Infineon posts record quarterly margin for 1Q23, defying weakening greenback

Yusin Hu, DIGITIMES Asia, Taipei 0

Credit: DIGITIMES Asia

Germany-based semiconductor IDM Infineon reported a sequential decline in revenue for the first quarter of FY2023 (quarter ended on Dec 30, 2022). The company cited weakening demand in consumer applications due to macroeconomic uncertainties, but said its capacities in the automotive division "are completely booked out for fiscal 2023."

At the earnings call for the first quarter of FY2023, Infineon reported a total revenue of EUR3.95 billion (US$4.03 billion at EUR1=US$1.02) – meeting company guidance, which was EUR4 billion, despite a 5% decline from the previous quarter. For the coming quarter, the company expects to see continuous sequential decline in revenue due to weak US dollar, assuming exchange rate of US$1.05. The company said it would be prepared to "review things" if the US dollar moves further away from its guidance in the coming year, where the possibilities of the exchange rate moving to US$1.07-1.08 could not be ruled out.

Segment result margin jumped from 25.5% to 28% for the first quarter, hitting quarterly record high, according to the company. The record margin could be attributed to improved product pricing, advantageous product mix, and reduced pressure from energy and material costs.

According to Infineon, demand for semiconductors for consumer, computing, and communication such as smartphones, computers, televisions, gaming consoles, and data centers is declining due to cyclical fluctuations in the market.

The company said it is focusing on long-term growth opportunities brought by decarbonization and digitalization. Revenue generated from automotive products in the quarter declined quarterly by 3% to EUR1.87 billion due to weakening of the greenback. However, comparing to the same period in the previous year, automotive revenue leaped by 35%. The result shows that strong demand in all product groups and automobiles are continuing, the company said.

Speaking of the exchange rate of Euro to US dollars, Infineon stressed that through receiving higher volumes of orders, adjusting pricing positively, and receiving less pressure from materials and energy costs, it may be able to compensate for currency impacts.

Infineon said it is seeing major clients moving assembly lines away from China. While continuing serving clients in China, the IDM said it is also "increasingly looking for growth possibilities outside China", which may be Japan, South Korea, or the US.

Infineon reiterated that it maintains a manufacturing strategy for Europe that focuses on highly-automated 300mm fabs. For Kulim, Malaysia, 200mm SiC chips would be the most suitable for the company to generate good returns over the factory's lifespan of 20 to 30 years.

The company announced in Feb 2022 that it was expanding capacity in Kulim with EUR2 billion investment. According to the company, construction of the new Kulim 3 has begun in June last year and the fab would be ready for equipment in summer 2024. The first wafers will leave the fab in the second half of 2024.