MUNICH -- In a major move to reorganize its sales activities, Infineon Technologies AG here announced its first worldwide semiconductor distribution agreement with Avent Inc.
The deal is expected to be worth at least $1 billion over the next three years, and it will play a key role in Infineon's goal of reducing direct sales accounts from 2,000 to about 300. By serving more chip accounts through strategic distributors and third-party resellers, Infineon hopes to re-deploy its own sales organization to penetrate new communications chip applications and to increase its business in regions outside of Europe, said Peter Bauer, chief sales and marketing officer.
Infineon, the former semiconductor division of Siemens AG, has traditionally posted more than half of its chip sales in Europe and nearly a third in Germany. The global distribution pact with Avnet will help Infineon expand chip sales in other regions around the world by providing more services and support to customers.
For about 10 years, Infineon (and Siemens Semiconductor) used Phoenix-based Avnet to serve regions in the U.S. and Europe. The new agreement expands that relation worldwide. Infineon's distribution sales have amount to less than 15% of its total revenues, but the company is aiming to move about 20-to-25% of the business to the resell channel, said Bauer in an interview with SBN today at the Electronica 2000 trade fair.
The Munich chip company has begun to shift its business worldwide since spinning out of Siemens last year. European sales were 45% of Infineon's fiscal 2000 revenues compared to 57% in 1999. Germany accounted for 22% of Infineon's fiscal 2000 sales vs. 29% in 1999.
Infineon increased its North America sales 119% to 1.81 billion euros ($1.54 billion) in fiscal 2000, which ended Sept. 30, compared to 827 million euros ($703 million) in 1999. The company's chip sales in Asia (including Japan) surged 133.6% to 2.1 billion euros ($1.79 billion) in fiscal 2000 compared to 899 million euros ($764 million) in the prior year.
In contrast, Infineon's European and German chip business grew at a much slower rate in fiscal 2000. The company's German chip revenues rose 29.8% to 1.61 billion ($1.37 billion) in the last fiscal year vs. 1.24 billion euros ($1.01 billion). Outside of Germany, Infineon's European chip sales grew 37.9% to 1.65 billion euros ($1.40 billion) in the 2000 fiscal year compared to 1.2 billion euros ($1.02 billion) in the 1999 period.
Since spinning out of Siemens, Infineon has been able to pursue strategic relationships with communications and telecom systems companies, which are direct competitors with its former parent company. "One very good example is Alcatel, which has really opened up to discussions," Bauer said, referring to the Paris-based telecommunications giant.
Cisco Systems Inc. in San Jose is another system house where Infineon believes it is making significant inroads as a strategic supplier. "I was impressed that we got a design win with embedded DRAM technology, and that seems to have started the whole thing moving forward," Bauer said. "Now we are in heavy talks about VDSL very high bit rate digital subscriber line," he said referring to the broadband technology that's capable of moving data, voice, and video at speeds up to 26 megabits per second. Infineon is also now working closely with Nortel Networks Corp. in optical technologies for communications applications.
The effort to push deeper into new markets and regions is part of a "New Allies" campaign launched three months ago by Bauer. Communications has become a major focal point of the campaign. In fiscal 2000, Infineon increased its communications chip sales 30% to 2.83 billion euros ($2.41 billion). Infineon's communications revenues reached 39% of its total sales of 7.28 billion euros ($6.19 billion) in the company's fiscal 2000 year. Memories (mostly DRAMs) accounted for 48%, or 3.47 billion euros ($2.94 billion), while automotive was 13%, or 979 million euros ($832 million) in the last fiscal year.
Infineon is aiming to make memory revenues about 30-40% of its total business, said Bauer. And to do this, the company aims to keep its global market share at about 10% in DRAMs, while increasing its communication chip sales in wireless, wireline, and automotive segments. "We would like to have communications at 50% of sales in the next two years," Bauer said.
The company believes it can remain competitive in the DRAM business by focusing on leading-edge processes for small die sizes and using 300-mm wafers. Infineon last year became the first chip maker to use the larger diameter substrates to make products for the marketplace at its fab in Dresden, Germany. Last spring, Infineon announced plans to invest $1 billion to set up 300-mm volume production in Dresden (see March 31 story).
In DRAMs, Infineon aims to serve a relative small group of customers as a strategic supplier, said Bauer. Infineon's top customers in DRAM are Acer, Compaq, Dell, Hewlett-Packard, and IBM. About 50% of Infineon's memories were shipped to these top five accounts vs. 22% in 1997.