Infineon CEO notes lack of power semiconductor investment, but deems chip self-sufficiency unattainable

Misha Lu, DIGITIMES Asia, Taipei 0

Credit: Digitimes

Jochen Hanebeck, CEO of Germany-based automotive chip supplier Infineon, voiced his thoughts on the ongoing trend of semiconductor self-sufficiency in a recent interview with Nikkei. According to the chief executive, "total self-sufficiency" is unattainable.

Even though Hanebeck believes that the chip shortage will be improved in the short term, the growing demand for semiconductor driven by vehicle electrification and clean energy in the long run will still render the supply of automotive chips and power semiconductors insufficient.

In the interview, the Infineon CEO also observed that foundries have not aggressively boosted the production capacities for non-cutting edge products, and noted that the power semiconductor sector is troubled by a chronic lack of investment, since many companies have opted to use fully depreciated production lines for volume production, instead of committing new capital to build production lines and compromise margins.

With regard to the historical amount of subsidies spent by various governments on building autonomous chip supply chains, the Infineon CEO worried that industrial policies geared for certain sectors might reduce supply chain efficiency, and cautioned that governmental funds should avert inefficient bureaucracy and slowing technology innovations.

In another recent interview with German newspaper Frankfurter Allgemeine Zeitung, Hanebeck revealed that Infineon is ready to spend several billions of euros on acquisition, without revealing potebtial targets. As indicated by the German chipmaker's Annual Report in 2022, Infineon targets an annual revenue growth of more than 10%, up from the previous goal of 9%, and an average 25% segment result margin, up from the prevous 19% target which Infineon deemed "too conservative."

It has also set a liquidity target of EUR1 billion - serving as a liquidity reserve for pension and contingent liabilities - in addition to having at least 10% of revenue allocated, allowing the company sufficient cash to finance business operation and investment.

Infineon has introduced a free cash flow target that replaces its previous investment rate target. According to the company, free cash flow, adjusted for large investments in frontend buildings, should fall within a range of 10% to 15% of revenue - achievable as long as Infineon ensures its operating cash flow grow at a faster rate in the long term than its investment expenditures.

As indicated in its annual report, Infineon's annual revenue rose from EUR11 billion to EUR14.2 billion from FY2021 to FY2022, up by 29%.