Infineon Technologies AG Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Johannes Schaller - Deutsche Bank AG - Analyst : Yeah, good morning. Thanks for taking my question. I mean, clearly, the current revenue run rate into Q1 is quite depressed by destocking effects. I mean, maybe you could give us a little bit more detail on how we should think about quantifying those. And I'm pretty sure you're not shipping in line with the EUR80 million or EUR88 million SAR in Q1 maybe -- what's the equivalent you're seeing in Q1? And then just as a quick follow-up on gallium nitride, great progress on 300-millimeter. How should we think about this conceptually? Is this for you more something to grow and expand your margins? Or is it more something that will allow you to defend your market share and defend your profitability? Thank you.

Question: Johannes Schaller - Deutsche Bank AG - Analyst : Maybe asking very slightly differently, I mean, I guess, you're planning to charge more for 300-millimeter gallium nitride wafer than for a silicon wafer. Because there is a bit of a debate in the market about this point specifically.

Question: Johannes Schaller - Deutsche Bank AG - Analyst : That's very clear. Thank you very much.

Question: Andrew Gardiner - Citi - Analyst : Thanks very much for taking the question. First on the -- just a sort of follow-up from the first question on your inventory levels and the customer inventory levels, and then one on silicon carbide, please. So what is your assumption in terms of what customers are doing. I suppose how clear are they being, particularly in the automotive space, about the reduction of inventory? Or are you just you're feeling the pressure in terms of your orders, and so you're making an assumption? I just try to understand the level of communication you're getting from those customers.

Question: Andrew Gardiner - Citi - Analyst : Understood. Thank you. And then on silicon carbide, you mentioned EUR650 million in the fiscal year just finished and low double-digit growth for the coming year. As you suggest, it seems like you're clearly gaining share. Can you give us an update on the split that you have between industrial and automotive as we look to fiscal '25? You have been over-indexing towards industrial relative to some of the peers. But I'm just wondering whether that's changing.

Question: Andrew Gardiner - Citi - Analyst : Okay. And then just finally, very quickly, the win you mentioned with the US OEM, can you tell us whether that's a traditional carmaker or is that a newer EV manufacturer?

Question: Andrew Gardiner - Citi - Analyst : Thank you.

Question: Andrew Gardiner - Citi - Analyst : Understood. Thank you, Sven.

Question: Didier Scemama - BofA Global Research - Analyst : Yes, good morning. Thank you for taking my questions. Maybe two questions. So first, Sven or Jochen, whichever wants to take the question, on

Question: Didier Scemama - BofA Global Research - Analyst : Got it. Makes perfect sense. My second question is more like sort of medium term and related to the Step Up program. I guess, the main question we get on Infineon from global investors is, why should I invest in power semiconductor companies? When I look at your US listed peers in power semis, their gross margins are higher than yours, at least at this stage. They might fall in the coming quarters, who knows. And obviously, your Japanese and US listed microcontroller peers in automotive have got tremendously higher gross margins. Just remind us why is it -- what's the investment case, really, for Infineon for investors relative to what they could get in investing in some of your overseas competitors?

Question: Didier Scemama - BofA Global Research - Analyst : Very well. Thank you so much.

Question: Sandeep Deshpande - J.P. Morgan Securities plc - Analyst : Yeah, hi. Thanks for letting me on this morning. I have a question on what you are hearing from your customers in the automotive space or pricing in the automotive semiconductor space. And will you see that impact fully reflected in the first-quarter results, or will that also be reflected in the

Question: Sandeep Deshpande - J.P. Morgan Securities plc - Analyst : Thank you. And then a follow-up on your chips which go into the AI market. I guess, you will see some improvement in your sales into that market in 2025. And could you comment on whether this is this lateral technology or the vertical technology that you are selling into this market, and how you see development into '26 as well? Thank you.

Question: Sandeep Deshpande - J.P. Morgan Securities plc - Analyst : Thank you.

Question: Francois Bouvignies - UBS - Analyst : Thank you very much. My first question is on China. It's one of the key highlights for this quarter. Many of your peers flagged the China robustness. And I think you mentioned it in your opening remarks. Can you tell us maybe what you have in terms of China revenues, I mean, this quarter or for the full year? That would be very helpful to monitor that. And then my follow-up question is, again, on the fiscal Q1, minus 18% quarter on quarter. I understand there is a correction happening. But still, minus 18% is well below -- above, I mean, in terms of decline than your peers, around minus 5% quarter on quarter. So my question is, do you take some proactive steps, I mean, to decline inventories? I mean, it seems that you are very different than peers. So I'm wondering if you have some proactive decisions to get inventories on top of what your customers are doing.

Question: Francois Bouvignies - UBS - Analyst : Okay. Thank you. And just on China, what -- sorry, did it get it to your growth -- China growth, what is it this quarter and this year?

Question: Francois Bouvignies - UBS - Analyst : For the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 8:30AM, IFXGn.DE - Q4 2024 Infineon Technologies AG Earnings Call

Question: Francois Bouvignies - UBS - Analyst : Share of total. And in terms of growth rate, I can calculate, I guess, but if you can help me save time.

Question: Francois Bouvignies - UBS - Analyst : Okay. Thank you.

Question: Janardan Menon - Jefferies - Analyst : Hi, good morning. Thanks for taking the question. I just want to go back to the Q2 quarter and what you are suggesting for that. So when you are saying that you will be slightly below the EUR7 billion range after doing EUR3.2 billion in Q1, that's still quite a punchy quarter-on-quarter growth that you're going for, which is sort of in a double -- low double-digit number. So is that growth mainly being driven by automotive? What I'm trying to say is would -- on a sequential basis, based on your current visibility, would automotive be the fastest-growing or rebounding segment into fiscal Q2? And if that is so, do you -- is that based on already the orders that you have from your customers, where they're saying, we are depressing our orders for the December quarter, but we want you to ship much more into the March quarter? And you have that visibility already.

Question: Janardan Menon - Jefferies - Analyst : Understood, and thanks for the clarification. And just on the margin, your level of improvement in margin -- segment margin through the year seems to be somewhat more muted than your expectations for revenue. Is that because you are targeting a lower level of inventory through the year and therefore, will keep your utilization levels low? What I'm trying to get at is the $1 billion or so of underutilization charges, how does that sort of track through the -- roughly through the four quarters of the year based on current visibility?

Question: Janardan Menon - Jefferies - Analyst : Understood. And just a clarification on the AI numbers. I just wanted to confirm that, previously, you were saying EUR200 million FY24 going to EUR400 million in FY25. And now you're saying EUR250 million in FY24, which will go to EUR500 million or around EUR500 million in FY25. Is that correct?

Question: Janardan Menon - Jefferies - Analyst : Understood. Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Hey, guys, thank you for taking my question. Good morning. Maybe I'll follow up on the last one first. Could you maybe provide any details on what's incrementally driving the increase since last quarter from EUR400 million to greater than EUR500 million in the data center business? And in particular, you mentioned you're exposed from core to grid. Any details you can give us on the drivers of the upside by socket? And is it more on the core? Is it more on the grid? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Thank you for all the detail there. For my follow-up, I wanted to ask about the China auto market, in particular. Many of your peers that have reported have acknowledged the digestion in the West, but also like had a pretty high growth rates in China that offset a lot of that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 8:30AM, IFXGn.DE - Q4 2024 Infineon Technologies AG Earnings Call Your numbers appear a bit weaker. Maybe you could give us any metrics on what China doing in your December quarter guidance versus digesting in the rest of the world, or any metrics you can give that can help square away those two buckets? Thank you.

Question: Joshua Buchalter - TD Cowen - Analyst : Got it. Thank you.

Question: Lee Simpson - Morgan Stanley - Analyst : Great. Good morning, everyone. Thanks for fitting me in. I just wanted to maybe just try and understand a little bit better the destocking and what you're seeing as underlying growth in the second half of the year, particularly as it relates to ATV, obviously. And as I've understood what you've said so far, I think you're seeing the run rate implied in the first half is just south of EUR7 billion, that there will be a 7% to 8% increase half-on-half in the second year, the second half; and that the inventory destock effect that you would net off that sort of sub EUR7 million is around about EUR700 million, if I got that right. So what, I guess, I'm trying to appreciate here is, is this the right way to look at the underlying dynamics for the first half and for us to better understand that sort of phasing between Q2 and Q1? Thanks.

Question: Lee Simpson - Morgan Stanley - Analyst : Yeah, sorry. That's actually very clear. Thanks so much for pointing that out. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 8:30AM, IFXGn.DE - Q4 2024 Infineon Technologies AG Earnings Call

Question: Lee Simpson - Morgan Stanley - Analyst : Yeah, no, very important point. And I think maybe just aligned to that, you're clearly enjoying a lot of market share wins in China, and this is across the board. This is power semis, microcontrollers, and other sockets. I just wondered, that seasonal pattern as you currently see it, is there a risk here that that could be disturbed to the upside in the second half of the year on the basis of China? Or do you see a sort of slowing effect from China in the second half of the year? Thanks.

Question: Lee Simpson - Morgan Stanley - Analyst : Great. That's very clear. And maybe if I could squeeze one last one in. Just on the cut to the investments this year at EUR2.5 billion, should we assume that all of that is coming from the slowdown in spend in Kulim 3 phase two, or are there other factors in that mix? Thanks.

Question: Lee Simpson - Morgan Stanley - Analyst : That's very clear, Sven. Thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 8:30AM, IFXGn.DE - Q4 2024 Infineon Technologies AG Earnings Call

Question: Adithya Metuku - HSBC - Analyst : Yeah, good morning, gents. Thank you for squeezing me in. Firstly, I just wondered if you could give us some sense of the lead times across your product ranges, and how this compared to the previous downturns we've seen in late 2015, late 2018, just to get a sense for how the current downturn compares to previous downturns. That would be great. And then my second question is on the company-specific growth drivers. You've given us color on the silicon carbide and the AI data center businesses. I just wondered if you could also give us some color on what you're expecting in terms of growth contribution from automotive MCUs and your MEMS businesses, so that I can get a sense for what your underlying assumptions are for the decline, excluding your company-specific growth drivers in 2025. Thank you.

Question: Adithya Metuku - HSBC - Analyst : Got it. But would you say these are in line with what you've seen in previous downturns? The reason I ask is there is a lot of concern around pricing taking another leg lower. And I'm thinking if your lead times have already come down, and pricing is going down? When is it going to go down? That's a question for the [best], I suppose, but I just wanted to hear your thoughts.

Question: Adithya Metuku - HSBC - Analyst : And just a quick clarification on the MCUs, when you said you expect growth, that's in automotive MCUs, I take it.

Question: Adithya Metuku - HSBC - Analyst : Got it. Thank you.

Question: Adithya Metuku - HSBC - Analyst : Understood. Thank you, Sven.

Question: Tammy Qiu - Joh. Berenberg, Gossler & Co. - Analyst : Hi, thank you for squeezing me in. So firstly, on the AI-related business, so you have definitely got a lot of traction within this AI new design. Can I ask what is your visibility from that design, especially, i.e., from my understanding, things have changed quite quickly. Or market share can move quite quickly in this market. Do you have visibility that you have similar or increased level of market share in the future generations compared to this [chart]?

Question: Tammy Qiu - Joh. Berenberg, Gossler & Co. - Analyst : Okay, thank you. And also regarding China, everyone's comment about China, especially auto market, has been very strong. Do you see any potential risk given that currently China's macro is still a bit uncertain, that China may come as a negative surprise after Chinese New Year? How long is your visibility on that market and your discussion with your local customers, please?

Question: Tammy Qiu - Joh. Berenberg, Gossler & Co. - Analyst : Thank you.