Infineon CEO Reinhard Ploss admitted the deal was pricey but was acceptable.
"If you look at the synergies, it represents an additional gain in value", he insisted.
Chief Marketing Officer Helmut Gassel said discussions had been triggered by interest expressed in Cypress by another party. Infineon was invited to take part in the process around five weeks ago.
Infineon was among the few companies in a sector facing headwinds that could finance a deal that in more prosperous times might have been out of its reach, veteran CEO Ploss said.
Investors were not happy and shares in Infineon fell by 6.4 per cent lower on fears that it was overpaying in a transaction that will be 30 percent financed through equity, with the rest paid for in debt and cash.
One trader speculated that Infineon could itself become a takeover target after the company twice lowered its revenue guidance this year as demand in China slowed and trade frictions escalated between Washington and Beijing.