“Not immune to market trends”
Infineon is proclaiming 2024 as a transition year
February 6, 2024, 1:51 p.m
The chip manufacturer Infineon lowers its forecast. Poor demand here and full shelves there ensure a rather mixed start to the financial year. Hopes rest on the second half of the year. The news is not well received on the stock market.
After the record results in the last financial year, Infineon is feeling the economic headwind more strongly and is scaling back its targets. “Infineon is not immune to general market trends,” said company boss Jochen Hanebeck. “2024 will be a year of transition.” Instead of four percent growth, the chip company now expects a decline in sales of two percent. A recovery in business, especially in consumer-related areas, will probably only begin in the second half of the year and therefore later than previously thought. Against this background, the chip manufacturer also wants to reduce investments by around 400 million to 2.9 billion euros. Infineon shares temporarily slipped by more than five percent.
A problem child for the Munich group is the Power & Sensor Systems (PSS) division, whose operating result fell by around two thirds in the past quarter. Because the customers’ shelves are comparatively full, Hanebeck warned of short-term sales and margin pressure in this area. But he hopes that demand will increase significantly in the second half of 2024.
Another negative factor for the mood is the cautious statements on demand for electromobility outside of China, commented DZ Bank analyst Dirk Schlamp. However, Infineon reiterated its goal of low double-digit growth and an operating profit margin of 25 to 28 percent for the automotive supply division. The order volume is expected to remain largely stable, said company boss Hanebeck. “Because the manufacturers know the strategic value of an adequate supply of semiconductors.”
Infineon forecast not an industry outlier
For the current 2023/2024 financial year, Infineon only expects sales of 16 billion euros, plus/minus 500 million euros. Last November he promised an additional billion euros. The segment result margin, the adjusted operating return, is expected to be in the lower to medium range of 20 to 30 percent instead of between 24 and 27 percent. In addition to the poor economy, Infineon blamed negative exchange rate effects for the forecast reduction.
The new full-year targets are below market expectations, commented analyst Janardan Menon from the investment bank Jefferies. However, the development is in line with that of the competition, which, apart from automotive chips, also has weak demand. He therefore sees price setbacks at Infineon as an opportunity to get started.
In the past quarter, the group’s sales fell by six percent to 3.7 billion euros compared to the same period last year, and the segment result fell by 25 percent to 831 million euros. The segment result margin fell from 28 to 22.4 percent. For the second quarter of the year, Infineon expects sales of around 3.6 billion euros and a segment profit margin of around 18 percent. On average, analysts had expected revenue of a good 4 billion euros and a margin of 22.9 percent.
In anticipation of increasing demand, the company announced in recent weeks that it would expand its collaboration with the contract manufacturer GlobalFoundries and the supplier Wolfspeed. The group is also expanding its factory in Dresden and is participating in the planned semiconductor factory there for the world’s largest contract manufacturer TSMC.