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Electronics Production | April 28, 2006

Infineon Rises to Second Place<br>in Global DRAM Market

German chipmaker Infineon Technologies AG in the first quarter capitalized on weak performances by its rivals to take the number-two position in global DRAM sales for the first time, according to a preliminary estimate from iSuppli Corp.
Infineon achieved DRAM sales of $1.16 billion in the first quarter, up a blistering 49 percent from $778 million in the fourth quarter of 2005. This propelled the company's market share to 17.5 percent, up 4.9 points from 12.6 percent in the fourth quarter of 2005. Infineon's ranking rose to number two, two places higher than the fourth-place position it held in the fourth quarter, surpassing Micron Technology Inc. of the United States and Hynix Semiconductor Inc. of South Korea. This marks the first time that Infineon has taken second place in the market, according to iSuppli data. The table below and attached presents iSuppli's preliminary first-quarter DRAM ranking.

iSuppli Table: Preliminary Q1 2006 DRAM results (Ranking by Revenue in Millions of U.S. Dollars)

(Rank, Company, Q1 sales in $M
1. Samsung, 1,762
2. Infineon, 1,160
3. Hynix, 953
4. Micron, 886
5. Elpida, 640
6. Nanya, 445
7. Powerchip, 343
8. ProMos, 213
9. Etron, 70
10. Elite, 39

Infineon's surge in the rankings was partly due to disappointing results at Hynix and Samsung Electronics Co. Ltd. of South Korea, whose DRAM sales declined by 7 percent and 3 percent respectively during the first quarter. Hynix and Samsung lost 2.1 and 2.8 percentage points of share respectively compared to the fourth quarter of 2005.

"Hynix and Samsung in the first quarter reduced their rate of DRAM production increases, resulting in disappointing results for the companies," said Nam Hyung Kim, director and principal analyst, memory ICs/storage systems, for iSuppli. "These companies have been engaging in diversification efforts, shifting production from DRAM to more lucrative NAND flash parts."

Infineon also benefited from its massive increase in DRAM bit shipments, which rose by 30 percent compared to the fourth quarter. The company also achieved a 6 percent rise in its DRAM Average Selling Price (ASP). This was surprising, given that DRAM ASPs at Samsung, the market's longtime leader in selling premium parts, actually experienced a 1 percent decline in its first-quarter ASP.
Infineon was able to boost its ASP by selling a greater portion of graphics DRAM, which is sold at a higher price than commodity DRAM. Graphics memories accounted for 16 percent of Infineon's DRAM bit shipments in the first quarter, up from 8 percent in the fourth quarter of 2005. The company was the number-three seller of graphics DRAM in 2005. However, Infineon has entered into a deal to supply graphics DRAM for Microsoft Corp.'s Xbox 360 video-game console,
causing it to surpass Hynix and become the world's number-two seller of graphics DRAM in the first quarter.

"Infineon's rise to the number-two rank in the global DRAM market lays the groundwork for the planned spin-out of the company's memory division, which will be called Qimonda," Kim said. "This shows that Qimonda has the potential to be a strong competitor in the DRAM market after it becomes independent."

The other star performer in the first-quarter DRAM market was Elpida Memory Inc. of Japan, whose sales rose to $640 million, up 34 percent from $478 million in the fourth quarter of 2005. The company attained a market share of 9.7 percent, up 2 points from 7.7 percent in the fourth quarter, solidifying its fifth-place position in the global DRAM market.

While the customary market leaders, Samsung, Hynix and Micron, posted disappointing results for the first quarter, up-and-coming competitors from Taiwan all achieved increases in revenue. Nanya, Powerchip and Promos increased their DRAM sales by 7 percent, 9 percent and 5 percent respectively during the quarter. Due to strong sales of commodity DRAM to the PC market, global DRAM sales in the first quarter increased by 7 percent, which is higher than iSuppli's original
estimate.

iSuppli predicts 2006 will bring more shakeups in the global DRAM rankings.

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