London Calling: Infineon prepares to hibernate

London Calling: Infineon prepares to hibernate

Like a cross between a German banker and German bear Reinhard Ploss, newly-installed CEO of chipmaker Infineon Technologies, is turning down the lights, putting on his nightcap and preparing to go to sleep.

It's not exactly a dynamic image but in the last couple of quarters Infineon (Munich, Germany) has become one the most bearish of companies and is forecasting a bad winter and a current fiscal year – Oct. 1 2012 to Sept. 30, 2013 – that will be down on the last fiscal year by a mid-to-high single-digit percentage rate – ouch.

And now incoming CEO Ploss is implementing the corporate equivalent of a national austerity package although – thankfully – lay-offs of direct employees are not mentioned. Instead Ploss is looking to put workers on short-time working to try and weather an "economic storm."

Wilkins Micawber was a character created by Charles Dickens and who appears in the novel David Copperfield. It was he that reduced economics to a simple aphorism: "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

It seems that Ploss is determined to follow the Micawber principle and cut Infineon's cloth according to its means.

However, it is unusual – and worrying – to hear of a company that is seeking to identify projects that can be temporarily postponed or stopped so that machines can be switched off and hands made idle. Even Infineon's initiative to make power semiconductors on thinned 300-mm diameter wafers has been affected by this. The standard in the industry is 200-mm wafers and the use of larger wafers would give Infineon a cost advantage over its competition. In a statement Ploss said: "As soon as Infineon sees demand, we will develop our production capacities. In the face of the weak economy, it may take some time until we can fully make use of the benefits of 300-mm technology."

Next: Fiscal engineering
TAG:London Calling Peter Clarke Reinhard Ploss Infineon