Unrest at Infineon as manufacturers feel the pressure in a faltering chip market

The German based chip manufacturer Infineon Technologies recently announced that CEO Wolfgang Ziebart will resign from his post over ‘strategic differences’ after four years in charge. During his time at the helm Ziebart re-aligned the company and formed a separate entity Qimonda in 2006. It is believed that Peter Bauer, a member of the company's board and head of its automotive chip business will take over as Chief-executive. Infineon Technologies offers semiconductor and system solutions and operates through the U.S. and Asia with approximately 43,000 staff. However, in a declining chip market the company has lost billions of dollars in recent quarters, primarily because of its majority stake in its memory division Qimonda.

The decision to invest in a notoriously volatile commodity market has not proved a success for the Neubiberg-based company. For the fifth consecutive quarter, Infineon suffered heavy losses of nearly £1.4 billion, dragged down by a £482 million deficit at its memory chip unit Qimonda. Contributing to the losses were decreased revenues in the wireless and chip business due to reduced volume demand and a slowdown in the market. Ziebart described the U.S. dollar-Euro exchange rates as “materially adverse”. Financial reports also suggest that Infineon is experiencing difficulties in the mobile phone chip market, struggling to compete with global heavyweights such as Texas Instruments and Qualcomm. In an official statement Infineon suggested that without Qimonda, in which it still holds a 77% majority stake, it would have recorded profits of around £30 million.

Unsurprisingly, it seems as if Infineon are desperate to offload their struggling companion. The assets and liabilities of Qimonda have been reclassified as ‘held for sale’ and operating results are reported as ‘discontinued operations’. Following these modifications the investment in Qimonda has been reduced to its current fair value less costs to sale, culminating in the aforementioned losses of over £1 billion. To rub salt in the wounds, shares of Infineon fell nearly 2.5% on the German stock exchange.

Ziebart’s failure to get out of the memory market may have ultimately cost him his job. Before his resignation he said that if the fall of the dollar against the euro was sustained throughout 2009 it “would negatively impact profits for next year by about 120 million Euros, based on our current revenue projections. Reaching a 10% margin under such circumstances would not be possible.”

Despite differences of opinion over strategic direction being the official reason for his departure, rumours are rife that Ziebart opposed a potential deal with Dutch chip manufacturer and market leader, NXP. A German national newspaper ‘Die Welt’ reported that the investment company Kohlberg Kravis Roberts & Co. were in advanced talks with Infineon that could see them become the biggest stakeholder and combine the company with NXP, a move that Ziebart allegedly was unhappy about.

Although Ziebart supposedly resisted the merger market analysts have predicted the potential deal would prove fruitful for both parties. Guenther Hollfelder, an analyst for UniCredit said, “NXP has a similar operating-profit margin potential as Infineon and additionally no commodity-memory-chip exposure. Infineon and NXP would be clear global-market leaders in the high-margin automotive and industrial markets.”

Infineon will now focus upon the ‘IFX 10-Plus’ program to improve the company’s results. The project is a number of initiatives and programs concerned with ‘accelerating the operational execution of the strategic re-alignment.’ Essentially, ‘IFX 10-Plus’ comprises of three core targets:

-Margin improvement through consistent portfolio management.

-Margin improvement through a stronger cutting of cost of manufacture.

-Margin improvement through increasing the efficiency of the organization.

For these aims to be achieved the new CEO Peter Bauer will have to be more ruthless in his management style and this could mean cutting costs and subsequently staff personnel. It is very likely that Ziebart won’t be the only person leaving Infineon in the near future.

It’s not just Infineon Technologies that are feeling the pressure of a struggling memory chip market. Almost all chip manufacturers are being forced to slash their costs and prices due to a sustained period of declining quarterly results. DRAM prices have collapsed and losses have ballooned, so what now for the memory chip industry?

To illustrate the extent of the plunge, we can look at the varying prices of SDRAM chips, the most commonly used memory chip in computers. Synchronous dynamic access memory chips (SDRAM) sold for £13 last year and today sells for a jaw-dropping £1.50. Andrew Norton, a Gartner Group analyst said, “Relative to cost of production, the market is at the lowest point it's ever been.” That's good news for consumers, who can purchase for a fraction of last year's prices, but disastrous for manufacturers who despite repeated rounds of layoffs are unable to cut costs deeply enough to squeeze out a profit. Research conducted by Dataquest revealed that DRAM prices were declining by around 32% every year.

Faced with the threat of slower sales, manufacturers have frantically cut prices. The subsequent price war resulted in manufacturers losing cash by the bucket load. Speculation has even mounted that several companies might sell out to competitors or shut up shop altogether. VLSI Research, which tracks the semiconductor industry, says that all of the leading manufacturers have trimmed production, hoping to reach a balance of supply and demand. However, the memory chip market is infamous for its ‘bust and boom cycles’. Industry analysts are confident the industry will bounce back and recover as it previously has done. On a brighter note for manufacturers, the revival of the PC market is likely to benefit the resurgence of new memory technologies, boosting the fortunes of those who outlasted the current downturn.

(Smartcard News Ltd, 2008)

NFC Forum: Advancing near field communication technology – Webcast with Vice-Chairman Gerhard Romen

The vice-chairman of the NFC forum Gerhard Romen gave the industry an insight into the progress of NFC technology and the accomplishments of his organisation during an educational webcast conference. Romen discussed the problems associated with NFC, as well as revealing details of latest specification developments and prospective dates for commercial use.

Since its inception in 2004, the NFC forum has attracted 150 members worldwide, a 20% growth in membership numbers each year. In March 2005 when the forum conducted its first working session it had just 20 members. Romen pointed out that the NFC forum members represented the entire industry.

“Our members include market leaders such as NXP in the silicon and chip industry, MasterCard in the financial sector, and major operators like Vodafone. 90% of all mobile phone companies are represented.”

So what makes NFC such an attractive application? Romen and the forum believe the technology is ‘revolutionary’ and ‘potentially limitless’ in its capabilities. “NFC is useable, consumer-focussed technology. It enables interaction by simply pointing; it’s fast to set up and can be used in a variety of different formats.”

The application already incorporates existing contactless technology. NFC-compliant mobile phones with payment and access capabilities are compatible with the infrastructure and supported by players in the payment sector, most notably the likes of Visa, American Express and MasterCard.

There are currently 60 NFC projects being piloted in the Far East, USA, and Europe including Transport for London. Commercial rollout is anticipated in 2009, and the NFC forum expects 200 million NFC-compliant mobile phones by 2012. Romen said,

“User trials are well under way across the world, and projects are becoming bigger and bigger. NFC technology will be one of the fastest uptakes in consumer electronic technology and will facilitate revenue of $36 billion by 2011.”

However, there are associated problems that the NFC forum is looking to eradicate.

“There are certain elements we are not happy with. The attractive benefits of NFC can sometimes be too complex for a large commercial audience, we need to be broadly interoperable and consumer friendly. Proximity technologies must evolve.”

Romen was quick to dispel any suggestions that NFC exposure near petrol pumps could put in the consumer at risk. “NFC uses a radio frequency and is passive; it only has a close range span of around four centimetres. Of course use of mobiles is not allowed in many petrol stations but tests will need to be done.”

The key focus areas for NFC are the payment sector, contactless, ticketing and service discovery. Today consumers can use public transport, pay for goods, and share business cards using their mobile phones. In the state of Monaco, NFC is used to provide smart posters and web contact on a tourist trail of the region. NFC isn’t just confined to mobiles either. Romen suggests that in the future laptops, TVs and entertainment will use NFC and the technology will be implemented commercially in other areas of the marketplace.

“Besides ticketing, finance and transport there are a great number of other ideas in which NFC can be implemented. For instance, in the security industry some businesses already use NFC technology when tracking their guards. Hotels may use NFC as a lock system. A customer’s mobile phone would act as the key to enable access to a room, and he could check in online using NFC to avoid queues at the front desk.”

So what were the aims of the NFC forum at the current time? Romen highlighted three main core application areas that the organisation was looking to develop in 2008. These were to improve canned electronic devices, to access digital content and to enable smoother contactless transactions. To accomplish this, the NFC forum has created several new specifications which are likely to be released within the next few months. One of these is ‘Mode Switch’, an application that enables automatic conversion between reading, writing, and peer-to-peer. Another is the NFC controller interface which allows for multiple secure storages.

Romen stressed the importance of the new specifications saying, “Lots of work must be done on security measures to make NFC solid and useable. We have published technology architecture and released nine technical specifications including ones regarding common data format for devices and tags, and a series of NFC forum plugfests. The NFC target mark will also be approved probably by the first quarter of 2009.”

The NFC target mark is the brand that will appear on every NFC-compliant device so consumers can easily recognise its availability. Romen attributes the increased market awareness and the established stable technology as factors in the success of the brand.

“The USA and the rest of the world are prepared for NFC, and understand the technology to a greater extent. The forum has three pillars, the technical department that works on specifications, the compliance department that focuses upon testing and the marketing sector that has allowed us to improve our communications and increase awareness of NFC, for example NFC zones at every major trade show.”

Romen emphasised the NFC forum’s position as a standardisation body and explained that despite not being regulated by the ISO, the forum worked in conjunction with the organisation to ensure that products comply with strict NFC specifications.

“We aim to provide an open platform for all, and will strive to ensure all technology meets the required standards. In the future we will certainly be looking to compete in the market and with other players.”

(Smartcard News Ltd, 2008)

Latest figures reveal 43% increase in skimming related attacks

The European ATM Security Team (EAST) recently announced a 43% rise in skimming related fraud losses in 2007. ‘Skimming’ is the latest device used by criminal organisations as a means to obtain cash from ATMs and pay points. The technique is highly effective and difficult to trace, and comes in two forms: ones that interfere with the ATM operation and ominously, ones that leave the victim completely unaware. So how does skimming work?

Well, imagine you insert your card into a seemingly unassuming ATM machine. However this particular ATM has been tapped with a skimming device and will read all the account information stored electronically on the magnetic stripe. The device could even record your personal identification number as you punch it in on the keypad. Before you know it, your account balance is considerably lighter.

Last year in Europe alone, there were 5000 reported cases of skimming fraud attacks. There were nearly as many reported physical attacks in the shape of robbery or gas. Physical attacks have risen by 65% and while cash losses are well below that of fraud, the damage to people and property remains a headache for the industry. These various criminal activities accounted for the loss of 306 million Euros stolen from European ATMs, a statistic that is sure to concern members of the EAST organisation.

EAST is a non-profit organisation set up in 2004. Its members gather and collate information regarding ATM security and work with deployers and international law enforcement to reduce the risk of fraud. Lachlan Gunn, the director of EAST spoke of his concern at the increase in skimming fraud attacks but insisted his members were working hard to eradicate the problem.

“Despite the increasing fraud figures being a great concern, we continue to benefit from international cooperation within the industry, we continue to focus on identified fraud trends for ATMs and other payment terminals. The data we gather continues to be of benefit to all involved in the cross border fight against organised crime.”

A 173.6 million Euro increase in international losses has generally occurred in countries where the ATMs deployed are not EMV compliant (EMV is an industry standard for Smart Cards and card readers). However, fraud losses in Europe are decreasing year after year, possibly as a result of an increasing number of EMV compliant ATMs in the continent. Today, 78% of European ATMs are compliant with EMV.

Alas, EMV compliance for ATMs has not halted the fraudsters completely. Although criminals seek non compliant ATMs to obtain cash, data can be skimmed from EMV cards and sent to criminals in countries without EMV compliance or where magstripe fallback is allowed. The data is then used to illegally withdraw funds from the victim’s account.

The fact that there are so many ATMs contributes to the problem of skimming. In a way, we've become victims of the convenience we demand. The notion of 24-hour access has given criminals options they previously didn’t have. Today ATMs are everywhere, sometimes in unattended locations. Whereas ATMs through the wall of a bank branch are monitored regularly, it is far more difficult to keep tabs on obscurely located pay points in the many newsagents and petrol stations across Europe.

It’s not just the work of a simple crook either. According to Rob Evans, marketing director of the ATM manufacturer NCR, the criminals are ‘efficient and competent’. “They're consummate businessmen. They adjust for the last countermeasure that we put in place. We build the wall higher, but they keep coming back with taller ladders.”

It seems as if fraudsters haves recognised the potential bounty of skimming and are willing to invest time and money into the devices. However, measures have been put in place to oppose the threat. One such technology is called Jitter, a device deployed on newer, motorized card readers. Jitter varies the speed and reverses the direction of the card intermittently and randomly upon the card’s entry. This prevents skimming as the illegal device needs a smooth card reader.

Lachlan Gunn also maintained that EAST were striving to prevent the risk of skimming. He said, “EAST members maintain close liaison with the vendors of anti skimming devices, and European ATM deployers have made a significant investment in such devices. The potential financial return of the criminal practises are staggering.”

(Smartcard News Ltd, 2008)

Student complaints rise for third consecutive year

An increasing number of students are lodging complaints against their universities. A report released by the Office of the Independent Adjudicator for Higher Education (OIA) revealed that the number of complaints had risen 25%, an increase for the third consecutive year. According to the OIA, almost two-thirds of the received complaints were regarding academic results, while disciplinary matters and plagiarism accounted for the remaining majority. One of the reasons for the friction between students and their universities is the desire for value for money, at a time when student’s fees are escalating at a concerning rate.

The OIA was set up in 2004 to review student complaints from the 146 universities in England and Wales. The independent adjudicator Ruth Deech, called on Universities to cater better for the changing make-up of the student population.
‘Today there are more graduates and older students, more foreign students, more with disabilities and an increasing number from non-traditional backgrounds. This year alone, 64% of the complainants were mature students over 25, and more than a third were postgraduates. The largest groups of complainants were medical students.’

However, Beech supported the need for British institutions to uphold high standards when marking student’s work claiming it would be ‘unrealistic’ to reduce conflict over grades. The adjudicator recommended that a total of £173,000 be paid as compensation to the complainants. Last year, just 26% of complaints were upheld or deemed eligible for consideration. Although that is a 7% increase on 2006, the majority of student grievances are still ignored.

It is a mounting perception that graduates would not be considered by potential employers unless they obtained upper second or first class degrees. While this opinion remains the OIA can expect an ever-increasing number of complaints by students determined to keep up with competitive university expectations.



(The National Student, 2008)