Infineon Global
Compensation Philosophy
GEO DACH Chapter Konferenz,
Frankfurt a. M., 13. September 2012
Infineon Technologies AG
Maik Metzdorf
Vice President HR Compensation & Benefits
Copyright © Infineon Technologies 2012. All rights reserved.
Page 1
About Infineon
Infineon at a Glance
Focus
Our Target Markets
 Energy Efficiency
 Automotive
 Industrial Power Control
 Mobility
 Power Management &
Multimarket
 Security
 Chip Card & Security
 Revenue FY 2010/2011 (30.09.): 3,997 billion EUR
 Forecast FY 2011/2012*: ~ 3,8 – 3,9 billion EUR
 26,526 employees worldwide (as per August 31, 2010)
 APAC (w/o Japan): 13,568
 Germany: 8,364
 Europe (w/o GER): 3,990
 America: 490
 Japan: 114
* Note: according to IFX press release, July 31, 2012
Copyright © Infineon Technologies 2012. All rights reserved.
Page 2
Preface
What is a Compensation Philosophy for?
The Compensation Philosophy …
… describes the core principles for
compensating and rewarding
employees.
… sets a framework for developing
compensation programs and policies.
… applies – in general – to all employees
in all countries.
… should be stable for longer period
of time.
… communicated proactively, creates a
common understanding between the
different stakeholders.
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Page 3
The Compensation Philosophy is based on
5 Core Principles to lever High Performance
Comparability
Affordability
& Flexibility
External
Competitiveness
Compensation
Philosophy
Employee
Contribution
Success
Participation
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 As functions naturally are different
regarding their value to the
organization, we need a systematic
approach to evaluate and structure
these differences.
 Within IFX we use the Global
Grading System to structure jobs
by level.
Job Level
Compensation Philosophy
Comparability
 Therefore, we have developed a
comprehensible and transparent
framework to ensure internal and
external comparability as well as
having a basis for the definition of
eligibility and individual differences
in our compensation programs.
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Compensation
Page 5
Compensation Philosophy
External Competitiveness
We strive for both
competitive and
attractive compensation
packages as well as
competitive
compensation cost
structures.
To be able to balance
both objectives, we
orientate on the market
and external
competitiveness.
Competitiveness of
Compensation
Costs
Attractiveness
Market
Orientation
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Page 6
Compensation Philosophy
Employee Contribution
 We honor our employees' contributions to the company success.
 In this respect, we reward individual performance, competency
development and increases in job responsibility through
differentiated …

performance-based income development
(differentiation within a job level)

career progression / development
(moving to and performing at a higher job level)
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Employee
Contribution
Page 7
Compensation Philosophy
Affordability & Flexibility
 Compensation at Infineon
is designed to keep personnel
costs flexible, calculable
and predictable.
Downturn
Market
 Our compensation
Upturn
structures are flexible
in order to maintain
affordable costs, support
changing business
environments and achieve
financial objectives over the cycle.
Boom
Time
Crisis
 Rather than simply focusing on costs, we consider compensation as an
investment in our employees that will enhance performance and lead to
increased productivity.
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Page 8
Compensation Philosophy
Success Participation
Variable
Income
Fixed
Income
 We share risks and success with
our employees through strong
correlation between compensation
and company success.
 We enhance the employees’
identification with the company
goals and encourage their
commitment to achieve Infineon’s
business objectives and, hence,
contribute to the overall company
success.
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Page 9
Variable Compensation
(Short Term)
Plan Design
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Page 10
Variable Compensation
Annual Success Bonus vs. other Short Term Incentives
Global
Grade
12+
Annual
Success
Bonus
(ASB)

Employees can be only on one short-term
incentive scheme at a time.

The predominant short-term incentive
scheme at Infineon is the Annual Success
Bonus (ASB).

There might be other Short Term
Incentives (STI) as locally defined
schemes, where the ASB is not applicable or
implementation not possible due to legal
reasons.

Other STI may use local criteria to consider
special circumstances (e.g. production site
productivity schemes), but ensure that those
schemes also consider the overall
company success.
ASB
Global
Grade
11-
or
Other STI
Other STI
ASB gilt in
Deutschland auch für
Tarifangestellte
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Variable Compensation
STI - Annual Success Bonus
250%
Annual
Success
Bonus
(100 %)
0%
Annual
Fixed
Income
 The ASB currently applies globally to all employees in GG/TL 12 and higher (for GG/TL 11 and
lower where agreed locally and legally feasible).
 The purpose of the ASB is to
 let employees directly participate in Infineon’s
success and profit
 enhance employee identification with the overall
company success and encourage their
commitment
 align all employees with the company targets
 underline the importance of results orientation
 support Infineon to achieve mid-term and longterm strategic, operational and financial targets
 The terms and conditions of the ASB (e.g. target
structure, key performance indicators, etc.) are
governed in the annually renewed IFX Bonus
Guideline.
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Page 12
Variable Compensation
ASB - Target Structure (KPIs and Target Weights)
Divisions
Operations
Central Functions
SMD
Return on Capital Employed (ROCE) 1)
25%
Free Cash Flow (FCF) 1)
25%
Division Segment
Result Margin 1)
Infineon Segment
Result Margin 1)
50%
50%
Division Segment
Result Margin 2)
25%
Specific Sales
Targets3)
25%
1) ROCE, FCF and Segment Result Margin all from continuing operations
2) For SMD employees who do not dedicatedly work for one specific Division, the Infineon Segment Result Margin target
has to be applied.
3) Targets according to SMD Incentive Guideline FY 11/12; targets preferably within own area of responsibility (e.g.
regional/customer-related revenue, design-win volume or must-win projects);
Target functions for ROCE, FCF and Division/Infineon Segment Result Margin approved by IFX Management Board.
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Page 13
Outlook:
New
Long Term Incentive Plan
Design
as of FY 13/14
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Page 14
Long-Term Incentive Plan Design
Basic model employees (summary)
DRAFT
Topic
Regulation
Plan type
Performance Share Plan (PSP) with equity share
settlement,
Performance Unit Plan (PUP) with cash settlement
Vesting period
4 years
Allocation
LTI allocation amount (in EUR, per Global Grade; will be
converted in no. of allocated shares upon grant based on
average stock price in last business quarter prior to grant
date)
Performance
hurdle / payout
conditions
50% of total allocation amount depending on achievement
of relative performance hurdle: outperformance of
Philadelphia Semiconductor Index (SOX) over total duration
of vesting period
Settlement
in shares / in cash [tbd.]
Personal
investment
• voluntary (but prerequisite for participation in LTI plan)
• x% of actual LTI allocation amount (to be held privately in
custody account during vesting period) [tbd.]
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Page 15
Long-Term Incentive Plan Design
Basic model employees (details)
DRAFT
 Example: performance hurdle after vesting period met
Allocation
Self Investment
Conditional
LTI
allocation
amount
Payout
Final
LTI
allocation
amount
Performance
hurdle 
value
60.000
25.000
15% self investment
7.500
50.000
+/-0%
50.000
50.000
25.000
4 years
share price
development
40.000
LTI allocation
amount
(replacement SOP)
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Page 16
Long-Term Incentive Plan Design
Basic model employees (details)
DRAFT
 Example: performance hurdle after vesting period not met
Allocation
Self Investment
Conditional
LTI
allocation
amount
Payout
Final
LTI
allocation
amount
50.000
value
30.000
25.000
15% self investment
7.500
Performance
hurdle 
50.000
25.000
+/-0%
4 years
LTI allocation
amount
(replacement SOP)
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share price
development
25.000
20.000
Page 17
Vielen Dank für Ihre
Aufmerksamkeit!
Copyright © Infineon Technologies 2012. All rights reserved.
Page 18