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Infineon has reported another robust quarter

Thursday, August 4, 2022

Despite the challenging macroeconomic and geopolitical situation, Infineon has reported another robust quarter with revenue of €3.6 billion, up 10% sequentially and 33% year over year, in the third quarter of its fiscal year 2022. The Munich, Germany-based chipmaker has raised its revenue forecast for the full year 2022.

The 10% revenue growth is attributed to strong product demand, higher prices, and a favorable U.S. dollar/euro exchange rate.

“In a difficult situation, Infineon is doing well*,” said Jochen Hanebeck, CEO of Infineon, during an earnings call on August 3.

“The lasting Coronavirus pandemic continues to cause restrictions on supply chains, especially in China. The war in Ukraine is leading to shortages and rising prices for energy and important raw materials. Inflation rates lead to more restrictive monetary policy on the part of the central banks. Some of these factors are dragging down economic growth.”

He continued, “Demand for some of our core consumer applications is declining, such as PCs, smartphones, televisions, domestic appliances, and battery-operated equipment. Nevertheless, the structural drivers, decarbonization and digitization, are ensuring that there’s still a high demand for semiconductors, and key applications such as automotive industry, renewable energies, data centers, and IoT remain robust.”

Automotive: Primary growth driver

In the third quarter of fiscal 2022, Infineon’s revenue continued to grow in all segments. In fact, the group recorded a segment result of €842 million, up 11% sequentially and 70% on a year-over-year basis.

The automotive segment was the primary growth driver in the third quarter. The revenue reached €1.7 billion, up 14% sequentially and 41% year over year. The segment result also improved “considerably”, as it came to €399 million and represented a segment result margin of 23.5% (vs. 21.7% in the second quarter). “Additional suppliers, positive price effects, and the support of the U.S. dollar exchange rate contributed to increased revenue and profitability,” said Hanebeck, specifying that automotive production is hampered by bottlenecks over materials and delivery interruptions.

Besides Automotive, Infineon reported a significant increase in revenue in the Sensor Systems (+10% sequentially) segment, as well as a slight increase in the Industrial Power Control (+1%) and Connected Secure Systems (+2%) segments.

Revised guidance

Based on market momentum and a favorable exchange rate, Infineon said it expects to generate revenue of about €3.9 billion in the fourth quarter of fiscal 2022.

“The 8% growth in the fourth quarter will be driven by volume and price,” Hanebeck said.

For fiscal 2022, the chipmaker now anticipates revenue of €14 billion, plus or minus €500 million. This compares with the revenue forecast of €13.5 billion announced at the end of the second quarter.

“A small part of the growth, about €140 million is due to the strong U.S. dollar, the greater part comes from additional volume and, to a lesser extent, from price developments which are positive for us,” Hanebeck commented. “Annual revenue growth will probably be about 27%.”

The end of an upturn

The third quarter was characterized by solid profitability and revenue growth.

As “an indication of the unbroken demand”, Infineon said its backlog continued to rise from €37 billion at the end of March to €42 billion at the end of June.

“We can see that the imbalance between supply and demand is gradually reducing, especially for products from our own manufacturing,” said Hanebeck. “The bottlenecks are less pronounced, the lead times are stabilizing.”

During the press conference, however, Hanebeck suggested several times that we are nearing the end of a long upturn. Does this foreshadow an economic stagnation? How can Infineon prepare for this?

“With the deterioration in demand for some markets, in particular consumer markets, we are vigilant,” Hanebeck said. “Watching out for early signs in sight and movements in our markets, we are prepared to react promptly. Nevertheless, we see robust dynamism in the most important fields of application: the automotive industry, renewable energies, data centers, and the Internet of Things. Supply is gradually improving, but it is still far from enough to satisfy the strong consumer demand.”

He later confirmed, “It appears that we are approaching the end of a long upswing. It will be particularly important to keep a close eye on early indicators and to react promptly.”

Infineon confirmed its intention to invest about €2.4 billion until the end of September.

By: DocMemory
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