Chip manufacturers inspire investors and analysts

Jochen Hanebeck

The new Infineon boss promises more growth and a higher margin.

(Photo: dpa)

Munich Germany’s largest chip manufacturer is planning more confidently than ever before. Infineon boss Jochen Hanebeck promises to increase sales in the next few years more than before and to become significantly more profitable.

The manager announced on Tuesday that it will generate an operating margin of 25 percent over an industry cycle, six percentage points higher than previously. The semiconductor group is also expected to increase sales by more than ten percent a year on average. So far, the Munich-based company has been aiming for an increase of at least nine percent.

The stock market is enthusiastic about the growth course of the manager who took office in the spring. As early as Monday afternoon, when Hanebeck announced the higher goals, the share price rose by almost eight percent. On Tuesday, the shares gained a good 2.5 percent in a weak environment by the early afternoon and climbed to a good 32 euros. This is the highest level since the beginning of the year.

Infineon hopes for the state

The increased margin target is proof that the new management is more concerned with profitability, praised the analysts at UBS. The analysis company Warburg Research immediately raised the price target for the Dax group from 36 to 45 euros and recommends buying the title.

Top jobs of the day

Find the best jobs now and
be notified by email.

In order to be able to grow so strongly, the Infineon boss wants to spend five billion euros on a new plant in Dresden. The catch: It is unclear how much the state is supporting the new building. Subsidies are essential to keep up with the competition. In Asia and America new factories are subsidized with large sums. Grants of 40 percent of the investments are common. At Infineon, that would be two billion euros.

“We rely on appropriate funding,” said Hanebeck. However, the manager did not want to give any details. And added: “We are in contact with the authorities.”

Infineon chip production

Germany’s largest chip manufacturer wants to build a new factory in Dresden.

(Photo: Bloomberg)

If the money flows as planned, the excavators would arrive in autumn 2023. Production could then begin in 2026. “We want to use this to serve the increasing demand in the second half of the decade,” explains Hanebeck. He calculates that the new plant will generate annual sales of five billion euros.

The subsidies are to be implemented as part of the EU’s so-called Chips Act. However, the law has not yet been passed. In the best-case scenario, it will come into force in early 2023. That worries experts. “Now it is crucial that the implementation of the European Chips Act becomes reality as quickly as possible,” warned Frank Bösenberg, Managing Director of the Silicon Saxony industry association. “All those involved in Brussels and Berlin must follow their words with deeds, finalize the framework conditions and start the funding programs.”

Hanebeck expressed optimism that the federal government and the EU would agree on substantial funding. The plant would contribute to the EU’s goal of doubling Europe’s share of global chip production to 20 percent by the end of the decade.

>> Read here: How the chip companies in Europe can close a dangerous gap in the supply chain

He doesn’t see the risk of overcapacities, added Hanebeck. “We are very confident that we can fill the factories.” Like Infineon, the most important competitors are also building large new plants: STMicroelectronics is investing heavily in Italy and France, Wolfspeed in America and Rohm in Japan.

Infineon has orders worth 40 billion euros on its books

The confident forecasts correspond to the economic reality. Infineon has orders for more than 40 billion euros on the books, said Hanebeck. This corresponds to almost three times the annual turnover. “Even if the order backlog is halved, we’ll all sleep quite well,” added the CEO.

Infineon got off to a good start in the new fiscal year, which began on October 1st. The group is still unable to meet all customer requests on time, the delivery bottlenecks that have been going on for almost two years.

In view of the high demand, the manager expects sales of 15.5 billion euros, around nine percent more than in the previous year. The margin should be 24 percent, which is about as much as in the past financial year. The good outlook is also evident from these figures: In the past financial year, the Group increased its forecast three times.

The shareholders benefit from the good business development through a higher dividend: Infineon intends to pay out 32 cents per share, five cents more than in the previous year.

More: Europe’s most valuable technology group ASML promises rapid growth

source site-12