Infineon Warns of Slower Sales Growth on Low Personal Electronics Demand — Update

   By David Sachs and Mauro Orru 
 

Infineon Technologies said sales would continue to grow in its new fiscal year, albeit at a slower pace than in fiscal 2023, as the company grapples with weakening demand for chips in personal electronics such as computers and smartphones.

The German chip maker is aiming for around 17 billion euros ($18.50 billion) in revenue for the year ending September 2024, up from EUR16.31 billion that Infineon reported for fiscal 2023. Its segment result margin--a key profitability metric--is expected at roughly 24%, below 27% reported for fiscal 2023.

Citi and UBS analysts wrote in research notes that Infineon's guidance is in line with expectations, as the company continues to see good demand for semiconductors from the automotive industry and its push for electric vehicles.

Infineon expects revenue growth to be driven by its automotive business, with sales there projected to grow in the low double-digit percentage range, while revenue at its green industrial power segment should remain more or less stable on year . The two businesses should compensate for a high single-digit percentage decline in sales at the power-and-sensor systems and connected secure systems divisions. Overall, Infineon is projecting a revenue growth rate of around 4% in fiscal 2024, well below 15% growth seen in fiscal 2023.

"Structural semiconductor growth in the areas of renewable energy, electromobility--especially in China--and microcontrollers for the automotive industry remains unabated," said Chief Executive Jochen Hanebeck. "In contrast, consumer, communication, computing and IoT applications are experiencing a temporary period of low demand."

Infineon on Wednesday posted revenue of EUR4.15 billion for the three months to the end of September, compared with EUR4.14 billion in last year's fiscal fourth quarter. Its automotive division contributed EUR2.16 billion to sales, up 12% on year. However, revenue at its power and sensor systems contracted 22% to EUR912 million.

"Automotive remains the standout division and, so far, continuing to demonstrate that automotive power semis remain resilient," Citi analysts said. Last month, peer chip maker STMicroelectronics also posted higher revenue led by growth at its automotive division despite weaker sales at its personal electronics business.

Infineon's net profit climbed to EUR753 million from EUR735 million, while its segment result slipped to EUR1.04 billion from EUR1.06 billion, generating a 25.2% margin.

Analysts had forecast revenue of EUR4.04 billion on a net profit of EUR674.8 million and a segment result of EUR1.01 billion, according to FactSet. Infineon had expected quarterly revenue of around EUR4 billion and a segment result margin of around 25%.

The group hit its annual targets for revenue and segment result margin in fiscal 2023 and proposed a dividend of EUR0.35 a share, up from EUR0.32 in fiscal 2022. Infineon shares climbed more than 7% in early afternoon trading.

Write to David Sachs at david.sachs@wsj.com and Mauro Orru at mauro.orru@wsj.com

Corrections & Amplifications

This was corrected at 12:05 p.m. ET because the original version incorrectly said the segment's revenue should remain more or less stable at 23%. The segment's revenue should remain more or less stable on year.

(END) Dow Jones Newswires

November 15, 2023 07:17 ET (12:17 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.