Chip maker Infineon yesterday added to the pall of gloom hanging over the technology sector, forecasting that it will slide into the red this year and warning that it could see little sign of recovery.
The German group, which has already announced plans to slash capital spending and a freeze on new recruitment, said that it was now looking at further ways to cut costs and could not rule out job losses. "Visibility for the market development in the second half of calendar year 2001 remains low, and there are no clear signs of a market recovery in the coming months," the group said.
Infineon, Europe's second largest semiconductor maker, said it has been hit by plummeting prices and had been forced to take a €209m (£128m) write-off against stock. That left it with an operating loss of €598m in its third quarter, in line with an earlier profits warning.
Infineon makes both memory chips - used in PCs, servers and laptops - and logic chips for both wired and wireless applications in the telecommunications industry. Losses at the mobile communications business rose to €176m while the memory business fell €340m into the red.
One of the few bright spots was the performance of the automotive and industrial sector, where demand from German car makers meant earnings were ahead of the same period last year and only fractionally below the previous quarter.
Until the third quarter Infineon's spread of operations had enabled it to ride out the downturn in the memory sector. But yesterday, president and chief executive Ulrich Schumacher acknowledged that in the last three months the downturn in the market "finally had a negative impact on Infineon's overall business".
"Our balanced product portfolio did not help to ease the current weakness in the memory market any longer. This dynamic development and the magnitude of the current downturn, especially in communications, was not expected," Mr Schumacher said.
"Due to the current negative market conditions, Infineon expects to incur a net loss in the fourth quarter as well as a loss for its fiscal 2001," the group warned.
Infineon is not putting a figure on the expected loss in the final three months but chief financial officer Peter Fischl indicated that it would be less than the third quarter deficit.
Karsten Iltgen, an analyst at WestLB Panmure, said there was little surprising in the Infineon figures. "The outlook was very vague, but it would not have made sense to do it any other way. Visibility is simply very limited."
Infineon believes it is well positioned to take advantage of an upturn. It is building a new facility at its Dresden plant to produce 300mm wafers, capable of being turned into 2.5 times as many chips as conventional 200mm wafers. "That would give us a 30% cost advantage," said a spokeswoman.
Earlier this month Infineon, in which Siemens has a 51% stake, raised €1.5bn through a capital increase. Yesterday the group said it planned to use the cash to fund future capital expenditure, make acquisitions and to provide working capital. It is also expected to raise €500m to €600m from the sale of its stake in Osram Opto, a lighting company.
Shares in Infineon yesterday rose slightly to just over €27, still ahead of the €25 at which they were offered to investors in the €1.5bn capital increase.
