UPDATE 1-Merkel says must consider aiding German chipmakers

* German chancellor cites plight of chipmakers

* Infineon doing well on operating level -CEO in magazine

* Infineon shares off session lows, down 2.6 percent (Adds Infineon comments, background, share prices)

BERLIN, June 15 (Reuters) - German Chancellor Angela Merkel said on Monday that politicians needed to consider whether to aid struggling chipmaker Qimonda (QMNDQ.PK) and its peers in Germany.

"With Qimonda, politicians are definitely called upon, in conjunction with AMD (AMD.N), Qimonda, Infineon (IFXGn.DE) -- these are all difficult cases, and this is the sole cluster of chipmakers in Europe -- perhaps to take care of them in such a way that allows for (their) survival..." she told a German industry conference.

The eastern German state of Saxony, nicknamed "Silicon Saxony", has encouraged technology companies such as AMD and Infineon to invest there.

Infineon, Europe's biggest automotive chip supplier, is suffering from a collapse in the global car market, inventory reductions throughout the electronics supply chain and exposure to its insolvent memory chip unit, Qimonda.

In an interview with German magazine Capital, Infineon Chief Executive Peter Bauer declined to discuss prospects for German state aid, but stressed the company was not in dire financial straits.

"We had 665 million euros ($923.2 million) in liquidity at the end of March and now we have a bit more because we successfully placed a convertible bond," he was quoted as saying.

The situation was under control at the operative level despite a sharp sales slump, he added, noting the company could now make a profit if it generated quarterly sales of around 850 million euros.

Its mobile phone business was on the verge of profitability, he added.

Infineon shares came off session lows to trade down 2.6 percent at 1049 GMT.

For a factbox on companies seeking German state aid click on [ID:nLQ944830]

(Reporting by Dave Graham in Berlin and Michael Shields in Frankfurt; Editing by Rupert Winchester)