M-Systems and Infineon Sign Supply Agreement for Mobile-RAM; Infineon Mobile-RAM will be used for DiskOnChip(R)-based Multi-Chip Package Products for Mobile Handsets.

SUNNYVALE, Calif. and MUNICH, Germany -- M-Systems (Nasdaq:FLSH), an industry leader and innovator of flash-based data storage devices, and Infineon Technologies AG (NYSE:IFX)(FWB:IFX), the world's fourth-largest DRAM manufacturer, today announced that the companies have signed a supply agreement for low power Mobile-RAM specifically designed for mobile applications.

Under the terms of the agreement, Infineon provides M-Systems with Known Good Dies (KGDs) of Mobile-RAM for use in DiskOnChip(R) -based multi-chip package (MCP) devices targeting multimedia-centric mobile handsets. The term "KGD" means that Infineon performs all functional and quality testing of the dies on the finished wafer, which are then stacked with M-Systems' non-volatile data storage devices in a space-saving MCP.

"MCP packaging is becoming mainstream in handsets as they become smaller, and we see our MCP business growing to meet that trend," said David Tolub, vice president and general manager of M-Systems' mobile division. "Our agreement with Infineon, a leader in the Mobile-RAM KGD business, augments our supply capabilities and further strengthens the DiskOnChip multiple source strategy."

A large portion of M-Systems' sales to the mobile market already consists of MCP devices. This trend is expected to further increase in 2006 as handsets continue to offer more capabilities while shrinking in physical size.

"To combine M-Systems' innovative MCPs with DiskOnChip technology and Infineon's advanced production and testing capabilities for ultra low power DRAMs dedicated for Known Good Dies assembly will result in a compelling MCP offering ideally suited for the needs of today's multimedia handsets," said Mr. Ayad Abul - Ella, vice president and general manager of the Mobile and Consumer business unit at Infineon's Memory Products business group.

The Infineon Mobile-RAM contributes high memory density, high speed, and low power consumption to the MCP. This is complementary to M-Systems' advanced DiskOnChip technology, which offers a standard, reliable and mature low-cost, high-density storage solution based on the latest NAND flash technology. The combination of both in one MCP component addresses a fast growing memory demand in mobile connectivity under given space constraints. This demand is driven by high-bandwidth cellular standards like EDGE, HSDPA, UMTS, WCDMA serving an ever-growing abundance of multimedia content.

MCP products based on M-Systems' DiskOnChip and Infineon Single Data Rate (SDR) Mobile-RAM are already available and shipping in mass production. Products featuring higher storage densities and based on Double Data Rate (DDR) Mobile-RAM will be available during 2006. Detailed information for any of these products can be requested via the local M-Systems or Infineon contact.

About Infineon Technologies

Infineon Technologies AG, Munich, Germany, offers semiconductor and system solutions for automotive, industrial and multi-market sectors, for applications in communication, as well as memory products. With a global presence, Infineon operates in the US from San Jose, CA, in the Asia-Pacific region from Singapore and in Japan from Tokyo. In fiscal year 2004 (ending September), the company achieved sales of Euro 7.19 billion with about 35,600 employees worldwide. Infineon is listed on the DAX index of the Frankfurt Stock Exchange and on the New York Stock Exchange (ticker symbol: IFX). Further information is available at www.infineon.com.

About M-Systems

M-Systems develops, manufactures and markets innovative flash-based data storage solutions for consumer electronics and embedded markets. The Company targets the fast growing multimedia mobile handset market with its DiskOnChip(R) and MegaSIM(TM) products and the popular USB flash drive market with its DiskOnKey(R) product. More information about M-Systems is available online at www.m-systems.com.

All company and product names mentioned may be trademarks or registered trademarks of their respective holders and are used for identification purposes only.

This press release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties which may cause actual results to vary significantly. These risks include, but are not limited to: the effect of global economic conditions in general and conditions in M-Systems' industry and target markets in particular, shifts in supply and demand, market acceptance, the impact of competitive products and pricing, product development, commercialization and technological difficulties, and capacity and supply constraints including dependence on flash component suppliers; changes in M-Systems' and its customers' inventory levels and inventory valuations; timely product and technology development/upgrades and the ability to manage changes in market conditions as needed; market acceptance of new products and continuing product demand; the impact of competitive products and pricing on M-Systems' and its customers' products and markets; the development, release and sale of new products by strategic suppliers and customers; the development and growth of anticipated markets for M-Systems' and its customers' products; and other risk factors detailed from time to time in M-Systems' filings with the Securities and Exchange Commission. M-Systems assumes no obligation to update the information in this press release and disclaims any obligation to publicly update or revise any such forward-looking statements to reflect any change in its expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. Reference to M-Systems' website above does not constitute incorporation of any of the information thereon into this press release.