Corona shock: Infineon withdraws forecast for 2020 fiscal year
Originally, the company had assumed a year-on-year increase in revenues of around 5%. However, the effects of the pandemic may lead to a deviation from previous expectations and to a noticeable decline in revenues compared to the previous fiscal year, the semiconductor manufacturer announced in a press release. The expected lower revenues will also impact Infineon’s profitability in the 2020 fiscal year, as vacancy costs will be higher than previously assumed.
Structural growth drivers intact
Against this backdrop, the company intends to continue the cost-cutting measures already initiated. The priority is to secure profitability and strengthen cash flow. Long-term, structural growth drivers – including electric mobility, the Internet of Things (IoT) or renewable energies – remain intact, and Infineon’s management even sees the possibility that they will accelerate once the corona crisis is overcome. However, since it is currently not possible to predict how long and how strongly the pandemic will have an economic impact, the specific consequences for revenues and earnings in the 2020 fiscal year cannot be reliably estimated or quantified more precisely.
All of Infineon’s major manufacturing sites worldwide are currently continuing production, albeit some with reduced capacity utilization, the company stressed. These include plants in regions such as Malaysia or California, where the authorities have imposed particularly strict output restrictions. The supply of raw materials is currently stable. Logistics chains, including alternative transport routes, have been secured in order to continue supplying our customers. In addition, research & development, marketing, sales and administration will continue, largely through work from the home office.
For the current quarter, which ends on 31 March, revenues are expected to be around the lower end of the forecast range.
In many of the end markets and regions where Infineon is active, measures have been initiated to combat the coronavirus pandemic. Their negative economic impact will weigh on the second half of the 2020 fiscal year. According to market researchers, the number of vehicles produced and sold will decline significantly compared to 2019. The cause is a combined shock on both the supply and demand side: major car manufacturers and suppliers have announced that they will temporarily cut back their production in Europe and the USA, while the situation in China seems to be slowly returning to normal.
However, there are still some Infineon business areas that are holding up comparatively well in the current market turbulence. These include products for communications and data centers, driven by the growing demand for online collaboration applications and increased data traffic. Tax and other measures currently being taken by governments and central banks to provide liquidity will take time to take effect.