Infineon Technologies AG is increasing its target operating model and reporting its results for the fourth quarter and for the full fiscal year, both of which ended on 30 September 2022.
“Decarbonization and digitalization are causing structurally increasing demand for semiconductors. Infineon will benefit disproportionately from this development thanks to its strategic positioning. This dynamic has further accelerated, so now is the right time for us to define an even more ambitious target operating model,“ says Jochen Hanebeck, Chief Executive Officer of Infineon. „Furthermore, by the planned investment in a new factory we are continuing the consistent execution of our strategy and are broadening the base for our accelerated profitable growth trajectory in a forward-looking way. We are pleased to have political support for an investment at the Dresden site (Germany) and we are counting on adequate funding through the European Chips Act. We concluded the challenging 2022 fiscal year very successfully, with an excellent fourth quarter. The 2023 fiscal year has also started well. In view of ongoing macroeconomic and geopolitical uncertainties, heightened vigilance is required in the coming quarters. We are prepared to act swiftly and flexibly if necessary.“
In its target markets automotive, industrial and IoT applications, as well as renewable energies Infineon sees increasing dynamic and strong structural growth drivers. The company is therefore upgrading its target operating model, which defines financial targets over the cycle. In future, based on an exchange rate of US$1.00 to the euro, the expected average rate of revenue growth will be more than 10 percent, increased from 9 percent + previously. Growth will in particular be driven by electromobility, autonomous driving, renewable energies, data centers and IoT, such growth being accompanied by a significant improvement in profitability: the Segment Result Margin is expected to reach an average level of 25 percent, compared with 19 percent to date. The main factors influencing the rise in earnings will be an increasing proportion of system solutions, a higher-value product/technology mix due to portfolio management, the expansion of costeffective 300-millimeter production, and operational expenses rising at a lower rate than revenue due to digitalization and economies of scale.
For the first time, Infineon is including an explicit Free Cash Flow target in its target operating model, replacing the investment-to-sales rate previously used. Free Cash Flow, adjusted for major investments in frontend buildings, should be within a range of 10 to 15 percent of revenue over the cycle.
Infineon is planning to continue expanding its 300-millimeter manufacturing capacity, to enable the expected acceleration in growth of analog/mixed-signal and power semiconductors. The intended location is Dresden (Germany). Adequate public funding is required for the investment decision. With a planned total investment of €5 billion, this would be the largest single investment in Infineon’s history. Thereby, the company would strengthen its position as a global semiconductor leader in power systems. When operating at full capacity, the planned factory would have the potential to generate annual revenue equal to the level of the investment. The new factory is expected to create up to 1,000 new highly qualified jobs and according to planning could be ready to start production in autumn of 2026.
Analyst webcast and press conference on the annual results
The Management Board of Infineon Technologies AG will host a live webcast for
analysts and investors (in English only) on 15 November 2022 at 8:30 am (CET). During the call, the Infineon Management Board will present the company’s new target operating model, its results for the fourth quarter of the 2022 fiscal year and the outlook for the first quarter and the 2023 fiscal year. In addition, the Management Board will host a press conference on the annual results at 11:00 am (CET), which can be followed over the Internet in both English and German. Both conferences will be available live and for download on Infineon’s website.
Outlook for the 2023 fiscal year
Based on an assumed exchange rate of US$1.00 to the euro, revenue of €15.5 billion (plus or minus €500 million) is forecast for the 2023 fiscal year, equivalent to a growth rate of 9 percent compared with the 2022 fiscal year. Revenue growth for the ATV segment is expected to be above Group average. In the IPC and CSS segments, revenue is likely to grow at around the average rate for the Group. Revenue generated by the PSS segment is forecast to grow below Group average. At the mid-point of the guided revenue range, the adjusted gross margin should be around 45 percent and the Segment Result Margin around 24 percent.
Investments – which Infineon defines as the sum of investments in property, plant and equipment, investments in other intangible assets and capitalized development costs – are planned at around €3.0 billion for the 2023 fiscal year. The focus here will be on the construction of the third manufacturing module on the Kulim site (Malaysia), designed to produce compound semiconductors, the planned start of construction work on the new factory in Dresden mentioned above, and the continuing expansion of front-end manufacturing capacity, especially in Dresden (Germany) and Villach (Austria).
Depreciation and amortization are predicted to be about €1.9 billion in the 2023 fiscal year, of which approximately €450 million is attributable to purchase price allocations arising mainly from the acquisition of Cypress. Taking the planned expansion in frontend buildings into account, Free Cash Flow is forecast to be around €0.8 billion. Adjusted Free Cash Flow is expected to be around €1.5 billion, or about 10 percent of the forecast revenue for the year.
Predictability of future revenue and earnings is currently strongly limited by various geopolitical and macroeconomic factors, such as the war in Ukraine, the coronavirus pandemic, and also sustained high inflation rates and thus increasing interest rates.
Infineon Financial Calendar (* preliminary)
➢ 16 – 17 Nov 2022 Morgan Stanley European TMT Conference, Barcelona
➢ 22 – 23 Nov 2022 Power presentation (IPC, PSS) and roadshow with Peter Wawer, head of IPC and Adam White, head of PSS
➢ 28 – 29 Nov 2022 Credit Suisse TMT Conference, Scottsdale
➢ 6 Dec 2022 Berenberg European Conference, London
➢ 13 Dec 2022 Deutsche Bank Auto Conference (virtual)
➢ 2 Feb 2023* Earnings Release for the First Quarter of the 2023 Fiscal Year
➢ 16 Feb 2023 Annual General Meeting
➢ 4 May 2023* Earnings Release for the Second Quarter of the 2023 Fiscal Year
➢ 3 Aug 2023* Earnings Release for the Third Quarter of the 2023 Fiscal Year
➢ 15 Nov 2023* Earnings Release for the Fourth Quarter and the 2023 Fiscal Year
