strongest growth drivers for our business. In all other areas, we see a temporarily difficult, cyclical market environment.

Overall, we are expecting revenue growth to continue in the 2024 fiscal year but at a lower rate. We are assuming an increase in revenue of 4 percent. Hence, after the two boom years of 2022 and 2023, we anticipate growth will be below the target we have set ourselves of average revenue growth of "more than 10 percent per year" over the semiconductor cycle. However, the sequence of different growth phases is nothing unusual in the semiconductor market and as a company we know how to deal with this situation.

With regard to structural growth opportunities, we are continuing to implement our strategy consistently and we are reinforcing our leading position in power systems and IoT with long-term investments in our manufacturing landscape and technological leadership. Decarbonization and digitalization remain the foundations of our business. With our solutions, we are driving forward the green and digital transformation, thus providing our customers and you, our shareholders, with tangible added value.

Neubiberg, November 2023

Jochen Hanebeck Chief Executive Officer

The Management Board

(From left to right)

Andreas Urschitz Chief Marketing Officer

Dr. Sven Schneider Chief Financial Officer

Jochen Hanebeck Chief Executive Officer

Elke Reichart Chief Digital Transformation Officer

Dr. Rutger Wijburg Chief Operations Officer

The Management Board

Andreas Urschitz Chief Marketing Officer

Dr. Sven Schneider Chief Financial Officer

Jochen Hanebeck Chief Executive Officer

Elke Reichart Chief Digital Transformation Officer Dr. Rutger Wijburg Chief Operations Officer

Andreas Urschitz has been a member of the Management Board and Chief Marketing Officer of Infineon Technologies AG since 2022 (appointed until 31 May 2025). He is responsible for Group Sales, Marketing & Distribution; Customer Engagement Strategy; Application Framework & Services; Organization and Strategy enablement/implementation of Regions Greater China, Asia Pacific and Japan; Marketing Communications.

Andreas Urschitz was born in 1972 in Klagenfurt, Austria. He obtained his master's degree in commercial science at the Vienna University of Economics and Business, Austria. He has been with Infineon (Siemens AG until 1999) since 1995.

Sven Schneider has been Chief Financial Officer at Infineon Technologies AG since 2019 (appointed until 30 April 2027). He is responsible for Group Finance; Group Financial Controlling & Planning; Treasury; Taxes; Accounting, Consolidation & Reporting; Investor Relations; Compliance; Audit; Risk Management; Internal Controls.

Sven Schneider was born in 1966 in Berlin, Germany. After completing his studies in business administration (Diplom-Kaufmann), he received his doctorate in business administration from the University of Trier, Germany. From 1995 to 2019, he held several positions at Linde AG, most recently as Spokesman of the Executive Board, Chief Financial Officer and Labor Director.

Jochen Hanebeck has been a member of the Management Board of Infineon Technologies AG since 2016. He has been CEO since 1 April 2022 (appointed until 31 March 2027). He is responsible for Divisions; Group Strategy; Mergers & Acquisitions; Organization and Strategy enablement/implementation of region Americas; Communications & Public Policy; Human Resources (Labor Director); Legal & Patents; Research & Development (CTO).

Jochen Hanebeck was born in 1968 in Dortmund, Germany. He received a degree in electrical engineering from RWTH Aachen University, Germany. He has been with Infineon since 1994 (Siemens AG until 1999).

Elke Reichart has been a member of the Management Board of Infineon Technologies AG and Chief Digital Transformation Officer since 2023 (appointed until 31 October 2026). She is responsible for Groupwide Digitalization Strategy, Information Technology, Digital Sales & Marketing Platforms and Services, Business Continuity, Business Excellence, Group Processes.

Elke Reichart was born in 1965 in Stuttgart, Germany. She received her diploma in Romance Languages and Economics as well as a postgraduate degree in Applied Computer Science from the University of Gießen, Germany. She began her career at Hewlett-Packard Inc. in 1991.

Rutger Wijburg has been a member of the Management Board of Infineon Technologies AG and Chief Operations Officer since 1 April 2022 (appointed until 31 March 2025). He is responsible for Group Manufacturing, Supply Chain, Procurement, Customs, Quality Management, Real Estate and Facility Management (Manufacturing Sites).

Rutger Wijburg was born in Nijmegen, Netherlands, in 1962. He studied Electrical and Electronics Engineering at the University of Twente, Netherlands, and received his PhD in 1990. He started his career in 1990 at the University of Twente. Before joining Infineon in 2018, he held various leading positions at Philips, NXP and Globalfoundries.

Report of the Supervisory Board to the Annual General Meeting

Dr. Herbert Diess Chairman of the Supervisory Board

The times we live in are being affected by so much change. What sets us apart at Infineon is that we see this as an opportunity and are actively working to shape that change. Our forward-looking technologies and products are making an important contribution towards halting (or at least slowing down) climate change and towards using digitalization with human beings in mind. I can see how Infineon employees around the world are playing their part with enthusiasm, skill and a positive mindset. This is not only making us an innovative high-tech company but also ensures sustainable economic success. The 2023 fiscal year has demonstrated this once again. We want you, dear shareholders, to be able to participate in this success in the usual way and will therefore submit a proposal jointly with the Management Board to the Annual General Meeting for another increase in the dividend to €0.35 per share entitled to a dividend. For many years, Infineon's success story has been built on outstanding technological and business performance combined with added value for society as a whole, and I would be delighted if you continued to accompany us on our way.

Main activities of the Supervisory Board

During the 2023 fiscal year, the Supervisory Board again performed its duties with utmost diligence in accordance with the law, Infineon's Articles of Association and the Supervisory Board's own rules of procedure. Its work was based in particular on reports presented by the Management Board at Supervisory Board and committee meetings regarding all issues relevant to Infineon. For the most part, the focus was again on corporate strategy, current business performance and the economic situation, financial and investment planning, and the risk profile, as well as issues relating to risk management and compliance. In addition, the Supervisory Board addressed the replacement of the Chairman of the Supervisory Board and other personnel changes on the Supervisory Board, as well as preparing for the appointment of a new Management Board member responsible for digital transformation. The Supervisory Board was provided with written quarterly reports on the economic environment, Infineon's business performance, including investment and acquisition activities, key financial data, risks and opportunities, and major areas of litigation, as well as other specific topics of relevance. Between quarterly reports, the Management Board also provided the Supervisory Board with additional information in the form of monthly reports on current business performance and developments.

As Chairman of the Supervisory Board, I was also in regular contact with both the Chief Executive Officer and other members of the Management Board between meetings. The CEO kept me well-informed at all times of other key events for Infineon. My working relationship with the CEO was respectful, constructive and based on trust.

In the 2023 fiscal year, the full Supervisory Board convened nine times, holding six ordinary meetings and three extraordinary meetings. Additionally, two resolutions were passed on the basis of written communication. The attendance rate at Supervisory Board meetings was just under 98 percent; Diana Vitale was excused from attending one meeting and Dr. Manfred Puffer from two meetings. The attendance rate at the Supervisory Board's committee meetings was 100 percent. Details of the individual attendance record of Supervisory Board members at full Supervisory Board and committee meetings are provided in a table in the Statement on Corporate Governance. www.infineon.com/declaration-on-corporate-governance

The three extraordinary meetings of the full Supervisory Board were conducted virtually, and all the ordinary meetings were face-to-face meetings. Of the six meetings of the Executive Committee, two were virtual. One of the five meetings of the Investment, Finance and Audit Committee and four of the six meetings of the Nomination Committee were in a virtual format. All the meetings of the Strategy and Technology Committee, without exception, were face-to-face meetings.

In preparation for ordinary Supervisory Board meetings, separate preliminary meetings were held for both the shareholder representatives and the employee representatives. The Supervisory Board and the Investment, Finance and Audit Committee also convened regularly without the presence of the Management Board.

Corporate strategy

The 2023 fiscal year was characterized by a variety of strategic projects that were closely monitored and then all approved by the Supervisory Board:

› First, the Supervisory Board approved a more ambitious target operating model and thereby an upward revision of Infineon's long-term financial targets. Like the Management Board, the Supervisory Board is convinced that decarbonization and digitalization will ensure structurally increasing demand for semiconductors and that, thanks to its strategic focus, Infineon will benefit disproportionately from this development.
› In addition, the past fiscal year has involved major investment the construction of a new factory in Dresden (Germany), significant expansion of manufacturing in Kulim (Malaysia) and, finally, the participation of Infineon in a joint venture with TSMC, Bosch and NXP to build a modern semiconductor fab, also in Dresden. Infineon is therefore creating the production capacity required to reliably meet growing demand from its customers over the long term. Moreover, the investment in Dresden is an important milestone that will reinforce the European semiconductor ecosystem and strengthen supply chain resilience in Europe. Accordingly, the Supervisory Board was satisfied that these investments were necessary for the business and made economic sense and approved the plans.

› Finally, the Supervisory Board examined measures relating to the Group's inorganic growth in promising new fields and granted its approval for the acquisition of the Canadian company GaN Systems, the technological leader in the development of GaN-based solutions for power conversion. The acquisition will significantly strengthen Infineon's leading position in power systems. The Supervisory Board also agreed on strategic portfolio management measures with the Management Board and endorsed the sale of its HiRel (High Reliability) DC-DC converter business to Micross Components, a transaction that enables Infineon to focus in the future on those HiRel business areas that benefit from its leading semiconductor technologies.

In the 2023 fiscal year, separately from the examination of specific strategic projects, the Supervisory Board also considered various aspects of Infineon's corporate strategy at a daylong strategy meeting that took place on the Dresden site. Topics discussed included strategic fundamentals, portfolio management, parameters for organic and inorganic growth, geopolitical issues, financial targets and, last but not least, Infineon's sustainability strategy.

Personnel matters relating to the Management Board

In the course of the fiscal year, Constanze Hufenbecher, Management Board member and Chief Digital Transformation Officer (CDTO), informed the Supervisory Board of her intention not to renew her contract which was due to expire in April 2024. The Supervisory Board accepted her decision with regret. Immediately thereafter, the Supervisory Board initiated the process of finding a replacement for the CDTO position on the Management Board. Based on the Supervisory Board's continuous succession planning and with the support of a human resources consultant, an extensive search process was launched. Infineon was eventually able to recruit Elke Reichart, an experienced digitalization expert. Elke Reichart was appointed as a member of the Management Board for three years with effect from 1 November 2023. Constanze Hufenbecher resigned from the Management Board with effect from 31 October 2023. The Supervisory Board thanks Constanze Hufenbecher for her achievements and personal commitment and wishes Elke Reichart a successful start in her new role.

Management Board remuneration

In November 2022, the Supervisory Board established a new remuneration system for the Management Board. This created a remuneration structure with higher variable remuneration components, whereby the Management Board remuneration will in the future be even more closely linked with the success of the business. Moreover, the maximum remuneration for longer-serving Management Board members will be increased, giving the Supervisory Board more scope to offer experienced Management Board members competitive remuneration. The restriction of the STI modifier to extraordinary developments brought the system more in line with the provisions set out in the German Stock Corporation Act (AktG) and the German Corporate Governance Code. Finally, the opportunity was provided to weight ESG targets in the longterm variable remuneration even more heavily in the future. At the Annual General Meeting in February 2023, this new remuneration system for the Management Board was approved by a large majority. It was thereupon implemented in all Management Board employment contracts as of 1 April 2023.

Further information on Management Board remuneration is available in the detailed Remuneration Report. As in the previous year, the Management Board and the Supervisory Board decided to ask the auditors to perform an additional review of the content of the Remuneration Report in addition to their formal audit of the report. KPMG issued an unqualified audit opinion on the Remuneration Report.

Litigation

The Supervisory Board was regularly provided during the 2023 fiscal year with in-depth information regarding major legal disputes, which it then discussed at length with the Management Board. These included, in particular, the legal dispute with the insolvency administrator of Qimonda AG pertaining to alleged residual liability claims, which has been ongoing for years.

Supervisory Board topics

Personnel matters relating to the Supervisory Board

Dr. Wolfgang Eder and Hans-Ulrich Holdenried resigned from the Supervisory Board with effect from the end of the Annual General Meeting on 16 February 2023. Based on a proposal by the Supervisory Board, Klaus Helmrich and I were newly elected to the Supervisory Board. At its meeting immediately after the Annual General Meeting, the Supervisory Board elected me as the new Chairman of the Supervisory Board, as a member and the Chairman of the Strategy and Technology Committee, and as the Chairman of the Nomination Committee. I am grateful for this vote of confidence from Infineon's Supervisory Board and would like to take the opportunity here to thank once again Dr. Wolfgang Eder and also Hans-Ulrich Holdenried for their successful work over the past years.

Following the resignation of Géraldine Picaud from the Supervisory Board at the beginning of 2023, Ute Wolf was appointed as a member of the Supervisory Board by court order in April 2023 and elected by the Supervisory Board as a member of the Investment, Finance and Audit Committee. Until shortly before her appointment by Infineon, Ute Wolf was the Chief Financial Officer of a public limited company listed in Germany. In addition, she has already spent several years as the Chair of audit committees of listed companies. She therefore increases the level of financial expertise on the Supervisory Board. At the Annual General Meeting to be held in February 2024, the Supervisory Board will propose that Ute Wolf be elected to the Supervisory Board for a regular four-year term of office.

Basic and ongoing training

Supervisory Board members are responsible for undertaking any basic or ongoing training considered necessary to perform their duties, and they receive appropriate support from Infineon to do so. In-house information events are held to provide targeted training. In the 2023 fiscal year, for example, events took place that covered the EU Taxonomy and governance topics as well as current regulatory developments affecting the Supervisory Board. As part of the onboarding process for new Supervisory Board members, Infineon also conducts comprehensive briefings covering a broad range of topics, including its individual operating segments, the principles and key elements of its corporate strategy, investment planning and its manufacturing strategy.

Committee work

The Supervisory Board's various committees are responsible for drawing up resolutions and preparing other major topics that need to be dealt with by the full Supervisory Board. Moreover, the Supervisory Board has delegated certain decision-making powers to its committees. The chairpersons of each committee are required to report on committee meetings at the next full Supervisory Board meeting.

Mediation Committee

The Mediation Committee did not need to convene during the reporting year.

Nomination Committee

The Nomination Committee held six meetings in total during the 2023 fiscal year. The topics discussed at the meetings included the replacements for Supervisory Board positions referred to above following the resignations of Dr. Wolfgang Eder, Hans-Ulrich Holdenried and Géraldine Picaud. Klaus Helmrich and I were elected at the 2023 Annual General Meeting and Ute Wolf was appointed by the court. The committee also prepared the nomination for election at the 2024 Annual General Meeting of Ute Wolf, as well as of Prof. Hermann Eul, an acknowledged expert in semiconductors.

Executive Committee

At its ordinary meetings, the Executive Committee focused primarily on preparing the Supervisory Board's resolutions to determine the level of variable remuneration to be paid to Management Board members. These included, firstly, determining the Short-Term Incentive (STI) target achievement levels for the 2022 fiscal year and setting new target values for the 2023 fiscal year and, secondly, determining the STI modifier criteria, confirming the ESG targets for limiting carbon emissions and increasing diversity that are relevant for the Long-Term Incentive (LTI) and confirming the composition of the TSR (Total Shareholder Return) peer group. The topics discussed at the extraordinary meetings were the personnel and remuneration issues referred to above.

Investment, Finance and Audit Committee

The Investment, Finance and Audit Committee held five ordinary meetings in the 2023 fiscal year.

Its activities centered on monitoring the financial reporting process, reviewing the half-year and quarterly financial statements, conducting the preliminary audit of the Separate Financial Statements, Consolidated Financial Statements and Combined Management Report for Infineon Technologies AG and the Infineon Group, and discussing the audit reports with the auditor. The Committee also conducted an assessment of the quality of the audit. In addition, the Committee examined Infineon's financial and investment budget. It also received regular reports on the internal control, internal audit, risk management and compliance management systems and deliberated on their appropriateness and effectiveness. The Committee was also provided with continuous updates on additional risks and significant legal disputes.

The Committee's recommendation to the full Supervisory Board to propose to shareholders at the 2023 Annual General Meeting that KPMG AG Wirtschaftsprüfungsgesellschaft, Munich (KPMG) be elected for the last time as Company and Group auditor was based on a Declaration of Independence obtained from KPMG as well as an analysis of the non-audit services provided by KPMG. There were no indications of conflicts of interest, grounds for exclusion or other lack of independence on the part of the auditor. The Committee also considered the fee arrangements, issued contracts for the relevant audit engagements and defined supplementary areas for audit emphasis.

Representatives of the auditor attended all the meetings of the Investment, Finance and Audit Committee and reported in detail on the audit procedures performed. At each of the meetings, there was also a closed session involving the auditor and the members of the Investment, Finance and Audit Committee without the Management Board being present. This also applied to the full Supervisory Board meeting that considered the financial statements.

The Committee also devoted time to the Remuneration Report and the separate combined Non-Financial Report and, in this context, considered other sustainability issues, including the German Supply Chain Act (LkSG).

Strategy and Technology Committee

The Supervisory Board's Strategy and Technology Committee convened three times during the reporting year. The Management Board provided it with reports on a number of topics, including key aspects of the macroeconomic market and competitive environment and the progress of the Group's digital agenda. Other areas discussed at committee meetings were strategic considerations with regard to the expansion of manufacturing capacity and the value contribution of software at Infineon.

Corporate Governance

Declaration of Compliance 2023

In the Declaration of Compliance dated November 2023, the Management Board and Supervisory Board jointly declared that, since the submission of the last Declaration of Compliance in November 2022, all the recommendations of the German Corporate Governance Code contained in the version dated 28 April 2022 have been complied with and will continue to be complied with in the future.

The actual wording of the Declaration of Compliance 2023 and all previous Declarations of Compliance are available on Infineon's website.

www.infineon.com/declaration-of-compliance

Self-assessment by the Supervisory Board

The Supervisory Board regularly assesses how effectively it performs its duties. It conducted such a self-assessment in the 2023 fiscal year. Given that in the 2022 fiscal year, the self-assessment was carried out with the support of an external consultant (including personal interviews with all the members of the Management Board and the Supervisory Board), Infineon reverted in the 2023 fiscal year to the use of an internal questionnaire. The results of the questionnaire were discussed in the course of a Supervisory Board meeting in August 2023 and a full-day Supervisory Board workshop in November 2023. Issues discussed included reinforcing the expertise of the Supervisory Board in the area of semiconductors, which led to Prof. Hermann Eul being nominated to the Supervisory Board, cooperation between the committees

and the full Supervisory Board, the framework for the Supervisory Board's engagement with strategic topics, and the parameters of the Supervisory Board's continuous succession planning for Management Board positions.

Skills and expertise profile and list of objectives for the Supervisory Board/qualifications matrix

The Supervisory Board decided to make a modification to the skills and expertise profile and list of objectives. One of the reasons for this was to make explicit reference in the skills and expertise profile to sustainability expertise. It was also decided to modify the age limit of 70 previously set for Supervisory Board members to the extent that, in the future, it will no longer be simply a rule but a strict limit. Moreover, the Supervisory Board looked in detail at the qualifications matrix published in the Statement on Corporate Governance.

Examination of potential conflicts of interest

The members of the Management Board and of the Supervisory Board are required to disclose any conflicts of interest to the Supervisory Board without delay. One Supervisory Board member disclosed a potential conflict of interest in respect of an M&A project. Thereafter, this Supervisory Board member was not given access to the relevant documents and also did not participate in the meetings and decisionmaking process of the Supervisory Board in this respect.

Prior to Management Board members assuming sideline activities, particularly supervisory board mandates outside the Company, the German Corporate Governance Code requires that permission be granted by the Supervisory Board. No conflicts of interest were discernible in any of the sideline activities performed. In fact, they were all in Infineon's best interests and were therefore approved by the Supervisory Board and/or Executive Committee.

Further information on the topic of corporate governance is available in the Statement of Corporate Governance.

www.infineon.com/declaration-on-corporate-governance

Rules of procedure for the Supervisory Board and the Management Board

All the rules of procedure for the Supervisory Board and the Management Board are available on the Infineon website.

www.infineon.com/cms/en/about-infineon/investor/corporate-governance/articles-of-association/

Related party transactions

Publicly listed companies such as Infineon require the approval of the Supervisory Board or one of its committees before entering into certain transactions with related parties. In order to identify related party transactions that require approval and to treat them in accordance with the law, Infineon has implemented a procedure based on guidelines that apply worldwide across the Group. The Supervisory Board has delegated responsibility in this area to the Investment, Finance and Audit Committee, particularly for resolutions requiring approval. There were no related party transactions requiring approval in the 2023 fiscal year.

Separate and Consolidated Financial Statements

KPMG audited the Separate Financial Statements of Infineon Technologies AG and the Consolidated Financial Statements as of 30 September 2023, as well as the Combined Management Report of Infineon Technologies AG and the Infineon Group, and issued unqualified opinions thereon.

The Half-Year Financial Report was also reviewed by KPMG. No issues were identified that might indicate that the condensed Interim Consolidated Financial Statements or the Interim Group Management Report were not prepared in accordance with the applicable provisions in all material respects.

KPMG has audited the Separate Financial Statements of Infineon Technologies AG and the Consolidated Financial Statements of the Infineon Group and reviewed the Interim Consolidated Financial Statements since the 1999 fiscal year (short fiscal year from 1 April 1999 to 30 September 1999). Martin Schmitt, the auditor responsible for the engagement, signed the auditor's report for the first time for the 2021 fiscal year (1 October 2020 to 30 September 2021) and Angelika Huber-Straßer, as co-signatory, for the first time for the 2023 fiscal year (1 October 2022 to 30 September 2023).

At the meeting of the Investment, Finance and Audit Committee held on 14 November 2023 and continued in a conference call on 21 November 2023, thorough discussions were held with the auditor regarding the Separate Financial Statements, the Consolidated Financial Statements, the Combined Management Report, the appropriation of profit and the auditor's findings. The Committee deliberated at length on the key audit matters disclosed in the auditor's report as well as on the related audit procedures. Based on the insights gained in the course of these deliberations, the Investment, Finance and Audit Committee resolved to suggest to the Supervisory Board that the financial statements drawn up and presented by the Management Board be approved and the proposed appropriation of profit agreed to.

The Separate Financial Statements, the Consolidated Financial Statements, the Combined Management Report, the Management Board's proposal for the appropriation of unappropriated profit (all prepared by the Management Board), and KPMG's longform audit reports were all made available to the Supervisory Board at its meeting on 23 November 2023. At this meeting, the Chairman of the Investment, Finance and Audit Committee reported in depth on the corresponding recommendations of the Committee. In addition, all material issues relevant to the financial statements and the audit, including the key audit matters, were exhaustively discussed with the auditor and closely examined by the Supervisory Board. The examination also covered the proposal to pay a dividend of €0.35 per share entitled to dividend.

After detailed discussions, the Supervisory Board concluded that it had no objections to the financial statements and the audits performed by the auditor. In its opinion, the Combined Management Report complied with all legal requirements. The Supervisory Board also concurred with the assertions regarding Infineon's future development contained therein, as well as with the results of the audit of the financial statements. It therefore approved the Separate Financial Statements of Infineon Technologies AG and the Consolidated Financial Statements of the Infineon Group for the 2023 fiscal year. The Separate Financial Statements were adopted accordingly. The Supervisory Board also approved the Management Board's proposal for the appropriation of unappropriated profit.

Moreover, the Investment, Finance and Audit Committee and the full Supervisory Board deliberated on the combined separate Non-Financial Report for the year ended 30 September 2023 drawn up by the Management Board and the Remuneration Report prepared together with the Management Board. KPMG performed a reasonable assurance engagement for the Remuneration Report and a limited assurance engagement for some parts of the combined separate Non-Financial Report and a reasonable assurance engagement for other parts of that report. In both cases, KPMG issued an unqualified opinion thereon. The documents were carefully examined by

the Investment, Finance and Audit Committee at its meeting on 14 November 2023, which was continued in a conference call on 21 November 2023, and by the Supervisory Board at its meeting on 23 November 2023. The Supervisory Board approved the Remuneration Report and positively acknowledged the combined separate Non-Financial Report prepared by the Management Board.

The Supervisory Board wishes to thank all Infineon employees and the Management Board for their great commitment and their excellent performance in the 2023 fiscal year, which has again been a challenging year.

Neubiberg, November 2023 On behalf of the Supervisory Board

Dr. Herbert Diess Chairman of the Supervisory Board

Combined Management Report

27 Group strategy

27 Long-term growth trends
27 Strategic targets
29 Strategic guidelines
33 Human resources strategy
34 Research and development
37 Internal management system
40 Review of the semiconductor industry

42 2023 fiscal year

42 Group performance
44 Segment performance
49 Review of results of operations
53 Review of financial condition
55 Review of liquidity
58 Infineon on the capital market
61 Overall statement on Infineon's financial condition
62 Report on outlook, risk and opportunity
62 Outlook
65 Risk and opportunity report
79 Infineon Technologies AG
82 Corporate Governance
82 Information pursuant to section 289a, paragraph 1 and section 315a, paragraph 1 of the German Commercial Code (HGB)
86 Statement on Corporate Governance pursuant to sections 289f and 315d of the German Commercial Code (HGB)
86 Remuneration Report
87 List of references

This report combines the Group Management Report of Infineon ("Infineon" or "the Group") – comprising Infineon Technologies AG (hereafter also referred to as "the Company") and its consolidated subsidiaries – and the Management Report of Infineon Technologies AG.

The Combined Management Report contains forward-looking statements about the business, financial condition and earnings performance of Infineon. These statements are based on assumptions and projections on the basis of currently available information and present estimates. They are subject to a multitude of uncertainties and risks. Actual business development may therefore differ materially from what has been expected. Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements.

With effect from 1 April 2023, the "Industrial Power Control" segment was renamed "Green Industrial Power". Decarbonization, electrification and energy efficiency are important drivers of the business in this segment. This focus and the significant contribution made by this segment to CO2 reduction are reflected in its new name. The change of name has no impact on the organizational structure, strategy or scope of business.

The content of these sections is voluntary content that has not been checked by the auditor but only read critically. In the case of crossreferences, the information to which the cross-references refer has not been checked either.

Business model

Infineon | Annual Report 2023

Business model

Overview

Semiconductors are essential to mastering the challenges of decarbonization and digital transformation. They make our everyday lives easier, safer and greener. With around 58,600 employees worldwide, Infineon is a leading global provider of semiconductor solutions that pave the way for green and efficient energy, clean and safe mobility, and intelligent and secure IoT. Infineon develops, manufactures and markets a large number of semiconductors and semiconductor-based solutions, focusing on the key markets in the automotive, industrial and consumer sectors. Its products range from standard components to special components for digital, analog and mixed-signal applications, all the way to customer-specific solutions and the appropriate software.

Our core business includes power semiconductors based on silicon (Si), silicon carbide (SiC) and gallium nitride (GaN) in the form of individual components, modules and system solutions. Over the years, Infineon has acquired in-depth knowledge about the use of power semiconductors in all applications and the specific challenges associated with them, developing a very broad portfolio. By adopting our strategic approach "Product to System", we combine these power semiconductors with microcontrollers (including software and driver components), so that we can provide perfect solutions for energy conversion systems and enable decarbonization.

In the area of digitalization, we have a broad portfolio of microcontrollers with hardware-based security, sensors and connectivity products, such as Wi-Fi and Bluetooth, supplemented by software. These are used in the automotive, industrial and consumer sectors, as well as in end applications such as mobile payment and governmental identity documents.

In addition to our established core business, we also service new and adjacent business areas. Links may arise between the different areas, not only in terms of products or technology but also in terms of markets or applications.

Business model Value chain and manufacturing

Value chain and manufacturing

Infineon covers the main stages of the semiconductor value chain: from development and design, via frontend and backend manufacturing and marketing, to delivery to customers (see C01). Increasingly, it also provides software and other services, such as application-specific support for the implementation of its solutions.

In frontend manufacturing, the wafers are processed. Optical, physical and chemical methods are used to create transistors and their interconnections, thus determining the function of the chip. The wafers are transferred from the frontend site to a backend site, where the remaining processing steps take place in backend manufacturing.

C01 The main stages of the semiconductor value chain

These steps include sawing the wafer into individual chips as well as assembly and testing. Following the backend manufacturing, the chips are sold to customers via regional distribution centers.

In order to optimize the use of capital and increase flexibility, we use external manufacturing partners in addition to our in-house manufacturing. In frontend manufacturing, this applies primarily to manufacturing processes with little potential for differentiation and, in backend manufacturing, to standardized package types. More information about our manufacturing strategy is given in the chapter "Group strategy". p. 27 ff.

Business model Value chain and manufacturing

Headquarters and manufacturing sites

Americas

Mexico ■ 1 Tijuana

USA

- 2 El Segundo, CA ■ 3 Austin, TX

4 Leominster, MA
5 Mesa, AZ ■ 6 San José, CA

Hungary ■ 6 Cegléd

Europe, Middle East, Africa

Austria

■ 1 Villach

Germany

2 Neubiberg near Munich
3 Dresden
■ ■ 4 Regensburg
5 Warstein

Asia-Pacific

Indonesia ■ 1 Batam

Korea ■ 2 Cheonan

Malaysia

■ 3 Kulim ■ 4 Melaka

Philippines

■ 5 Cavite

Singapore

■■ 6 Singapore
Thailand ■ 7 Bangkok

Greater China

Mainland China
8 Shanghai
9 Wuxi

Japan

■ 10 Tokyo

■ Corporate headquarters ■ Regional headquarters ■ Frontend manufacturing ■ Backend manufacturing

For the definition of frontend/backend manufacturing, see chapter "Value chain and manufacturing". p. 22

Management Board and Supervisory Board Combined Management Report Consolidated Financial Statements Further information 24 Business model The segments

The segments

In addition to general areas within the Group, such as manufacturing and various corporate functions, Infineon comprises four segments (also known as divisions). Each segment focuses on the needs of its own target markets and customers and also has individual responsibility for specific areas that reflect its core competencies. The Automotive segment is responsible for the semiconductor business for automotive electronics. The Green Industrial Power segment concentrates on power semiconductors primarily used in industrial applications and renewable energy, while the Power & Sensor Systems segment addresses not only sensor technologies but also power supplies in general, including those for data centers, telecommunications networks and more consumer-oriented applications. Activities relating to IoT and traditional and new security applications are bundled within the Connected Secure Systems segment. The segments often cooperate with one another to ensure comprehensive coverage of the requirements of the various target markets. As a result, the sales activities of one segment are generally, but not always, focused on its own target market.

Chart C02 provides an overview of the core competencies of the individual segments.

C02 Core competencies in the segments

Core competencies	Automotive	Green Industrial Power	Power & Sensor Systems	Connected Secure Systems
Sensor technologies	✓		✓
Radio frequency	✓		✓
Embedded control	✓	✓		✓
Control of power semiconductors	✓	✓	✓	✓
Power semiconductors	✓	✓	✓
Memories for specific applications	✓
Connectivity			✓	✓
Security	✓			✓
Software	✓	✓	✓	✓

A detailed presentation of the applications and product range of the individual segments is given in the chapter "Applications and product range". p. 180 ff.

Business model The segments

ATV Automotive

The Automotive segment shapes the future of mobility with products and solutions to make cars clean, safe and smart. We cover all application areas in the vehicle: powertrain and energy management, connectivity and infotainment, body and comfort electronics, safety and data security. Infineon is the world market leader in semiconductor solutions for cars. Our range of products and solutions helps to navigate the transition from internal combustion engines to hybrid and electric drives, enabling an ever-increasing degree of automated driving, electric-electronic (E/E) vehicle architecture, greater connectivity and digitization, and a higher level of data security in vehicles. We also offer our customers innovative solutions in the areas of safety, digital cockpit, infotainment, comfort and lighting technology. In addition to sensors, microcontrollers, software solutions, a reliable power supply, memories for specific applications and power semiconductors based on Si and SiC, our product portfolio also comprises components for human-machine interaction and vehicle connectivity.

GIP Green Industrial Power

The Green Industrial Power segment specializes in semiconductor solutions for the intelligent management and efficient conversion of electric energy along the entire conversion chain, comprising the generation, transmission, storage and use of electricity. The product portfolio comprises mainly IGBT power transistors and the driver ICs to control them, as well as power semiconductors based on SiC. We offer products in the Green Industrial Power segment, whether Si-based or SiC-based, in various form factors and with different levels of functionality. The segment's broad application spectrum includes motor control units for industrial manufacturing and building technology, inverters for photovoltaic and wind power systems, major home appliances, traction, electric utility vehicles (such as buses and construction and agricultural vehicles), systems for high-voltage direct current transmission and energy storage, industrial power supplies and the charging infrastructure for electric vehicles.

Business model The segments

PSS Power & Sensor Systems

The Power & Sensor Systems segment encompasses a wide selection of technologies relating to power semiconductors, radio frequency and sensors. We use these technologies to make electronic devices like power supplies, power tools, lighting systems, mobile devices and industrial and consumer applications smaller, lighter and more energy-efficient, as well as to develop new functionalities. We are drawing on the next generation of new, innovative solutions based on Si, SiC and GaN for applications in the areas of 5G, data centers, power supplies and adapters, battery-powered devices, and renewable energy. Our portfolio of products for power supplies, comprising control ICs, drivers and MOSFET power transistors, addresses the two key requirements of the market: efficiency and power density. Infineon is the clear market leader in the global Si MOSFET market. Our high-precision sensor solutions give IoT devices "human senses", enabling them to react intuitively to their surroundings. The portfolio is rounded off with USB controllers and radio frequency products such as RF antenna switches, RF power transistors and low-noise amplifiers.

CSS Connected Secure Systems

The Connected Secure Systems segment supplies comprehensive systems for a secure, connected world based on reliable, game-changing microcontrollers and wireless connectivity and security solutions. In particular, we offer microcontroller solutions, Wi-Fi and Bluetooth solutions and combined connectivity solutions (known as combo chips), along with hardware-based security technologies and an efficient software environment for the programming and configuration of the microcontrollers and connectivity components that cover many application areas. These include devices for IoT applications, connected home appliances and smart home appliances, IT equipment, consumer electronics, cloud security and connected vehicles, as well as credit and debit cards, electronic passports and national identity cards. With our technologies in the areas of computing, connectivity and security, we are contributing significantly towards ensuring that current and future connected systems are reliably protected.

Management Board and Supervisory Board Combined Management Report Consolidated Financial Statements Further information 27 Group strategy Long-term growth trends | Strategic targets

Group strategy

Long-term growth trends

As a leading global provider of semiconductor solutions, Infineon focuses its business activities on two issues that are fundamental to society and where it sees major longterm growth trends: decarbonization and digitalization.

Decarbonization

Decarbonization is a necessity to contain global warming and therefore the key responsibility of humanity over the next decades. We will need to make drastic changes to the ways in which we generate, transport, store and use energy. To halt global warming, it is imperative that we waive the use of fossil fuels to a great extent and that we make a consistent transition to renewables and widely adopt electrification. Effecting this transition requires not only the use of wind and solar power but also of systems for the storage and efficient transportation of energy. We believe that one of the key tasks for Infineon is to provide semiconductor solutions for more efficient generation, conversion and use of electric energy. Our business operations are thereby making a significant contribution to the quality of life of generations to come.

Digitalization

Digitalization is another key trend. This involves connectivity between ever-smarter devices with an ability to perceive their environment; devices that make life easier, safer and more pleasant. The possibilities are huge: greater convenience and security in the smart home, more efficiency in manufacturing, higher productivity together with better environmental sustainability in farming, and new services to support older people. Infineon's products in these areas include microcontrollers with software and sensors that make it possible to produce connected and smart IoT devices with increasing performance in both the industrial sector and the end user sector.

Infineon sees itself as a trailblazer for a carbon-neutral and digital future: "Driving decarbonization and digitalization. Together." This applies to large parts of our portfolio. Sensors record mostly analog information from the world around us and transform it into digital data; microcontrollers process these data and generate control signals; memory ICs enable the microcontrollers to store data and program codes; actuators such as power semiconductors convert the control signals into actions and make the efficient generation and conversion of energy possible; security solutions protect the integrity of devices and data, while connectivity chips transfer these data within the digital world. Software enhances the benefit to customers of our semiconductor solutions, allowing for more flexible adjustment. We thereby establish a link between the real world and the digital world and enable a carbon-neutral future.

Strategic targets

To generate value from decarbonization and digitalization for our customers, the company, our shareholders and society with our semiconductor solutions, we pursue clear and measurable strategic targets.

Profitable growth

We want to continue to grow in the markets in which we operate and to increase our profitability. Our long-term financial targets reflect this aspiration and apply over the semiconductor cycle. At the beginning of the 2023 fiscal year, we revised our target operating model and significantly raised our long-term financial targets. This reflects Infineon's success over the past few years and, at the same time, is an expression of our greater ambitions, especially with regard to profitability and value generation. We want to create even more value by focusing consistently on the long-term growth trends of decarbonization and digitalization and implementing our strategic guidelines (see the chapter "Strategic guidelines", p. 29 ff.).

Management Board and Supervisory Board Combined Management Report Consolidated Financial Statements Further information 28 Group strategy Strategic targets

Target 1: Average annual revenue growth of more than 10 percent over the cycle

We hold leading positions in our core markets and have expanded systematically over the years into new and adjacent markets. Our four segments focus on the long-term growth trends of decarbonization and digitalization. With our strategic approach "Product to System", we use our extensive technological and product expertise to provide more comprehensive solutions and thus create more value for our customers. In the areas of electromobility, advanced driver assistance systems (ADAS), renewable energy, data center/AI and IoT in particular, we expect to achieve above-average growth, resulting in total average annual revenue growth for the Group over the cycle of more than 10 percent (">10%").

Target 2: Average Segment Result Margin of 25 percent over the cycle

A key criterion for our success is sustainable profitability. Infineon can consistently pursue its targets even in weaker market phases by engaging in economic activity that is sustainably profitable. We have set ourselves the target of achieving an average Segment Result Margin of 25 percent over the cycle. Key elements that will enable us to achieve our profitability target are our system solutions, which are based on our strategic approach "Product to System", and generate higher value and greater customer benefit. In the future, software will play a larger role. We enjoy economies of scale and cost advantages while continuing to develop our leading market position and innovative manufacturing technologies (such as those used to produce 300-millimeter thin wafers) and accelerating the expansion of silicon carbide manufacturing facilities. At the same time, we make sure that, if we consider our overall portfolio, all our businesses are making an adequate contribution to Infineon's success. We also aim to ensure that our research and development expenses as well as our selling, general and administrative expenses increase at a slower rate than the rate of growth in our revenue. This is supported by our digitalization strategy.

Target 3: Adjusted Free Cash Flow within a range of 10 to 15 percent of revenue over the cycle

Looking at value generation, we include a Free Cash Flow target in our target operating model. Free Cash Flow, adjusted for large investments in frontend buildings as well as large M&A transactions (acquisitions and disposals), should fall within a range of 10 to 15 percent of revenue over the cycle. This will be achieved by ensuring our operating cash flow grows at a faster rate in the long term than our investment expenditure.

Capital structure targets

Our capital structure targets link together the concepts of environmental and economic sustainability and ensure that Infineon remains a trusted partner in the long term. An investment grade rating is the key element of Infineon's conservative financial policy. From this cornerstone, we derive our long-term capital structure targets, which consist of a liquidity target and a leverage target.

Our liquidity target is €1 billion, plus at least 10 percent of revenue. The fixed base amount of €1 billion provides a solid liquidity reserve for contingent liabilities and pension liabilities, which are unrelated to revenue. The additional amount of at least 10 percent of revenue means that we always have access to sufficient cash to be able to finance our operating business and investment throughout all phases of the semiconductor cycle.

Our leverage target is expressed as an upper limit on gross financial debt of two times EBITDA. Infineon defines EBITDA as earnings from continuing operations before interest, taxes, depreciation and amortization.

Management Board and Supervisory Board Combined Management Report Consolidated Financial Statements Further information 29 Group strategy Strategic targets | Strategic guidelines

Sustainable corporate governance

We are convinced that economic success must go hand in hand with environmental and social commitment. This includes contributing towards more sustainable development in society. With our products, solutions and systems, we are enabling greater efficiency and making an active contribution towards climate protection. Sustainability is of crucial importance both within the Group and in relation to our supply chains. We manage Infineon sustainably and are committed to acting sustainably for the benefit of society. Making a contribution towards containing global warming forms part of our mission. We have therefore set ourselves the target of becoming carbon-neutral by the end of the 2030 fiscal year; by 2025, our emissions are to be reduced by 70 percent compared with 2019. This target relates to Infineon's own greenhouse gas footprint and includes not only all direct emissions but also indirect emissions from electricity and heat. Already by the end of the 2023 fiscal year, our scope 1 and scope 2 emissions were 56.8 percent below the emissions for the base year 2019. The development of intelligent exhaust air abatement systems, the purchase of electricity from renewable sources and the implementation of energy efficiency schemes have all contributed to this reduction.

Our other sustainability activities are described in the separate report "Sustainability at Infineon". This report, including the summarized separate Non-Financial Report, which is based on the requirements set out in the German CSR Directive Implementation Act, can be downloaded from the internet at www.infineon.com/csr\_reporting.

Strategic guidelines

To achieve our strategic targets, we rely on a number of strategic guidelines to ensure sustainable corporate governance and profitable growth.

"Product to System" (P2S) and software

With our approach "Product to System" (P2S), we are fostering our leading positions in the area of power systems and IoT. P2S helps us to better adapt our solutions and products to customer requirements. We understand new trends early on and can develop innovative approaches together with our customers. As a result, our customers can realize sustainable benefits, among others, in terms of systems performance, system costs and development time.

For this to succeed, we have to understand the environment in which our customers' products are used, how these products are embedded in larger systems, with which other devices the products interact, what requirements they have to fulfill and what function they are intended to perform. We also have to consider which other active and passive components and control concepts they use and what capabilities our customers themselves contribute to the value creation process. Equipped with this knowledge, we can make the most of our competencies. We want to translate the technologically possible into marketable products that provide the greatest possible benefit to our customers. This helps us to continue to develop leading positions in our markets. Group strategy Strategic guidelines

In the context of P2S, software is playing an increasingly significant role. We have intensified our activities in this area in recent years through our own organic growth and strategic partnerships, as well as through the acquisitions of Cypress, Industrial Analytics and Imagimob. This means that we have at our disposal an entire ecosystem comprising software components and a development environment, as well as reference designs, product support, blogs, a developer community and online tutorials. An important element of this ecosystem is the ModusToolbox™ development environment. This includes reusable firmware that makes it easier for customers' developers to program microcontrollers and Wi-Fi and Bluetooth components. With software, we enable smaller customers in particular to make even better use of our products and thus increase our profitability.

Technology leadership and customer-focused innovation

In accordance with our strategic approach of thinking in application trends, our developers identify challenges early, together with our customers. This enables us to fulfill the promise of technological leadership. Through close cooperation, we learn to understand applications better, allowing us to identify future trends at an early stage and develop products that are tailored accordingly. In this way, we can offer our customers either individual components or complete solutions, including the necessary software, depending on their requirements.

We are continuing to enhance our leading technological position and expertise in our core markets through radical and customer-focused innovation. As a result, we are strengthening our core business and identifying long-term growth opportunities in adjacent business areas. As one of the market leaders in the field of power electronics, we began researching new materials such as silicon carbide and gallium nitride at an early stage, building up our expertise, and we are constantly broadening our product portfolio in order to generate added value for our customers.

From a technological perspective, compound semiconductors are of particular importance. Whereas most semiconductor components to date have been based on pure silicon, silicon carbide and gallium nitride are two chemical compounds with physical properties, in particular a wide band gap, that make it possible to produce semiconductors with even greater performance. These compounds allow for particularly efficient electric switches in the smallest space; for example, they make efficient charging stations for electric vehicles much more compact, allowing them to be installed in more places. We consider a strong position in compound semiconductors essential to reinforcing our leading position in power semiconductors and, thereby, in power systems. The acquisition of GaN Systems Inc., which was successfully completed after the end of the past financial year on 24 October 2023, will make a significant contribution to this. The Ottawa (Canada)-based company contributes a broad portfolio of GaN-based energy conversion solutions and first-class application expertise.

Value creation through differentiating in-house manufacturing and high quality

We are continuing to expand our in-house manufacturing in areas in which we create added value for the customer and differentiation for Infineon. Thus, we manufacture products in our own fabs when doing so means that our customers benefit from lower cost, higher performance or improved availability. This has been the case until now, for example, for power semiconductors and sensors. Customers are increasingly recognizing the competitive advantage offered by our in-house manufacturing by entering into long-term supply contracts and capacity reservation arrangements. Some customers make multi-year advance payments that support the cashflow during times of investments to expand production capacity. However, where manufacturing in our own fabs offers no additional customer benefit or opportunity to differentiate ourselves from the competition, we work together with contract manufacturers. This is predominantly the case for highly integrated digital products such as microcontrollers, connectivity components and security ICs, where the differentiation arises mainly

Group strategy Strategic guidelines

from the design and the software. To ensure and improve our delivery capability, even in times of scarce production capacity in standard technologies, we have signed supply agreements with our contract manufacturers, sometimes covering a period of several years.

Our 300-millimeter thin wafer manufacturing technology for power semiconductors is a clear indication of the value of differentiating manufacturing in our own fabs: As pioneers of this technology, the scale of manufacturing we have now reached allows us to achieve significant economies of scale. Compared with manufacturing on 200-millimeter wafers, we benefit from significantly lower costs and lower capital investment. This has enabled us to maintain our lead: With the factory at the Villach site (Austria), together with our 300-millimeter manufacturing facility in Dresden (Germany), we have established a closely coordinated manufacturing network across the two sites. In line with our "One Virtual Fab" concept, we are using the same processes, equipment, and automation and digitalization concepts in Villach and in Dresden. This generates economies of scale, but it also benefits the customer, as we have the flexibility to shift production volumes between the sites. We are applying a similar concept in the area of compound semiconductors between our sites in Villach and Kulim (Malaysia). The third module under construction in Kulim is also able to generate synergies with the existing 200-millimeter production infrastructure.

Expanding our capacity in line with expected market trends over the cycle has proved very effective and forward-thinking. For this reason, we have now decided to extend the third module significantly beyond its original specifications, creating the world's largest and most competitive manufacturing facility for silicon carbide semiconductors, reflected in a particularly efficient production landscape and substantial economies of scale. We are also expanding our site in Dresden as planned to include an additional 300-millimeter module for analog mixed-signal products as well as power semiconductors. These can be used in a wide variety of applications, such as data centers, automotive and IoT. The new factory combines the two growth areas, decarbonization and digitalization, and is designed to meet demand from our customers in the second half of the decade.

Our supply chains and our production are both particularly resilient. Our manufacturing facilities are spread across all major regions of the world, and our contract manufacturer and supplier base is broadly diversified. The investment in a production company in Germany (European Semiconductor Manufacturing Company, ESMC), which will be founded under the leadership of TSMC (Taiwan Semiconductor Manufacturing Company) and in which Infineon will hold a 10 percent stake, will play an important role in the geographical diversification of the supply chains.

High quality and reliability are key values for us, differentiating us from our competitors. Therefore, quality plays a key role in the lifecycle of an Infineon product – from its development and production to its supply and product-related services. Infineon is certified worldwide in accordance with the leading quality standards and has an efficient management system.

In addition, clearly defined quality principles provide guidance for our employees. These principles have the overriding aim of honoring the pledges we have made to our customers relating, among other things, to product functionality and reliability. To achieve this, we attach great importance to understanding our customers' concerns and clearly defining their product requirements. Honoring our pledges is an essential guiding principle that is also reflected in the in-house cooperation we see at Infineon.

Tried-and-tested processes, methods and tools, together with continuous improvement programs, form the basis for the high priority Infineon attaches to quality. Our quality departments are embedded in the global organization. Regular events such as Quality Days at our global sites promote a greater awareness of quality, with the result that all Infineon employees are responsible for honoring our quality pledge within their own sphere of responsibility.

Portfolio management and inorganic growth

We conduct regular reviews to ascertain whether our operations, both individually and as part of our overall portfolio, make an appropriate contribution to the success of Infineon. This enables us to target the use of our financial resources and, as a result, to continue to improve our profitable growth. We consider individual operations from various points of view, such as value creation, current and expected market position, significance to the customer and risk assessment. On this basis, we decide the extent to which we will invest in or divest an operation. Growth prospects and profitability are mutually dependent here, with profitability enabling investment and ensuring sustainable innovation and growth as a result.

We will continue to supplement our organic growth in the future with selective acquisitions. These acquisitions will need to fulfill three criteria: a) be strategically beneficial based on the portfolio process, b) be financially advantageous and c) be a good cultural fit. A purchase must strengthen Infineon's market position in accordance with our strategic focus, usefully complementing our range of competencies. The corporate culture of any potential acquisition must be a good fit with Infineon's culture or must add valuable elements.

A pioneer of digitalization

An important topic for us is Infineon's digital transformation, which we are driving forward using a strategic roadmap. As a global semiconductor manufacturer, we benefit from the digital transformation in two ways: on the one hand, as a provider and, on the other, as a user of digital solutions. As a provider, we use digitization and efficient platforms to support our customers in the best possible way throughout the customer relationship and the development process. We are constantly optimizing and expanding our website and web content, and it is important for us that all product-related information and support services are easily accessible.

The accompanying software products and digital services are increasingly being provided using appropriate licensing models via our digital customer interfaces, such as the Infineon Developer Center. A major focus is on scaling up technical support, so that, even in fragmented markets, we can provide support to customers during their product choice and design-in. The Infineon Developer Community offers round-the-clock technical support to all customers and continues to expand and improve by learning from customer queries and customer experience. With the specific usage of AI-based methods, we enable even better support for our customers through the use of powerful generative language models. This makes access to our resources faster and easier. We will therefore continue to expand the AI-based portion in the next few years. This is a particularly efficient way for us to ensure that customers use our products and, indeed, use them in a more effective and targeted way.

As a user, we also use digitization to optimize our internal processes and make them as efficient and future-proof as possible. So, for example, we connect our sites and contract manufacturers in accordance with Industry 4.0 in a virtual manufacturing network. In sales and marketing, we use applications based on methods for analyzing big data that enable us to provide our customers with targeted personal and increasingly customized support via our digital platforms. In addition, we evaluate customer behavior and customer requirements in a structured way and incorporate these results into the development of our solutions and products. In manufacturing, we are focusing to a greater extent on a high level of automation and the increasing use of artificial intelligence methods in order to continue to improve our productivity and quality. In all of these areas, we systematically analyze which processes can be further improved and optimized through the use of generative AI language models.

As part of our digital roadmap, we are focusing on the rapid implementation of projects. When selecting projects, we are guided by the direct value contribution to improving the customer experience through efficiency or productivity gains and by their function as the necessary basis for future digitization initiatives.

Group strategy Human resources strategy

Human resources strategy

Our human resources (HR) strategy is a key component of Infineon's success. It supports us in our efforts to achieve our growth and profitability targets and enables us to successfully navigate our way through varying economic phases and challenges. Our HR understanding is "People create value. Engagement drives people". Our overriding objective is to foster our employees' engagement and to take targeted measures to achieve this. When employees are enthusiastic about their job, have the relevant skill sets, and can take advantage of suitable opportunities for continuing professional development, the outcome is a higher level of creativity, productivity and innovation, as well as better results. We use regular pulse checks of our employees worldwide to measure their level of engagement and thus keep our finger on the pulse of their needs, enabling Infineon to make continuous progress.

We consider it our responsibility to contribute to addressing the key societal challenges. Decarbonization and digitalization are having an impact not only on our world but also on the future of work. From this, we derive the key action areas of our HR strategy. Our main focus is on

1) attracting the best talent in the market, optimizing the onboarding process, developing internal talent and keeping it loyal to Infineon,
2) continuing to drive digitalization and standardization forward in HR and positioning ourselves in a scalable way to support Infineon's growth,
3) strengthening hybrid working where possible and practical,
4) pushing ahead with leadership development programs as well as employee training and skill enhancement, and
5) strengthening the area of organizational development in order to be prepared for further growth and to promote the desired internal cultural change (SPIRIT).

People are the main focus of our activities, as dedicated, healthy, successful employees are key to maintaining and improving our market-leading position, thereby creating a successful future for us all.

Further information, including detailed statistics, is available in the HR Report 2023 and the 2023 Sustainability Report.

www.infineon.com/hrreport

www.infineon.com/csr\_reporting

Research and development

Infineon | Annual Report 2023

Research and development expenses were €1,985 million in the 2023 fiscal year, compared with €1,798 million in the previous year. This increase of €187 million, or 10 percent, was less than the increase in revenue. Accordingly we invested 12.2 percent of revenue in research and development in the 2023 fiscal year, compared with 12.6 percent in the previous year. Capitalized development costs in the 2023 fiscal year were €214 million (previous year: €209 million). The amortization of capitalized development costs in the 2023 fiscal year was €93 million (previous year: €94 million). Subsidies and grants received for research and development increased from €113 million in the 2022 fiscal year to €130 million in the 2023 fiscal year.

At the end of the 2023 fiscal year, Infineon employed 12,830 people (22 percent of the total workforce) in research and development worldwide. Of these, 1,645 worked on software. At the end of the 2022 fiscal year, 12,005 people were employed by Infineon in research and development worldwide (21 percent of the workforce). The number of research and development sites in the 2023 fiscal year was 69 (2022: 64) in 25 countries.

Infineon's research and development activities are in accord with its strategy of continuing to strengthen its leading technological position through customer-focused innovation. Research and development activities therefore concentrate on continuing to improve our power semiconductors, with a particular focus on the use of new materials such as silicon carbide and gallium nitride. Important development goals are to improve efficiency and increase power density while at the same time maintaining a high level of reliability.

Research and development activities are also focused on the digitization of products and solutions as an essential prerequisite for the implementation of our P2S strategic approach. The opportunity to offer customers all-in-one solutions is particularly important and provides them with benefits in terms of system performance, system costs and development time. The main development fields here are microcontrollers, connectivity and security solutions, and software.

Artificial intelligence (AI) methods are being used in a wide variety of applications to improve products and processes. In the field of edge computing, for example, AI is used in combination with our smart sensors and microcontrollers to classify tone, key words or gestures to enable the adoption of new and innovative approaches in human-machine communication. In addition, AI supports many processes such as chip design, marketing and production.

We are also addressing longer-term future-related topics in areas such as quantum computing and post-quantum cryptography.

Patents

Another indication of Infineon's innovative power and long-term competitiveness is the number of our patents. In the 2023 fiscal year, we applied for around 1,850 patents worldwide (previous year: around 1,700). In addition to patent applications and expirations, there were changes in the portfolio due to regular strategic patent portfolio adjustments. Maintenance of the patent portfolio is carried out on a regular basis. This has resulted, along with new patent applications for inventions, in a significant increase in the relevance of the patents, as highlighted again by LexisNexis® and Clarivate® in their innovation reports. At the end of the 2023 fiscal year, the worldwide patent portfolio comprised around 29,700 patents and patent applications (previous year: around 29,600).

Research and development