Ulrich Pelzer, Corporate Vice President, Investor Relations Dr. Wolfgang Ziebart, Chief Executive Officer Peter Fischl, Chief Financial Officer, Executive Vice President Peter Bauer, Executive Vice President and Chief Sales and Marketing Officer Professor Hermann Eul, Deputy Executive Vice President

Janardan Menon – Dresdner Kleinwort Wasserstein Nicolas Gaudois – Deutsche Bank Simon Schafer – Goldman Sachs [Ubume Asalou?] - Lehman Brothers Stuart Adrian – Morgan Stanley Thomas Grenier – Societe Generale Sandeep Deshpande – JP Morgan Didier Scemama – ABN AMRO Antoine Badel – Credit Suisse Brett Simpson – Arete [Barak Amin?] - Citigroup Jerome Ramel – BNP Paribas Clara van der Elst – Standard & Poors

Good day, ladies and gentlemen and welcome to today’s Infineon Q1 FY2007 results release conference call. For your information, this call is being recorded. At this time, I would like to turn the call over to your host today, Mr. Ulrich Pelzer. Please go ahead, sir. Ulrich Pelzer, Corporate Vice President, Investor Relations: Yes, thank you. Welcome everyone on behalf of Infineon Technologies to our fiscal Q1 conference call. With me on the call today is the entire Infineon management board. Dr. Ziebart, our Chief Executive Officer, Mr. Fischl, our Chief Financial Officer, Professor Eul, responsible for the business unit communication solutions and Mr. Peter Bauer, in charge of Automotive, Industrial and Multimarket. We have done the usual, i.e. a couple of introductory remarks by Doctor Ziebart and then we’ll turn the call over to Q&A. Over to you, Doctor Ziebart. Dr. Wolfgang Ziebart, Chief Executive Officer: Thank you, Ulrich. Good morning, ladies and gentlemen. I would also like to welcome you to our conference call this morning. I’m going to briefly comment on the results there for the quarter, including some detail on the developments in our segments. I will then turn to the outlook for Infineon excluding Qimonda and after my short remarks, my colleagues and I will be happy to answer your questions. Starting with the Q1 group results, as you know we expected revenues and EBIT for Infineon without Qimonda to decrease in fiscal Q1 compared to the higher quarter. As anticipated, the operating environment was challenging. Nonetheless, we are happy to see that our results for the quarter came out better than originally expected. In Q1 of our fiscal year, we reported group revenues of €2.13 billion, down from €2.29 billion last quarter. Excluding Qimonda, Infineon revenues were €958 million after €1,058 million in the prior quarter. Group EBIT in the first quarter was €216 million, up significantly from last quarter’s €30 million. Qimonda once more increased its EBIT reaching an EBIT margin of almost 20% after minority interests. While the previous quarter’s EBIT contained total charges of €169 million, mostly for restructuring and impairments, there were basically no charges in the first fiscal quarter. EBIT excluding those charges, therefore improved from €199 million to €216 million in fiscal Q1. If you look at Infineon excluding Qimonda it is worth noting that our EBIT excluding such charges remained more or less flat versus last quarter’s minus €11 million, despite the revenue decline that was caused mainly by the BenQ insolvency. This is evidence that we continue to improve our operational performance. Now let me turn to our segments. In the Automotive Industrial and Multimarket, sales and EBIT were down less than we had originally anticipated as we were able to improve our operating performance. Revenues were €710 million with EBIT of €55 million. As expected, revenues and EBIT in the Automotive business decreased sequentially in Q1. The quarter saw double digit percentage reduction cuts at US car manufacturers. Those in turn impacted sales by a good double digit million euro amount, which we were able to offset in part with new product ramps. In our Industrial and Multimarket businesses, we saw another solid performance in power semiconductors, with capacity being the main limiting factor. Our disk rates business also posted another solid quarter. Here our focus on value added products such as for example integrated acted, passive and ESD protection devices is paying off. Our security and ASIC activities also were at levels comparable to the prior quarter. Our chip card IC business maintained an overall satisfactory level, despite the usual seasonal effects that we always see in the fourth calendar quarter. Our ASIC business, by contrast, benefited from positive year end seasonality, in particular in the hard disk drive space. In our communications solutions segment, revenues and EBIT dropped significantly. Also, revenues with BenQ fell to basically zero. Our base band shipments to other customers increased versus the last quarter. The remainder of the revenue decline is explained mainly by the usual early impact of seasonality in our wireless business. Our wireline business, by contrast, was more or less stable with strong growth in the DSL activities, where we experienced strong demand for CPE – customer premise equipment – and voice over IP applications. We are very pleased with the business wins in our wireless business and in particular in our mobile phone platform activities. In the latter, we continue to make excellent progress. I’m pleased to report another large new OEM customer win in the December quarter. Shipments are set to begin in the calendar year 2007. This design win is a clear validation of our technical capabilities and our value proposition for the mobile phone market. It also illustrates that taking the tough decision to remain in the base band business after the BenQ insolvency was the right one. We also believe it clearly shows that our strategy to focus on high value added product offerings for volume customers is not only right, but beginning to pay off. Turning from mobile phones to RF Transceivers, we are pleased to report a significant new design win for our EDGE RF transceivers also. Another result worth noting is in our corporate and elimination segment. We had told you we would be making a strong effort to reduce the level of ongoing EBIT losses. I’m very pleased with the EBIT loss of only €4 million that we were able to report in the last quarter. This result basically included no charges, and counter to our expectation, going into the quarter, we did not take the anticipated €30 million restructuring charge in connection with our base band activities in the fiscal Q1 2007, as we are defining measures aimed at lowering the overall level of charges while maintaining the targeted savings. Now let me turn to the outlook for the fiscal Q2 2007. Despite a challenging operating environment we expect revenues and EBIT for Infineon excluding Qimonda and before charges to remain at least flat relative to fiscal Q1 2007. For Automotive, Industrial and Multimarket, we expect a slight revenue increase and a slight improvement in the EBIT margin. This improvement is likely to be driven by our Automotive activities, where we foresee a return to QoverQ growth. Product ramps as well as improving seasonality and operating performance should more than offset annual price reductions at car manufacturers and ongoing weakness in the US auto environment. The outlook for our Industrial and Multimarket activities is more or less flat. Our Kulim fab for power semiconductors in Malaysia is ramping nicely and will contribute to growth in our semiconductors in the current quarter. This creates semiconductors, however we’ll see the usual negative seasonality as those areas shipping into consumer, communications and computing applications. Finally, we are expecting a stable performance in our security and ASIC businesses. The chip card activities should see some seasonal strength in the March quarter, but our ASIC and design security activities should experience weak seasonality in the current quarter after a very strong December quarter. In Q2 FY2007, we expect revenues and EBIT in the communication solutions to remain broadly unchanged from the last quarter. Our business in broadband access remains strong and should enable our overall access activities to remain broadly flat with the fiscal Q1. In our wireless activities, we expect to be able to offset the usual negative seasonality of the March quarter with the ongoing ramp of production for LG and Panasonic as well as for other customers. Given this strong customer success with our mobile phone platform and also RF transceivers offering that I talked about earlier, we reiterate our goal of reaching break even EBIT in our wireless business in the December quarter 2007. Moreover, we look with confidence into 2008. In corporate and eliminations, we remain committed to reducing ongoing losses and expect EBIT before charges to remain broadly flat with the outstanding level achieved in the fiscal Q1 2007. With regards to restructuring charges, the changes to the restructuring plan for base band that we made during the first fiscal quarter 2007 will allow us to reach our targeted savings level at a lower level of charges. We now believe the charge in corporate and eliminations for the second fiscal quarter will be significantly less than €30 million. All cost reductions remain on schedule and we should realize cost savings of approximately €10 million per quarter in our communications solution segment from the June quarter 2007 onwards. Overall, given return to growth in Automotive, Industrial and Multimarket, strong design win momentum in communication solutions and solid expense discipline in corporate and eliminations, we look to the coming quarters with full confidence. Ladies and gentlemen, this concludes my introductory remarks and my colleagues and I are looking forward to your questions.

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Operator instructions.: Q - Janardan Menon – Dresdner Kleinwort Wasserstein: A couple of questions on wireless. The new customer that you have signed up in the December quarter, would that customer be ramping in the first half of the calendar year or the second half of the calendar year? A - Dr. Wolfgang Ziebart: To answer the question, they will ramp in the second half. Q - Janardan Menon – Dresdner Kleinwort Wasserstein: Would this customer be for an EDGE platform solution or would it be for an ultra low cost? A - Dr. Wolfgang Ziebart: I’m sorry, but we won’t go into more detail there. Q - Janardan Menon – Dresdner Kleinwort Wasserstein: : On corporate and reconciliation, your costs seem to have come down quite significantly. You had earlier suggested a run rate of €20-30 million of losses which will gradually come down, but now you’ve come down to €4 million. What changed over there, what was the reason for that and how sustainable is that going forward? A - Dr. Wolfgang Ziebart: First of all, the restructuring plan was changed in a sense that the efforts which we made in order to get the costs down were successful. We were able to transfer people into some other growth areas and we were also able to get some external projects into the company so we have long-term contracts now for those guys, and they don’t sit on our payroll, so to speak. Besides this, when you look at the running costs, the major reason why we did better in this area compared to the previous quarters was related to a significantly less amount in idle costs in our factories.

Our next question comes from Nicolas Gaudois – Deutsche Bank. Q - Nicolas Gaudois – Deutsche Bank: Considering the RF EDGE win you had at a large customer, does this signal this customer has shifted somewhat from your position at the low end towards more the mid range? A - Professor Hermann Eul, Deputy Executive Vice President: Yes, that is true. Q - Nicolas Gaudois – Deutsche Bank: Fair enough. Could you also give us some granularity on how much you had of costs reallocation from Qimonda to – sorry, to Qimonda from other in terms of the billing of [200 minimum capacity at Dresden?] A - Dr. Wolfgang Ziebart: No, I don’t think we can go into details here. The positive thing is that we have in the meantime concluded our negotiations on the contract, the relationship between Qimonda and us and the contract will be extended into September 2009, but we don’t disclose any details.

Our next question is coming from Simon Schafer – Goldman Sachs. Q - Simon Schafer – Goldman Sachs: Thank you and good morning. I was wondering in light of the incremental design win activity in wireless, both in RF transceiver and platform it seems, how does that change your confidence level on the state of break even targets? Should we think about it in the same vein as you expressed confidence levels in September? Or are we incrementally higher based on those design wins? A - Hermann Eul: This is Herman Eul speaking. I think you should rate this as a confirmation of our strong belief that we can make it in the said quarter. Q - Simon Schafer – Goldman Sachs: Thank you. Then in terms of – I think you mentioned before that you intend to get some authorization for potential buyback activity at the AGM in February, which is actually coincidental with the lock up expiry of Qimonda. I was wondering whether you could express any intention as to how you intend to utilize those proceeds and how large any authorization for the buyback could be. Thank you. A - Dr. Wolfgang Ziebart: You will not be surprised when we say we cannot disclose anything in this respect. Q - Simon Schafer – Goldman Sachs: So we will just wait until February 15th to see an authorization? A - Dr. Wolfgang Ziebart: The only thing – but I’m sure you are aware of it – is the size of the buyback according to the laws is 10% of the outstanding shares.

Our next question comes from [Ubume Asalou?] from Lehman Brothers. Q - [Ubume Asalou?] - Lehman Brothers: Just to maybe go back to that design win in wireless comms, just trying to figure out what else you might be able to say. In terms of the word ‘large’, how do you define this? Is it relative to existing customers or is that ‘large’ within the customer’s own business? A - Dr. Wolfgang Ziebart: I’m not sure I understand your question right. I think you are chasing for the name of that customer, which I certainly will not give you. The customer belongs to our company’s traditional customer base and is a significant one, perhaps this answers your question. Q - [Ubume Asalou?] - Lehman Brothers: If I were to maybe go onto Qimonda, could you just remind us of the main factors that determine what happen to this thing. There were three points if I recall correctly that determined when or how much of this that you’d sell. In particular, has anything changed as regard to these three factors, same as the last quarter? A - Dr. Wolfgang Ziebart: No. We indicated some quarters ago already that the three factors you were mentioning were actually status of the DRM business, that was status of Qimonda as a company, and third was our need for proceeds. So not very much has changed. We don’t have an urgent need for money in Infineon. Qimonda is running well and also has given a reasonable positive outlook as you heard last week. The market is strong so there three circumstances haven’t changed so there is nothing new to report.

Our next question is coming from Stuart Adrian – Morgan Stanley. Q - Stuart Adrian – Morgan Stanley: Just back to the comm business. Is it possible to say with the design wins that you have announced so far and the ramp plans that are associated with those that they essentially take you to the break even level that you’ve talked about for the calendar Q4 of 2007? Or embedded within that kind of forecast, are you still assuming that you win some more wins from here? A - Hermann Eul: I think your assumption is right. This is basically what brings us there so we are still working on further opportunities as currently our products are very well accepted in the market and customer interest is very high. A - Dr. Wolfgang Ziebart: Let me add to what Hermann Eul said. The customer win which we had announced already some quarters ago would have already led us to the target which we have communicated. This new one will further strengthen that achievement. On the other side, short term, it is even building on the engineering resources. Q - Stuart Adrian – Morgan Stanley: Okay, thank you. Just onto the two cost cut programs that you’ve got going, one in comm and one in ICoRe, I think you mentioned that in comm you’re actually going to be to your previously stated level of cost cuts by the June quarter. Can you just confirm that’s the case, and talk about where we are with ICoRe? A - Dr. Wolfgang Ziebart: The June quarter target for the €10 million which is related to comm is correct. The ICoRe program has been finalized in November in time as far as the identification of the potential is concerned, and we are right now in the middle of the implementation. As we stated, we will see improvements here starting in the June quarter going forward. We will address exactly what we stated a while ago after the carve out of Qimonda, this overhang, and we will do away with that completely.

Our next question comes from Thomas Grenier – Societe Generale. Q - Thomas Grenier – Societe Generale: I was wondering if you could comment on the future ejection rates of your fabs, especially the Logic A-Change[?] one. I would just like an update on how the situation is going with this, please. A - Dr. Wolfgang Ziebart: The utilization in the last quarter of our Logic fabs was not completely 100% and the tendency is going upwards. The situation in Altus is as stated in the press and we don’t have anything to add on top of this. Q - Thomas Grenier – Societe Generale: As a follow up, I would just like to have a comment on how we should model the taxes for the group going forward, and if you have any indications of how the German tax reform can impact that going forward? A - Dr. Wolfgang Ziebart: The tax reform, as you know, has not been decided yet so it’s a little bit speculative whether this would even have an impact in this fiscal year. For the ongoing business, what we have projected for Infineon ex-Qimonda, very roughly speaking for the year, was around €50-60 million, of which we now incurred €13 million so we are pretty much in line with what we anticipated. For Qimonda it’s a little bit more difficult, because the volatility is hard to predict. The main portion as indicated of the tax cost in Q1 was of course related to Qimonda with I think €74 million.

Your next question comes from Sandeep Deshpande – JP Morgan. Q - Sandeep Deshpande – JP Morgan: Just a couple of questions. Firstly back again to the wireless business. Would you give any clarification on any customers you have on the ULC? You have said on the EDGE platform you have three customers, of which LG is the named customer. Is there any further color or granularity on the ULC design wins you’ve had? A - Dr. Wolfgang Ziebart: The ULC also has been selected by LG as well, so I think this is known to you. With customers beyond that, it’s not possible to reveal at this point in time. Q - Sandeep Deshpande – JP Morgan: There was some support for you have four customers in the ULC – would you kind of comment on having four customers in the ULC? A - Dr. Wolfgang Ziebart: I would prefer not to go into this kind of detail. I can assure you that there is additional design wins. Q - Sandeep Deshpande – JP Morgan: Finally back again to the comms business. You talked about breaking even in this business at around €400 million in revenue and that this €30 million charge was going to bring down that break even point somewhat. Would you talk a little bit about breaking even and what levels you would expect to break even in the comms business? A - Dr. Wolfgang Ziebart: We would like to keep it at the given statement that we will break even by Q4 of the calendar year and refrain from going into further detail or mathematics about it. A – Hermann Eul: One additional comment on the €30 million restructuring – you should not see this in connection with the EBIT performance of the comm business, because that’s a people-oriented, people-related restructuring charge which we show under corporate and eliminations. Q - Sandeep Deshpande – JP Morgan: Thanks. Just one quick follow up – I mean, some of your competitors are talking about not developing about CMOS process beyond 45 nanometers? In your core business, what is your technology strategy going forward? A - Dr. Wolfgang Ziebart: The strategy which has now been announced by our major competitors – some here in Europe, some in the United States – this we have announced a year ago already. We told at that time that starting with 65 nanometer we will not invest into our own manufacturing capacity any more. We will continue to stay in an alliance with IBM, Samsung Electronics and ourselves which now has been joined by Freescale too. We already executed this strategy a year ago. Let me just add one thing to the first part of your question – let me point out that regarding ULC, we feel that the momentum of ULC2, what we call the E-GOLD – E-GOLD Voice – is now much, much stronger than the momentum for the first generation ULC bond has been.

Our next question comes from Didier Scemama from ABN AMRO. Q – Didier Scemama – ABN AMRO: Just coming back again to wireless I’m afraid. For this important CMOS EDGE RF win with this large customer, can you confirm that we’re talking here about your own solution, and second can you talk perhaps about the level of market share you would have with that customer, say 12 months out? I guess the ramp will start at some point this year. The second question is how confident are you that you can convert your EDGE platform win into [density and HADP wins?] as well? A - Dr. Wolfgang Ziebart: Going one after the other, this new design win is based on our CMOS technology and we were able to convince the customer of these capabilities and that this is the right way to go. The second one - certainly I will not be willing to comment on market share, which we expect to have with this customer in one year from now – what you were targeting. The third one was how we can convert EDGE design wins towards wideband CDMA. All our existing customers are looking into this solution and they find out that the upgrade from the next solution towards the wideband CDMA solution is a very easy one because of the use of the same architecture, the existence of a dual mode protocol stack – a fully integrated one – and in particular looking at the very, very nice ramp of our wideband CDMA with our customer, Panasonic. This convinces more and more customers that this is a mature, fully tested and viable solution. Q – Didier Scemama – ABN AMRO: On Panasonic, at which point do you eliminate the Zyreco[?] processor? A - Dr. Wolfgang Ziebart: The design which we have in production for example for Panasonic uses the Zyreco[?] processor. Q – Didier Scemama – ABN AMRO: But in the next generation do you expect that to go away? A - Dr. Wolfgang Ziebart: We announced last year in Barcelona that we have an HSDPA 7.2 megabit solution on our table and this is a fully owned Infineon solution. Q – Didier Scemama – ABN AMRO: Brilliant. My other question will be you said that the E-GOLD Voice design win is strong and in fact much stronger than for the ULC1 solution. Can you recap where you are in terms of design wins with tier one and non tier one at this point? You just announced LG, which I think is very strong, but I’m just wondering if you can give us a bit more detail there. A - Dr. Wolfgang Ziebart: I understand that you want to have more insight here, but if I were to give you more insight here, this would immediately reveal what I’m not allowed to reveal right now, so please give me a chance to work with our customers on the possibility to have it publicly stated and do not drag me into something that my customers do not like me to say. On the other hand, I think counting design things is one thing. The other one is that interest in the market is really tremendous and there is also interest in second and third tier. Q – Didier Scemama – ABN AMRO: My final question. There are discussions in the market that you would soon announce a solution integrating the [PA and front end module?]. Is that correct? A - Dr. Wolfgang Ziebart: I cannot comment.

Our next question comes from Janardan Menon – Dresdner Kleinwort Wasserstein. Q - Janardan Menon – Dresdner Kleinwort Wasserstein: Just moving topic to your Industrial and multi purpose chips. Effectively you’re not showing much seasonality in that division, which is you’re sort of flat from Q3 to Q4 and Q4 to Q1. I would presume that like your competitors there should be areas of seasonal weakness and stuff like that, which you seem to be compensating for. What are the key products which are sort of ramping and compensating for normal seasonality in that area? A - Peter Bauer, Executive Vice President and Chief Sales and Marketing Officer: That’s actually a good observation, you’re 100% right. Within the Industrial power business there is a lot of seasonality but it’s compensating each other. On the one hand, what is now typically going down a little bit is the [G-related DCDC power business?] and also we see consumer power – SMPS and this – going down slightly and the market softening. Compensation clearly by the Industrial business which is still running very well, also server power supplies is running very well. We see the classical Industrial stuff very strong while the consumer PC related started shortly before Christmas and now obviously in Q2 outlook perspective it’s going down slightly. Another effect is that even though we are ramping Kulim, and the output from our fab in Malaysia helps us to expand capacity, in Q1 we were somehow capacity limited and couldn’t grow further, even though demand on the Industrial side was very, very strong. Q - Janardan Menon – Dresdner Kleinwort Wasserstein: Is this a market phenomenon, this strong Industrial demand? Or is it that you’re getting a lot of share right now? A - Peter Bauer: It’s clearly so that the market on a worldwide basis is very strong. I think Europe saw in 2006 the strongest growth ever in this area and also in 2007 market analysts are projecting a good year in terms of Industrial growth and also in Asia, where I currently am, there is very strong demand here. We see a good outlook here for the rest of the year. Also from an internal side, we are one of the only companies really going into this market with additional capacity and we’re winning shares from others as we have the products and as we also can provide a strategic road map from a capacity perspective and also it’s well received. Q - Janardan Menon – Dresdner Kleinwort Wasserstein: Once more going back to the comms if I may, you made a comment that while the ramp for the new customer will come in the second half of the year, you would be incurring engineering costs and R&D costs in the first half. Given that you have said it’s a platform solution, would it not be fair to assume that such R&D and engineering costs will be almost minimal if at all and so why are the engineering costs higher? A - Dr. Wolfgang Ziebart: It is true that in case of platform solutions, of course the effort is somehow limited while on the other hand, each and any customer has a particular software environment which requires some adaptation work to this one.

Our next question comes from Antoine Badel – Credit Suisse. Q - Antoine Badel – Credit Suisse: Could you please give us an update on the chip card business, what’s the environment like on the SIM card side and on the project side and how is your business doing please? A - Peter Bauer: The Q1 fiscal we expected the business to go down slightly as we also said on the last quarterly call. This happened fortunately not to the extent we were expecting so we saw more demand than we originally thought and end of Q2 now we also see very strong demand. So I’m actually very positive for the beginning of this year and what we hear from the market – it should continue to be positive. Q - Antoine Badel – Credit Suisse: How much of that is on the SIM side and how much is on the project side? A - Peter Bauer: There’s a lot on the project side, especially with regard to contact lists and the higher margin products as we have won a number of major government designs for passports and as well for a contact list product in Japan, so this is growing very rapidly while the part commoditised business is – as they said in the first quarter – was down. It’s going steady right now. Q - Antoine Badel – Credit Suisse: Just to finish on this topic, have you now completed their repositioning of your business in chip cards? A - Peter Bauer: We have not 100% completed, we are still cleaning up some items from a cost perspective and then without going into big detail, we are also revealing another generation of micro controller architecture which we are currently developing this year, which will come to market next year. We’ll have a continuous cost reduction plus security and feature upgrade during this year, which then comes to fruit next year.

Our next question comes from Brett Simpson, Arete. Q - Brett Simpson - Arete: I have a question on depreciation and amortization. When you strip out Qimonda and you look at the logic business, it looks as if the D&A rate is about 17% of sales which seems quite high compared to a company like Freescale or TI that’s gone through this transition. Can you maybe talk a bit more about this D&A trend for Logic since you’ve – I guess, in the last three or four years, your spending has been quite low in capex. You’ve already said you don’t plan to spend heavily on leading edge going forward. A - Dr. Wolfgang Ziebart: That’s a right observation. Since we have announced that we will pursue the fab light strategy, of course in the next two to three years you should also see that the D&A should come down. We did not say that this would have an immediate impact while we are still investing in some areas this year, but we stated that our capex will come down and consequently of course the D&A will also show the respective result. We have said that medium to long term we will see depreciation of roughly 10-12% on revenues. In the short term, we have very good opportunities especially in the power semiconductor area by ramping up our manufacturing in Kulim faster, so in the short term it will be higher than those 10-12%.

Our next question is coming from [Barak Amin?], Citigroup. Q - [Barak Amin?] - Citigroup: Quick question on inventory levels, I know this fab looking at inventories in Q1 against Q4 of the last fiscal year, excluding the Qimonda business inventories looked like they were up around just under 8% relative to the end of the last fiscal year. Could you just make a quick comment on whether that was intended or just the rationale behind it? A - Dr. Wolfgang Ziebart: Yes. It was pretty much intended. I mean first of all, all it was anticipated. First of all we see on the revenue side the BenQ impact as you all know and second there is some pre-production which we have taken care of in the context of our Munich fab which we will now close down in spring. There’s nothing dramatic about it. Q - [Barak Amin?] - Citigroup: Okay. So would we expect them to fall going forward from here? A - Dr. Wolfgang Ziebart: Going forward we would see some easing of the inventory levels as the communication business will pick up and as we will make this shift of our factories in Automotive industry and communication.

Our next question is from Nicolas Gaudois – Deutsche Bank. Q - Nicolas Gaudois – Deutsche Bank: Could you comment on the RF 3G side? I think you said that six months ago you had a couple of decent wins on the WD CDMA side for stand alone RF transceivers. Just to get confirmation this is ramping as expected this quarter? A - Dr. Wolfgang Ziebart: Yes it is true that we have gained the majority of the market for 3G transceivers, while on the other hand we see that all those customers are not ramping as they planned to do so. Q - Nicolas Gaudois – Deutsche Bank: As a follow up, we have some pretty clear comments on the evolution of a mix for the chip card business. Could you maybe comment on what margin did in the last quarter and how you see the progression with you shifting to higher value projects into the rest of the year? A – Peter Bauer: You know that we don’t want to disclose business unit margins, so I apologize for not doing this right now, here. I can tell you that in the last quarter, the Q1, the security and ASIC design segment – so the combination of chip card and ADS – was positive. Also chip cards remained to fulfill what I promised last quarter, but this is not satisfactory in the long run. We want to get the chip card business to double digits but we’ll not manage to do that in 2006/07. This will be the target for next year. Q - Nicolas Gaudois – Deutsche Bank: As a clarification, I think if you look at the NXP disclosure about a few months ago, they had a 21.5% margin for security cards. If you take a long view, if your business is shifting towards basically security applications versus SIM cards, I mean are double digit margins achievable? A - Dr. Wolfgang Ziebart: Yes. You have to also say that – Philip there is in this high end contact list market so we are in there as well as in the communication market, but also all market segments in chip cards become congested and I think at the end the solution decides. So as we’re going now into contact, the air becomes thinner there as well and we get our margin up but also the overall environment might change. Q - Nicolas Gaudois – Deutsche Bank: Just as a last clarification, you talked about the new architecture for smart cards. Is it on base this time with [10 Shiva cortex m3?] or is it still leveraging the tri core? A – Peter Bauer: We’re talking about – you mean what I just mentioned before? 16bit proprietary architecture.

Our next question is from [inaudible]. Q - Analyst: I have two questions. The first one is a housekeeping follow up question. The corporate elimination – let’s say around €10 million could be a sustainable level for the coming quarters. The other questions are regarding your recently announced design wins for GPS systems. What do you think could be the momentum for GPS in mobile phones in the coming months and quarters and also how well are you positioned to level your technology also into mobile phones? Maybe you even could talk about potential sales on an annual or quarterly level, which we could expect going into 2008. A - Dr. Wolfgang Ziebart: Just quickly on the first question, corporate and elimination, it’s rather €15 million you should project. A – Hermann Eul: For the second question, our GPS design wins are currently running very nicely and as you may have taken from the press, we also want personal navigation devices also. It means the solution which we offer is not only well geared for assisting GPS in the majority used in the mobile phone space, but also a very, very capable solution to be used standalone in the personal navigation devices. We expect that this market will increase very nicely and we will be able to participate in this while on the other hand you will certainly understand that I will refrain from giving any particular numbers about our expectations.

Our next question comes from Jerome Ramel, BNP Paribas. Q – Jerome Ramel – BNP Paribas: I have a question on the wireline. Considering the last wins you announced in Korea, is it set to assume this deal could be as big as the deal you had with Deutsche Telecom? What is your view on the way [inaudible] market? A - Dr. Wolfgang Ziebart: The announced design win in Korea is a very important and very nice one, because we enter this market now with our fully standard, compliant VDS L2 solutions. The market so far was captured by a more proprietary based solution so this is a very, very important step for this country to go toward standard compliance solutions. With this design win in this field, I think we could underline our strengths – the strength of our solution. Certainly we cannot comment on the size of the contract but we assume that this is a very important lead market in the Asian world as Deutsche Telecom was in the European world. Q – Jerome Ramel – BNP Paribas: How do you see the short-term outlook for wireline? A - Dr. Wolfgang Ziebart: We see it as stable.

Our next question comes from Sandeep Deshpande – JP. Morgan Q - Sandeep Deshpande – JP Morgan: Another follow up question on the comms business. In the comms business, you have other chips. I mean you talked about the GPS chip but you have other chips such as Bluetooth as well as wireless LAN. Bluetooth, you had at one point some customers. Do you see any further traction on this business or is this not a business you want to significantly focus on going forward? What is the future of this business going forward. A - Dr. Wolfgang Ziebart: The Bluetooth devices are designed into the majority of our platforms, wherever Bluetooth comes to deployment and I think this will develop very nicely along with our platform business. Q - Sandeep Deshpande – JP Morgan: Are you saying that the majority of the platform wins already have Bluetooth along with the base band RF etc? A - Dr. Wolfgang Ziebart: In all the platforms where we have a Bluetooth socket, it depends on the customer’s choice whether this socket is used or to which extent the portion of the models use Bluetooth or don’t use Bluetooth. Q - Sandeep Deshpande – JP Morgan: Regarding the previous question on GPS, is the shipment of the GPS parts going to help you towards achieving the Q4 or end of year break even target? Is that a significant revenue generator in 2007? A - Dr. Wolfgang Ziebart: This is not significant in these circumstances.

A follow up question from Didier Scemama – ABN AMRO. Q - Didier Scemama – ABN AMRO: Just a follow up on the broadband business. It seems like your peers are guiding for revenue decline in the DSL business, whereas you seem to be guiding flat. Are we talking about market share gains at the expense of those guys, or is it more related to the deployment of DSL and ADSL from your customers? My second question would be about the Ethernet switch business, where from what I’m seeing, it seems like you’re getting a bit of traction in wireless routers. Can you confirm that? A - Dr. Wolfgang Ziebart: I think you have given all the answers already by yourself, coming from the latest – our new switch family is really getting very good acceptance from the market and so this is the confirmation of your assumption. The second one is that you assume that we are taking more and more market share in the DSL. This is also our observation, but we do not have any official numbers yet. If we look into the market and see our shipments, it is I think fair to assume that we have a good track record here. This holds true for ADSL as well as for VDSL too. Here we can now start harvesting our early investment and also harvesting on the outstanding technological performance of the device. Q - Didier Scemama – ABN AMRO: Fantastic. Just two things [inaudible], did you say the corporate and reconciliation line should be minus 15 on an ongoing basis going forward? A - Dr. Wolfgang Ziebart: Yes. Q - Didier Scemama – ABN AMRO: Finally, on the wireless side, did you say that you are porting proprietary software stack on your base band and as part of the engineering cost? A - Dr. Wolfgang Ziebart: No, I didn’t say that. What I actually meant is if you go with a baseband solution to a customer, all these customers have software in place. Somehow you have to find a very smart way in making the transition for that customer easy. All our solutions go with our protocol stack.

Your last question comes from Clara van der Elst – Standard & Poors. Q – Clara van der Elst – Standard & Poors: I have a question on SG&A expenses. You realized quite a significant drop there, although you’re talking to many new customers in the comms segment. Could you elaborate on how you realized that and how you see that going forward? A - Dr. Wolfgang Ziebart: SG&A is pretty much affected by the BenQ situation because as you’ll remember in the last quarter, we incurred some special write-offs there and these were €28 million in Q4. Then in Q1 we had some positives regarding some payments from BenQ, but they were offset by some other items. That’s why we said in this quarter we have practically no special charges. The deviation you are referring to is related to this particular situation.

There are no further questions at this time, sir. Ulrich Pelzer, Corporate Vice President, Investor Relations: Then I think that concludes the fiscal Q1 conference call. Thanks, everyone, for your attention, for your interest and your questions. If there is anything that remains unclear, if you have any awkward questions, please be in touch with the investor relations team here in Munch. Thanks everyone. Bye bye.

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