Infineon Lowers Guidance Amid Broader Slump in Chip Demand

Agatha Cantrill, Bloomberg News

A printed circuit board during the ground-breaking ceremony for the new Infineon Technologies AG semiconductor plant in Dresden, Germany, on Tuesday, May 2, 2023. Infineon gathered European powerbrokers at the ground-breaking ceremony for a new semiconductor fab in Dresden, Germany as its chief executive called for more cooperation among allies amid a flood of competing subsidies announced by the US and EU. Photographer: Krisztian Bocsi/Bloomberg , Bloomberg

(Bloomberg) -- Infineon Technologies AG forecast lower-than-expected revenue this year as the German chipmaker is hit by a broader slump in semiconductor demand from industrial customers.

Revenue is expected to be €15.5 billion to €16.5 billion ($16.7 billion to $17.7 billion), lower than its previous guidance midpoint of €17 billion, the German chipmaker said in a statement on Tuesday. That compares to the €16.8 billion average analyst estimate, according to a consensus compiled by Bloomberg.

The second quarter is expected to be particularly difficult with a “noticeable decline” in sales for power and sensor chips for industrial applications. Sales for the industrial business are expected to fall to €3.6 billion in the quarter, missing the €4.06 billion average analyst estimate. Infineon said its overall segment result margin is expected to be about 18% in the second quarter, missing analysts’ estimates for 23.1%.

Infineon is the latest industrial semiconductor supplier to give weaker-than-expected guidance for this year, as a slowdown in industrial production also impacted competitors including STMicroelectronics NV and Texas Instruments Inc. Demand for automotive chips, which typically account for more than 50% of the company’s revenue, is expected to remain strong, with revenue growth in the low double-digit percentage range.

Infineon shares fell 1.9% to €34 at 9:11 a.m. in Frankfurt trading. The stock has declined 9.4% this year.

“In consumer, communication, computing and IoT applications, we are not anticipating a noticeable recovery in demand until the second half of the calendar year,” Chief Executive Officer Jochen Hanebeck said.

Hanebeck added that the company’s expectations for the automotive market remains “virtually unchanged,” despite the slowdown in demand for electric vehicles outside of China. The automotive sector saw a slight decline in sales in the first quarter of fiscal 2024, compared to the previous quarter, at €2.1 billion.

“Although automotive remains solid, there were some indications that electromobility outside of China was starting to impact the outlook,” said Bernstein analysts Sara Russo and Chris Elias.

--With assistance from Henry Ren.

(Updates with analysts’ reaction and context throughout)