Infineon and Samsung in the red

Global- Infineon and Samsung are the latest hit in the deteriorating global chip market as the global recession wipes out profits.

The world's largest maker of memory chips Samsung Electronics said the global recession is wiping out profits this quarter.

Chu Woo Sik, executive VP and head of investor relations for Samsung Electronics in San Francisco said to Bloomberg, "The glut in the memory-chip market has worsened, making it difficult for Samsung to earn a profit from the product."

According to Bloomberg, Samsung's struggles may signal bigger shortfalls at Toshiba and LG Display because Samsung produces memory chips cheaper than any of its rivals.

Chu said, "Samsung will be very conservative with its budget for new plants and equipment in 2009, after spending about 10 trillion won (US$10.4 billion) in 2008. It will have to pay at least 6 trillion won just to keep its plants up to date."

German chipmaker Infineon said diminishing demand from troubled carmakers has badly affected profit margins.

Infineon's shares have dropped by almost 80% this year and the company is predicting revenue to decline by a further 30% in the next quarter.

Infineon's net loss for the current financial year stood at US$3.75 billion; a huge decline when compared to a US$449.6 million loss in 2007.

In July, Infineon unveiled plans to trim 10% of its total workforce, as part of the firm's cost-cutting strategies.

"We started a programme called IFX10+ earlier in the year before the financial meltdown, which included among other measures, a restructuring of the business organisation and active portfolio management," an Infineon spokesperson told ProcurementAsia.

"One third of the 3,000 job cuts was to come from operations in the US, Japan and Asia Pacific. Some operations and employees in Singapore were affected by the IFX10+ measures, but these measures have been executed by the fiscal year end which ended in September," the spokesperson said.