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Infineon Technologies AG

Investor Presentation • Sep 1, 2005

222_ip_2005-09-01_d333b09a-4e95-47d9-bd3b-878aaf181ed1.pdf

Investor Presentation

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Investor Meetings

Investor Meetings

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F4Q FY05

Slide -1-

Fiscal 4th Quarter FY05 ñ July-September 2005

Disclaimer

Please note that while you are reviewing this information, this presentation was created as of the date listed, and reflected management views as of that date.

This presentation contains certain forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.

Such risks and uncertainties include, but are not limited to the Risk Factors noted in the Company's Earnings Releases and the Company's filings with the Securities and Exchange Commission.

Investor Meetings F4Q FY05 Slide -2-

Agenda

Quarterly Update & Financials Quarterly Update & Financials

Automotive, Industrial & Multimarket Automotive, Industrial & Multimarket

Communication Communication

Memory Products Memory Products

Outlook Outlook

Investor Meetings F4Q FY05 Slide -3-

Overview ñ Market Environment and Results in F3Q

IFX Group IFX Group

  • !Stable revenues compared to F2Q with increased memory sales !Stable revenues compared to F2Q with increased memory sales
  • ! Significant ASP-decline in memory market of approx. 30% !Significant ASP-decline in memory market of approx. 30%
  • ! Rapid decline of market demand in chip card and security IC area !Rapid decline of market demand in chip card and security IC area
  • ! EBIT loss increased to EUR 234 m incl. EUR 81 m one-off charges !EBIT loss increased to EUR 234 m incl. EUR 81 m one-off charges
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Investor Meetings F4Q FY05 Slide -4-

Results for Q3 vs. Q2 of FY05

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Investor Meetings F4Q FY05 Slide -5-

Maintaining a Solid Financial Cash Position

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Investor Meetings F4Q FY05 Slide -6-

(1) Excluding purchase/sale of marketable securities

Continuing IFXís Commitment to Restructuring

  • !Fiber-to-the-home optical component activities (BIDI) sold to Taiwan-based EZconn
  • !Corporate Research to be integrated in BGs
  • !eupec GmbH to be integrated into IFX AG (maintaining products & brand within AIM BG)
  • !Wearable electronics and RFID software activities spun off by MBO

Investor Meetings F4Q FY05 Slide -7-

Recent Management Changes

Mr. Kin Wah Loh ñ Now head of BG Memory Products Mr. Kin Wah Loh ñ Now head of BG Memory Products

  • ! ! ! ! !
  • Member of Management Board of IFX AG since 2004
    • President of Infineon Technologies Asia Pacific 1999-2004
    • General Manager of various production sites of Siemens Semi
    • 25 years of experience in semiconductor and manufacturing
    • Engineering and Business degrees

Mr. Hermann Eul ñ Now head of BG Communication Mr. Hermann Eul ñ Now head of BG Communication

  • ! New Deputy Member of Management Board
  • ! Group VP and GM of Communication Business Group since 2004
  • ! Professor for RF-Technology and Radio-Systems at University of Hanover/Germany
  • ! GM of various Business Units at IFX AG and Siemens AG
  • ! 18 years of experience in R&D and management functions in communications and RF technologies
  • ! PhD in Electrical Engineering

Investor Meetings F4Q FY05 Slide -8-

Infineonís Business Groups

Automotive, Industrial & Multimarket

Communication

MPMP

Memory Products

Customers

Investor Meetings F4Q FY05 Slide -9-

BG Automotive, Industrial & Multimarket #2 in Car Electronics, #1 in Power ICs, #1 in Card ICs

Microcontroller, Automotive Power Sense & Control, Power Management & Drives Chip Card & Security ICs Discrete Semiconductors ASIC & Design Solutions

Investor Meetings F4Q FY05 Slide -10-

AIM ñ Recent Business Highlights

!Automotive

ñ Increased market share in car electronics from 8.7 % in CY03 to 9.1 % in CY04 (Source: Strategy Analytics, June 2005)

!Chip Card & Security ICs

ñ IFX to supply secure chips, package and more for German e-Passport

!Asic Design Solutions

  • ñ Agreement with a leading HDD manufacturer to develop a product for fast-growing mobile applications market
  • ñ Will supply 3 key components for Xbox 360ô: removable solid-state memory unit; a single-chip ASIC wireless game-pad controller; an advanced security chip

Investor Meetings F4Q FY05 Slide -11-

AIM ñ Recent Business Highlights

! Asic & Design Solutions

  • ñ Supplier of key components for the Microsoft Xbox 360ô games console:
    • !a removable solid-state memory unit
    • ! an advanced security chip

Investor MeetingsF4Q FY05 Slide -12-

In Automotive, Infineon Leads the Long-range Route

Outstanding performance: Outstanding performance: #1 in Europe, #2 worldwide, #3 in U.S. #1 in Europe, #2 worldwide, #3 in U.S.

Market 2004: USD 15 bn 100% 200% 300% 400% 500% 600% 700% 19941995199619971998199920002001200220032004Sales Growth 1994-2004 (CAGR) Infineon Automotive (20%) Automotive Semi Market (10%) Total Semis (8%)" Strong development in Europe " Improved in NAFTA & Japan Key applications- Powertrain - Safety management - Body & convenience - Infotainment IFX products - Sensors - Microcontrollers - Power devices - Wireless chipsets - Discretes Others 33.8% STM 8.3% Freescale 12.0% 9.1% Bosch 5.9% Philips 6.0%Toshiba 6.1%NEC 6.2% Renesas 7.0% TI 3.4% Fujitsu 2.2%

Investor Meetings F4Q FY05 Slide -13-

Source: (Market data) Strategy Analytics

IFX is Worldwide #1 in Power ICs and #4 in Industrial Applications

Industrial semiconductor market Industrial semiconductor market

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Power semiconductor market Power semiconductor market

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Key trends Key trends

! Power management market is expected to grow about 13% CAGR to USD 33 bn in CY09 from USD 16 bn in CY04 !Power management market is expected to grow about 13% CAGR to USD 33 bn in CY09 from USD 16 bn in CY04

!DC/DC !DC/DC

    • Cost/footprint per ampere - Cost/footprint per ampere
    • Solution business in PC motherboards and notebooks - Solution business in PC motherboards and notebooks

! AC/DC !AC/DC

    • Miniaturization of power supply - Miniaturization of power supply
    • Higher switching frequencies - Higher switching frequencies

Investor Meetings F4Q FY05 Slide -14-

Sources: (top) iSuppli, March 2004; (bottom) IMS Research, June 2004

Complete Coverage of DC/DC and AC/DC Applications

Investor Meetings F4Q FY05 Slide -15-

Source: Power Supply Workshop PEC, San Francisco/CA, January 2002

Chip Card and Security ICs Commanding Position Despite Difficult Environment

Addressing broad application base with ~40 % market share Addressing broad application base with ~40 % market share

Ongoing productivity measures in order to regain profitability Ongoing productivity measures in order to regain profitability

  • Volume roll-out of 130 nm process #Volume roll-out of 130 nm process

  • Focus on new 32-bit emerging applications #Focus on new 32-bit emerging applications

  • Accelerated shift to MicroSlim technology #Accelerated shift to MicroSlim technology

  • Shift to Flip-Chip-on-Substrate (FCOS) packaging #Shift to Flip-Chip-on-Substrate (FCOS) packaging

Investor Meetings F4Q FY05 Slide -16

IFX is #1 Worldwide in Chip Card and Security ICs

Investor Meetings F4Q FY05 Slide -17-

Source: Gartner Dataquest

Infineon AIM F4Q Outlook as of July 26th

  • !Estimating revenues and EBIT to remain stable sequentially
  • !Awaiting benefits from seasonal strength in auto and industrial
  • !Continued pricing pressure in chip card & security IC markets
  • !Continued focus on productivity improvements
  • !Planned phase-out of production in Munich and start-up costs for new site in Malaysia to negatively impact EBIT through end-CY06

Investor Meetings F4Q FY05 Slide -18-

BG Communication

Driving Convergence of Technologies and Applications

Broadband Access ñ Access and CPE RF Connectivity ñ RF Engine, RF Power, Tuner System, Short Range Wireless Mobile Phones ñ Entry Phone, Feature Phone, Platform Design, Software

Investor Meetings F4Q FY05 Slide -19-

(1) Excl. acquisition related expenses and net charges resulting primarily from reorganization measures.

COM ñ Recent Business Highlights

  • !MP-E GPRS/EDGE \$ one of smallest multimedia phone platform incl. all HW/SW components required for highperformance and advanced multimedia functionality; true 3-chip solution consists of multimedia baseband, power management unit and CMOS RF chip
  • !Panasonic/PMC \$ uses MP1-G multimedia platform now for GSM/GPRS phones; 3-band functionality and camera support, polyphonic-ring tones, color displays and Java capability
  • !SMARTi 3G \$ worldís first CMOS RF transceiver chip for UMTS applications; single-chip for 6-band solution makes UMTS phones usable worldwide; various design wins already
  • ! VINAX \$ industry's first fully standard-compliant VDSL2 end-to-end solution; established leading position with regard to Triple Play services

Investor Meetings F4Q FY05 Slide -20-

Wireless ñ Emerging Markets Remain Unit-growth Driver, Replacement Sales Shift Towards Feature Phones

Investor Meetings F4Q FY05 Slide -210

2003

2004 2005e

250

Sources: Infineon (2005), Gartner (Jan 2005), Strategy Analytics (Dec 2004)

2007e 2008e Replacement

!

!

! Personalized design

Reliable usage

Handset price

2006e

Investor Meetings

F4Q FY05

Slide -22-

CMOS ñ EDGE & 3G RF Transceivers Already Sampling, Providing Basis for Low-cost GSM/UMTS Single-chips

Dates refer to first customer samples available

IFX Introduced Worldwide First Single-chip RF/Baseband to Target Low-cost Phone Markets

Long-term experience Long-term experience

RF CMOS transceiver RF CMOS transceiver

  • !In volume production !In volume production
  • !130 nm CMOS !130 nm CMOS
  • ! Single-chip digital RF solution !Single-chip digital RF solution

Baseband Baseband

  • ! In volume production ! In volume production
  • ! 130 nm CMOS !130 nm CMOS

  • !Integrates: !Integrates:

    • Digital baseband - Digital baseband
    • Mixed signal - Mixed signal
    • SRAM - SRAM

Monolithic integration !30% lower BOM !30% smaller footprint !

Less complexity

Volume-ramp in 2005 Volume-ramp in 2005

Single-chip CMOS RF and baseband

Supports: Supports:

  • ! Up to GPRS Cl. 12 !Up to GPRS Cl. 12
  • !1.3 MPix camera !1.3 MPix camera
  • ! Dual color display !Dual color display
  • ! MP3 playback ! MP3 playback

Investor Meetings F4Q FY05 Slide -23-

Infineonís Ultra Low-cost Solution Featuring RF/BB Single-chip Already Sampling to Customers

Investor Meetings F4Q FY05 Slide -24-

Infineon Features Advanced Platform Applications

Applications Applications

Multimedia phone MP-E/EU platform

Feature phone (low-end) MP1-G platform Feature phone (low-end) MP1-G platform

Product features Product features

  • !Video conferencing and video streaming !Video conferencing and video streaming
  • ! Video recording with preview !Video recording with preview
  • !High-speed browsing !High-speed browsing
  • !3D sound and 3D gaming !3D sound and 3D gaming
  • ! Advanced J2ME features ! Advanced J2ME features
  • ! UMTS reception diversity ! UMTS reception diversity
  • ! 2 MPix still picture camera !2 MPix still picture camera
  • !Video playback and recording !Video playback and recording
  • !Video streaming without companion !Video streaming without companion
  • ! MPEG4, H.263, MP3, AAC++ !MPEG4, H.263, MP3, AAC++
  • !Voice recording and recognition !Voice recording and recognition
  • ! VGA camera module ! VGA camera module
  • ! Polyphone ringer: up to 40 voices !Polyphone ringer: up to 40 voices
  • !Video: MPEG-4/H.263 play/record !Video: MPEG-4/H.263 play/record
  • !Codecs: FR / HR / EFR / NB-AMR !Codecs: FR / HR / EFR / NB-AMR
  • ! Connectivity: IrDA, USB 2.0, Bluetooth ! Connectivity: IrDA, USB 2.0, Bluetooth

Investor Meetings F4Q FY05 Slide -25-

Wireline ñ Strong Positioning in Access Growth Markets

Investor Meetings F4Q FY05 Slide -26-

Sources: Dell'Oro 2005 (ADSL), IFX 2005; Gartner 07/2005 (T/E)

Critical Factors for VDSL2 ñ Infineon Has it All

Early availability "

  • !VINAX: 1st fully standard compliant VDSL2 chip solution
  • !IFX: Sole company meeting all regional requirements

"Experience

  • !More than 4 million VDSL1 lines powered by Infineon chip solutions
  • !Fully ADSL backwards compatible

"Complete solution

!Extensive line-card and CPE solutions portfolio including: DSL, Communications Processors, VoIP, WLAN, switch/PHYs

Investor Meetings F4Q FY05 Slide -27-

Infineon COM F4Q Outlook as of July 26th

  • !Expecting revenues to remain stable or increase slightly sequentially
  • !Anticipating EBIT to remain stable or improve slightly compared to 3rd quarter EBIT (excluding impairment charges)
  • !Awaiting wireline business to be profitable by end-CY 2005

Investor Meetings F4Q FY05 Slide -28-

BG Memory Products Leader in 300 mm DRAM Manufacturing

Computing ñ DT, NB, WS, Server Graphics ñ Graphic & gaming applications Consumer & Mobile ñ Low power appls Aeneon ñ Modules for white box markets Flash ñ NAND-compatible NVMs

Investor Meetings F4Q FY05 Slide -29-

(1) Excluding antitrust-related charges.

MP ñ Recent Business Highlights

  • !Started 90 nm production commercially with 512M DDR and DDR2 in volume
  • !Increased share of specialty DRAMs e.g. for infrastructure and graphics applications
  • !Sampling customized 8GB DDR2-400 tall registered DIMMs
  • !First to provide DDR3 samples with full interface functionality
  • !IDF news: 1st company to offer complete in-house solution for next generation server modules (FB-DIMMs - Fully Buffered Dual-In-line Memory Modules - with an AMB chip plus heat spreader)

Investor Meetings F4Q FY05 Slide -30-

ï

90 nm Trench Technology: Developed and Ramping

Highlights Highlights

  • 30 % more chips vs. 110 nm

  • ï 512M DDR with die size of <65 mm² is smallest in volume production \$ 1000+ chips per 300 mm wafer
  • ï App. 5% of DRAM capacity converted already in June quarter

First: 512M DDR Now: 512M DDR2

Product portfolio Product portfolio

  • ï 512M DDR2 qualified in July 2005
  • ï Standard 256M and 1G DDR2 as well as specialty DRAMs in 2006

Key innovations Key innovations

Checkerboard cell layout

Bottle shaped

trench with HSG

  • ï High-density arrangement of DRAM memory cells
  • ï Storage capacitors with highest capacitance in industry at 90 nm

Investor Meetings F4Q FY05 Slide -31-

300 mm Fabs Up and Running, Now Converting to 90 nm

Investor MeetingsF4Q FY05 Slide -32-

Shifting Memory Portfolio to Higher Margin Products

Investor Meetings F4Q FY05 Slide -33-

Infineon MP F4Q Outlook as of July 26th

Memory Market

  • !Demand estimated to pick up based on further increase in content per system and current overall low price level for DRAMs
  • !Only moderate growth of supply expected due to shift of capacities from DRAM to flash by some competitors
  • !Infineon anticipates a rather balanced demand and supply environment in the market, facilitating price stability during the quarter

BG Memory Products

  • !Infineon is confident that both, a further market growth and a stable price environment, combined with further operational improvements, will help to substantially reduce our losses in the current quarter
  • !Expecting bit-production to increase by ~15 % based on additional shipments from Inotera, foundry partners and ramp of Richmond 300
  • !Bit-shipments are estimated to increase above market average
  • !Continue focusing on expansion of portfolio with higher margin products and increasing share of 512M and DDR2 products

Investor Meetings F4Q FY05 Slide -34-

Agenda

Quarterly Update & Financials Quarterly Update & Financials

Automotive, Industrial & Multimarket Automotive, Industrial & Multimarket

Communication Communication

Memory Products Memory Products

Outlook Outlook

Investor Meetings F4Q FY05 Slide -35-

!Revenues and EBIT: expect firm improvement sequentially !R&D and SG&A: should remain roughly at a similar level

!Capex: expected range for FY05 is EUR 1.3-1.4 bn !Depreciation: expected FY05 range approx. EUR 1.3-1.4 bn !FY06: Capex & Depreciation ranges not expected to increase

!One-off charges: substantially lower, range of EUR 20-40 mn !Pay back of EUR 450 m credit facility from available funds !Tax expense rate: around 30 %

Investor Meetings F4Q FY05 Slide -36-

Investor Meetings

F4Q FY05

Slide -37-

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