Infineon trims financial forecast amid order slowdown

Chipmaker outlines plans to save hundreds of millions and, hey presto, share price magically jumps

Infineon, maker of chips for the automotive and industrial sectors, told investors that it is embarking on a cost purge after lowering revenue estimates for the full financial year amid weakened demand.

The German manufacturer has clipped forecast revenue from €16 billion to €15.1 billion, with a possible variance of €500 million. Adjusted gross margin is calculated to be nearer to the low-forties percentage range versus the previously projected mid-forties.

It was only back in February that Infineon issued a previous reduction in sales forecast, although at the time the company was banking on an uplift in orders during the second half of this year.

In Q2 of fiscal 2024 ended March 31, Infineon said revenue was €3.632 billion compared to €4.119 billion a year earlier, and operating profit plunged to €496 million from €1.064 billion.

"In the prevailing difficult market environment, Infineon delivered a solid second quarter," said CEO Jochen Hanebeck in a statement [PDF]. "Many end markets have remained weak due to economic conditions, while customers and distributors have continued to reduce inventory levels.

"Weak demand for consumer applications persists. There has also been a noticeable deceleration in growth in the automotive sector. We are therefore taking a cautious approach to the outlook for the rest of the fiscal year and are lowering our forecast."

Hanebeck reckons that "decarbonization and digitalization" remain the structural drivers of profitable growth. So what's Infineon plotting to help improve its prospects in the shorter term?

"In order to realize the full potential of our Company, we will further strengthen our competitiveness. To this end, we are launching the company-wide 'Step Up' program. We are aiming to achieve structural improvements in our Segment Result in the high triple-digit million euro range per year."

The program involves a "targeted, sustainable improvement of the cost structure."

"The program includes various packages of measures focusing on the areas of manufacturing productivity, portfolio management, pricing quality and operating cost optimization without compromising the Company's innovative strength," said Infineon.

Despite slowing trade, investors cheered the action Infineon is taking to counter this, and at the time of writing its share price was up almost 12.8 percent.

The German chipmaker joins the ranks of others navigating choppy waters amid slowing demand. Intel recently disappointed the markets with its outlook for calendar Q2, and ST Microelectronics lowered its outlook for the year ahead due to tumbling orders from automakers. ®

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