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Infineon Remains a Powerhouse

The leader in automotive and power semiconductors is undervalued, in our view.

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 Infineon Technologies (IFNNY)/(IFX) is a leading broad-based European chipmaker with nice exposure to secular growth drivers in the industrial and automotive chip sectors. However, like most chipmakers, its business remains highly cyclical as demand ebbs and flows in line with the health of its various end markets.

Looking at the automotive chip market, vehicles with advanced powertrain technology and safety systems require a variety of sensors and power management chips supplied by companies like Infineon. Similarly, the company’s exposure to power management circuits positions it to benefit from trends in the electronics industry toward power conservation, not only in more efficient devices like industrial drives, but also in green energy solutions like solar panels. Infineon is also a leader in chip card and security products, such as chips for chip-and-pin credit cards. We think limiting exposure to challenging markets is just as important as increasing exposure to promising markets, and Infineon has done a good job of eliminating unattractive business segments in recent years, such as its spin-off of its wireless baseband chip business to Intel.

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Brian Colello does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.