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Monday, September 22, 2003

Infineon to invest $1.2 bn in booming China

Reuters
Shanghai, September 17

Germany's Infineon, the world's sixth-largest semiconductor maker, will
invest $1.2 billion in China up to 2007 to tap booming demand for microchips
and electronics in the country's multibillion-dollar market.

China's semiconductor sector is experiencing one of the fastest growth rates
of any major chip market in the world. Infineon has said it would spend
$241.4 million over five years on a new chip assembly plant in the eastern
part of the country.

"The planned investment in China until 2007 is $1.2 billion, which is a
significant part of our overall spending," Infineon Technologies AG's chief
executive Ulrich Schumacher told a news conference in Shanghai on Wednesday.

Infineon, Europe's number two semiconductor maker, hoped to capture 40 per
cent of China's market in memory products, including DRAM (Dynamic Random
Access Memory), up from nine per cent, Schumacher said.

"It should be definitely somewhere between $500 million and nearly $1
billion depending on the DRAM prices," he told reporters after the news
conference.

In the six months ended June, Infineon's revenues in China grew 30 per cent
from a year earlier to almost $250 million, company executives said, but
declined to give any forecast.

"Since we expect the Chinese market for personal computers and consumer
electronics to grow even faster than the world market, China will become a
home base for motherboard and PC production for both domestic sales and
exports," Schumacher said.

Market research firm Gartner Inc estimates China's market will be worth $30
billion this year, up 18-20 per cent from 2002, and would jump another 20
per cent to $36 billion by 2004, or about 42 per cent of the Asia-Pacific
semiconductor market.

RECOVERY

Schumacher expected a global recovery in sales volume for an industry
emerging from its worst-ever downturn in 2001 when sales plunged 34 per cent
as economies slowed and the telecoms and dot-com bubbles burst.

But he cautioned that competition would remain stiff. "I think it's going to
be a difficult market for quite a while."

Infineon's shares ended at 12.61 euros on Tuesday, up from 12.53 euros a day
before and gaining about 80 per cent since the start of the year, partly due
to the recovery in the global semiconductor business, industry executives
said.

Still, Infineon is grappling with its share of problems. It narrowed its
loss in the quarter to June, but has spent the past nine straight quarters
in the red.

It now aims to grab a six per cent global market share over the next five
years from rivals such as Samsung Electronics Co Ltd and Elpida Memory Inc,
a joint venture between Japan's Hitachi and NEC Corp.

In the third quarter ended June, the company reported 1.47 billion euros
($1.64 billion) in sales, up from 1.32 billion euros a year earlier and
almost flat from the second quarter's 1.48 billion euros.

Infineon was aiming for annual sales growth of 20 per cent in Asia, company
executives were quoted in German media as saying earlier this month, without
elaborating.

The company also plans to increase outsourcing to places such as China. It
is in talks with Grace Semiconductor Manufacturing Corp over possible
cooperation and also hopes to win a major order to supply microchips for use
in identity cards for a billion people, but nothing has been sealed yet.

© Hindustan Times Ltd. 2003.
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