MUNICH, Germany — Against the background of sluggish sales, Infineon has announced to cut more than 10 percent of its workforce as a part of the company's IFX-10+ cost-cutting program. German locations are hit hardest.

Currently, Infineon employs 29.500 workers at locations in Europe, the USA and Asia, with Munich, Dresden and Villach (Austria) being the largest R&D and production locations for the chip company. The job cuts will hit all sites, functions and levels of the company, the company announced. However, some locations are hit harder than others.

In terms of workforce percentage, the Regensburg fab will suffer the worst: Of a total of 2400 jobs at that location, 600 will be eliminated, Infineon CEO Peter Bauer explained in a conference call with the press. In Regensburg, the company manufactures sensors for automotive applications, smart card modules and packages, and certain communications products.

The Munich headquarters will also be hit hard: 650 of 4400 jobs here will be cut, mostly in administration, sales and marketing and R&D functions. Villach (Austria), where Infineon develops and manufactures power semiconductors, will have to sacrifice 400 of its 2400 jobs. In the company's manufacturing location in Dresden, 650 workers will get pink slips. However, the Dresden job cuts have been announced about two months ago, Bauer said. No additional job cuts beyond these figures will take place in Dresden, he added.

Not all job cuts will be implemented by layoffs, he said. Infineon will try to reduce the employee number by attrition and by offering a bonus payment for persons leaving the company voluntarily.

In this context, Bauer announced to intensively make use of production options in Asia. Nevertheless, he has no plans to shift the company's manufacturing center of gravity to this geography. "We remain committed to production in Europe," he said.

Not included in the figures are job cuts at Infineon's loss-making memory chip subsidiary Qimonda, of which the parent company still holds 77.5 percent of the shares. "Qimonda is a separate company," Bauer explained. The DRAM maker earlier had announced an own program aiming at reducing the headcount.

With the announcement, the company for the first time discloses detail of the cost-cutting program launched by the company's new CEO Peter Bauer when he took over the position form its predecessor Wolfgang Ziebart.

With the job cuts and other measures, the company plans to reduce the manufacturing costs by 15 percent. Further measures within the IFX 10+ program are eliminating unprofitable and insufficiently profitable product families. This can be done by reducing R&D in the product lines affected to zero and cash in as long as there is a demand for them, or by intensify the controlling in these segments in order to improve profitability. In some cases, the company also has plans to sell products or product families. Bauer declined to specify which product lines are affected.

Another segment subject to cost cutting will be Sales and Marketing. "We need to reduce our cost base," Bauer said. In this segment, he hopes to realize cost savings of at least €50 million per year. Further measures within the IFX 10+ program include increasing R&D efficiency and optimizing the value chain.

In addition, Mr. Bauer has announced to reorganize the company. Instead of today's two large business units, the company will have five divisions, effective October 1. With the move, he hopes to create small, agile, customer-oriented entities that can act very flexible on the market, he said.