Infineon sees market weakness ahead after results

Business news | May 8, 2019

By Nick Flaherty

In the quarter between January and the end of March, Infineon performed somewhat better than observers had expected in a difficult market environment. In particular, weaker demand from customers in the automotive industry and reduced growth in China put pressure on the figures. Infineon CEO Reinhard Ploss expects business to remain weak in the short to medium term. “The boom is over for the time being, the momentum of demand has weakened,” said Ploss.

For the third quarter of its financial year, which ends in October, Ploss now only expects a sales development of minus 2% to, at best, plus 1%. For the entire fiscal year, the company predicts sales of 8 billion euros with a fluctuation range of +/- 2%. The decline in sales is worse than the usual seasonality, Ploss said.

The company’s sales in the third quarter amounted to €1.98 billion – a mere 1% higher than in the previous quarter, but still 8% more than in the same quarter last year. Automotive accounted for 44% of sales. Power Management & Multimarket generated 30% of sales, Industrial Power Control 18% and Digital Security Solutions 8%. The growth rates of the individual divisions did not differ significantly from those of the company as a whole.

Despite the current market weakness, the chip manufacturer is sticking to its strategic investments. Ploss continued: “The long-term prospects in key target markets such as electromobility, automated driving, renewable energies, data centers and mobile communications are excellent.”

Regardless of the presentation of the quarterly figures, Hans Adlkofer, head of Infineon’s Automotive division, was very optimistic about the semiconductor manufacturer’s future at an event. In a speech at the Cadence Design Systems user meeting, Adlkofer predicted that electromobility would lead to a significant increase in demand for semiconductors for vehicles. While today’s cars contain semiconductors with an average value of $375 ($475 for Mild Hybrid vehicles in 48V technology), this value would rise to 750 dollars for battery electric vehicles, of which $455 will be for power semiconductor. The company also anticipates an increase in electric vehicles (48V mild hybrid, plug-in hybrid and battery electric vehicles) from 5.5 million units in 2018 to 38 million units in 2025, resulting in a multiplication of power semiconductor fabs – Adlkofer expects 7 to 9 times as many production facilities in 2030 as today.