Munich The chip manufacturer Infineon expects a long-lasting boom in the important electromobility business. “With some customers, we are now planning the quantities two years and more in advance,” said the head of the auto division, Peter Schiefer, the Handelsblatt.
This is good news for investors: they can expect generous margins. Because in the past, the Dax group usually had to struggle with overcapacity and the associated high vacancy costs. Or there were too few machines available and the Munich company lost sales – as in the past two years.
In view of the persistent, massive delivery bottlenecks, customers are now willing to give long-term purchase guarantees. This is enormously helpful for Infineon, explained Peter Wawer, head of the industrial division, in an interview with the Handelsblatt: “It takes a lot of time to increase capacities. Meanwhile, the lead times for equipment are also very long.”
Experts see it the same way. Peter Fintl, chip expert at the consulting company Capgemini, says: “The supply chain is moving closer together. This allows chip manufacturers to plan better.”
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Infineon has been investing in the electromobility business for years. To this end, the group has developed new products on the one hand and expanded its plants on the other. Above all, this squeezed the margin in the car division, which accounts for around half of the group’s sales.
For a long time it was therefore significantly less profitable than the group as a whole. That is now changing in view of rapidly increasing sales: In the most recent, third quarter (ended on June 30) of the financial year, sales climbed by 41 percent to 1.7 billion euros. “Electric cars are catching on faster than we thought,” explains Schiefer.
According to Schiefer, the group is also growing faster than the market in this business: “Infineon is benefiting disproportionately from the boom in electric cars. Because the power electronics account for a large part of the additional chip requirement.” Vehicles with combustion engines contain semiconductors for an average of 500 dollars, in electric cars it is around 1000 dollars.
Infineon achieves around 50 percent of its group sales with these so-called power semiconductors. The components are important for the power supply in electric cars. In addition, the company benefits from the fact that the network of charging stations is growing rapidly worldwide – and thus faster than the company had previously expected. “Even the bravest orders are being increased at the moment. There is no end in sight,” explains industry boss Wawer. A fast charging station contains power semiconductors for up to $3,000.
Green electricity for electric cars
The power semiconductors are also needed in another growing business: for solar systems and wind turbines. Both are related, explains Wawer: “Electromobility only makes sense if you use green electricity. And that is exactly what we benefit from.”
Infineon is currently more profitable than it has been for a long time. In the past quarter, the operating margin, i.e. the share of operating profit in sales, rose to 23.3 percent. That is around five percentage points more than in the same period last year. This was mainly due to the car business, which improved from 16.5 to 23.5 percent. For comparison: the Munich group has promised investors 19 percent over an industry cycle.
Infineon’s automotive division supplies customers such as Bosch, Continental, Denso, Valeo and ZF. According to the experts at Strategy Analytics, Infineon Automotive is the world’s largest supplier of automotive chips with a market share of almost 13 percent. The Dutch competitor NXP follows in second place with almost twelve percent.
Infineon benefits from empty warehouses
According to Manager Wawer, there is currently nothing to indicate that the electromobility business is weakening. “The semiconductor industry still lacks the buffers that we used to have. As a result, all disruptions have a direct effect on the chip supply.” The warehouses are empty.
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The worst delivery problems are over, adds auto boss Schiefer. But Infineon is still not able to completely cover the demand: “In our own plants, we are getting better and better at keeping up with the orders. But for certain power semiconductors, such as for automotive and industrial applications, demand continues to outstrip supply.”
Schiefer warns that microcontrollers from contract manufacturers will also remain in short supply until 2023. Infineon does not produce all chips itself, but obtains some from so-called foundries. Microcontrollers are minicomputers for special tasks and are used in many places in the car.
Investors have recently regained confidence in Infineon. In the past four weeks, the papers listed in the Dax have gained almost a fifth in value. In the same period, the Dax rose by just four percent.
The fact that CEO Jochen Hanebeck increased the forecast for the current financial year (ending on September 30) at the beginning of August was particularly positive. The Infineon boss now expects sales of 14 billion euros. That’s 1.3 billion more than the company had promised at the beginning of the fiscal year. In addition, the operating margin is expected to rise to 23 percent, two percentage points more than originally promised.
The group currently has orders worth 42 billion euros on its books, which is 5 billion more than in the spring. However, a certain degree of uncertainty remains. Because it is quite “understandable that customers order more than they actually need in the hope of getting hold of more goods,” explained Auto boss Schiefer. That means: One or the other air booking cannot be ruled out.
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