The German chip manufacturer Infineon has announced drastic measures after disappointing results in the third quarter of its fiscal year 2024. The company not only lowered its annual forecasts for the third time in 2024, but also confirmed that it will lay off 1,400 workers and relocate another 1,400 positions to countries with lower labor costs to reduce expenses.
Cost reduction measures
Jochen Hanebeck, CEO of Infineon, explained that these decisions are part of a cost-cutting program called Step Up, which the company had already announced. With this plan, Infineon expects to save about $1.1 billion annually by 2027. Hanebeck assured that, despite the challenging market environment, Infineon remains strong. “The recovery of our market objectives is progressing, just at a slow pace,” he commented. He pointed out that the prolonged weak economic situation has led to inventory levels exceeding demand in many areas, emphasizing the importance of strengthening the company’s competitiveness through the Step Up program.
Layoffs and relocation
Although forced layoffs in Germany have been ruled out, it is expected that the cuts will affect several hundred positions at the Regensburg plant, located in the south of the country. Currently, Infineon has 58,600 employees worldwide, and the layoffs and relocations represent a significant adjustment to its global workforce.
Third quarter results
During the third quarter of its fiscal year 2024, Infineon reported a year-on-year revenue decrease of 9.5%, reaching 3.702 billion euros, a figure that fell below the forecast of 3.8 billion euros. However, thanks to growth in its sensor systems and energy divisions, total quarterly revenues grew by 2% compared to the previous quarter. These divisions experienced a 4% improvement between both quarters, totaling 734 million euros.
Outlook and challenges
Infineon’s announcement underscores the challenges facing chip manufacturers in an uncertain global economic context. The company is adjusting its strategy to address weak demand and high inventory levels while seeking to maintain its position in a highly competitive market. The implementation of the Step Up program will be crucial for the sustainability and future growth of Infineon as it adapts to changing market conditions and works to strengthen its long-term competitiveness.