"We're going through a number of different scenarios at the moment and are considering sites outside Europe," Pegam told the business daily Handelsblatt.

"Anyone who isn't doing that could be out of the picture tomorrow," he said, adding that German politicians were "unable to push through far-reaching reforms".

He added: "One day we'll regret not having acted more decisively. Germany has a problem as an industrial site."

Pegam said that it would be easier in the short run to relocate within Europe, such as in Austria or Switzerland.

"But that would only provide relief for a short time, could only be an interim solution. Of course it's easier to relocate within Europe than to say, Shanghai or Singapore."

However, Pegam said nothing had been decided yet.

Epcos, a former unit of electronics giant Siemens, is currently based in Munich. German computer chip maker Infineon, also formerly part of Siemens, is also considering a move abroad.

Pegam expressed optimism regarding Epcos's second-quarter earnings.

The group, which runs its business from October to September, remained in the black in the period from January to March, the chairman said.

"We continued the positive development" seen in the first quarter, he said. "One can assume that we won't be in the red in the second quarter."

Epcos edged back into the black in the period from October to December, notching up a modest net profit of 0.5 million euros (0.54 million dollars).

Pegam said he was also confident that the group would post a profit for the year as a whole.

"I have no doubt that we will be in the black for the whole of 2002-2003," he said, but declined to make any specific sales forecasts.

"I can't many any prognosis, given the global economic uncertainty, even if I don't think we'll see a decline in sales," Pegam said.

SPACE.WIRE