Q1 2025 Infineon Technologies AG Earnings Call
Good morning, everyone and welcome to the conference call for analysts and Investor for 2025 first fiscal quarter results with Infineon the.
Today's call will be hosted by Alexandra <unk> Executive Vice President Finance Treasury and Investor relation of Infineon technologies. As a reminder, this call is being recorded this conference call conference call contains forward looking statements and or assessments about the business financial condition performance and strategy of the Affinion group. These.
Statements or assessments are based on assumptions that management expectation resting upon currently available information.
They are subject to a multitude of uncertainties and risks, which many of which are partially an entirely beyond the convenience control opinions actual business development financial condition performance and strategy may therefore differ materially from what is discussed today in this conference call beyond.
Beyond disclosure requirements stipulated by law Infineon does not undertake any obligation to update forward looking statements. At this time, it's my pleasure to hand over to Infineon. Please go ahead.
Speaker Change: Many thanks, operator, and good morning, ladies and gentlemen, thank you for joining our first earnings call in 2025, well. This cold you have our C O Johan <unk>, our CFO Luis mentioned idle and our Chief marketing Officer Andreas horses.
Speaker Change: You'll notice when we will provide a comprehensive overview on the market situation and divisional performance key financials and our outlook after that we will start our Q&A session.
Speaker Change: As usual the illustrating slideshow, which is synchronized with the telephone audio signal it's available at Infineon Dot com slash slides.
Speaker Change: We will again provide a PDF with yawns and swings introductory remarks in the course of the call on our website, namely Infineon dotcom, especially investor.
Speaker Change: There you will also find a recording of this conference call, including the aforementioned slides a copy of our earnings press release as well as our investor presentation.
Speaker Change: And now over to you.
Speaker Change: Thank you Alexander and good morning, everyone 2075 marks the 20th anniversary of Infineon is an independent stock listed company.
Speaker Change: During a quarter of a century, we have transformed our business towards the most attractive strategic opportunities. It has always been key to distinguish near term often cyclical market behavior from long term structural patents.
Speaker Change: The same applies today at the beginning of the year. The cycle trough is dragging on that are old and correction in many of our target market such as automotive and industrial is continuing our modus recoveries in the cards for the second half of our fiscal year as predicted in November.
Speaker Change: Near term cyclical headwinds aside secular trends provide us with undiminished growth opportunities occasion point is continuing and in men's momentum we are seeing for our solutions for powering AI service.
Speaker Change: Like in the past quarter of a century, while we manage the here and now we simultaneously focus on innovation and structural improvements to successfully shape the future.
Speaker Change: Now, let's take a closer look at the start of our 2025 fiscal year, where our revenue and margin numbers came in slightly ahead of expectations. In this December quarter group revenues amounted to 3.424 billion euros.
Speaker Change: Corresponding to a steep quarterly decline of 13% as revenues came in about 200 millions ahead of our predictions about half of this was currency related as the actual U S. Dollar exchange rate for the quarter was 107 compared to the assumed guidance rate of 110, we also noted as <unk>.
Speaker Change: Lately better volume development than you originally anticipated.
Speaker Change: The segment result came in at 573 million euros equivalent to a segment result margin of 16, 7%, reflecting the meaningful revenue contraction compared to the previous quarter and correspondingly high Underutilization charges.
Speaker Change: Included in the margin is a one time compensation payment from a customer or a mid double digit million amount.
Speaker Change: Our order backlog at the end of December was standing at around 20 billion euros practically unchanged quarter over quarter, considering the stronger U S dollar.
Speaker Change: Now, let's take a closer look at our divisions beginning with automotive.
Speaker Change: In the first quarter of 2025 fiscal year the segment achieved.
Speaker Change: Revenues of 1.919 billion euros as expected customers brought down the inventories significantly compounding normal seasonal effects.
Speaker Change: The quarter over quarter decline of 11% was a little lower than initially anticipated even accounting for the stronger U S. Dollar.
Speaker Change: In particular, our sales volume in China increased by 10% quarter over quarter.
Speaker Change: Trauma than forecast.
The segment result of a T V came in at 363 million euros with a corresponding segment result margin of 18, 9%, reflecting mainly the declining sales under loading charges and some adverse mix effects.
Speaker Change: In the near term inventory destocking across the automotive supply chain will remain the major drag on revenue development.
Speaker Change: <unk> production numbers are forecast to stay flat in 2020 fights Amit.
Speaker Change: Middle injuring terrorists and trade uncertainties, yet to structural content growth is set to continue assisted in semi autonomous driving features should keep proliferating at a healthy pace.
Speaker Change: The adoption of electric vehicles will continue to differ by region in China by far the world's largest and by now also the most innovative global HCV market. The extension of Scrappage and trade in policies schemes is expected to support strong genuine customer demand.
Speaker Change: Conversely, the new U S administration will likely curb EV growth.
Speaker Change: Overall, we anticipate electric vehicles to grow globally at a mid teens percentage rate somewhat more cautious than market analysts like standard and poor's.
Speaker Change: With our unrivaled portfolio of breath and word wild customer reach we will continue to lead the global automotive semiconductor market from the pole position and nurture our structural growth drivers around E mobility and software do you find vehicles.
Speaker Change: This is well received by our customers for example, a key Chinese OEM recently increased its silicon carbide Marlin you orders significantly.
Speaker Change: Furthermore, we are happy to announce another major silicon carbide design win at the German tier one Z F. Using our latest 1200 volt cool sake, I D pad discrete devices with four dies per package this unique product.
Speaker Change: Isn't established form factor dedicated to high current high power applications allows the schaible literal integration into the next generation of traction Inverters, we were be suppliers that F with a mid triple digit million Euro volume, serving two premium Oems.
Speaker Change: Looking at the Silicon carbide market in general in senior was the fastest growing major company in 2024. According to third party market research with revenues growing more than twice as fast as the market leading to a market share of around 20%.
Speaker Change: Current market dynamics, let us conclude that we will likely outgrow the other establish silicon carbide players over the coming years.
Speaker Change: A key highlight for the quarter is the continuation of our excellent collaboration with a leading Chinese EV manufacturer B y D.
Speaker Change: We are proud to report new design wins, ranging from zonal control units to steering applications.
Speaker Change: The design wins extend over multiple years and cover a wide range of infineon products, including cutting edge Optimus seven power management Ics T. In our based sensors as well as microcontrollers comprising both the outbreaks and Trabi Yosemite.
Speaker Change: Looking at other regions, we achieve new design wins for zonal control for a Japanese and for a French OEM for total volume north of 300 million euros.
Speaker Change: Now moving to Green industrial power.
Speaker Change: Coming from a revenue level of 500 million euros in the preceding quarter G. I P witnessed the anticipated steep decline in the December quarter.
Speaker Change: 340 million correspond to a sequential contraction by 32%.
Speaker Change: The persistently weak market momentum and the reduction of elevated supply chain inventories.
Speaker Change: Provided the usual seasonality impacting all application areas as a consequence of significantly lower volumes and unfavorable price changes. This segment result of G. I P deteriorated to 34 million euros, reducing the segment result margin to 10%.
Speaker Change: Cyclical market weakness affecting industrial applications is continuing into 2025.
Speaker Change: Global PMI readings have remained soft macro data points has yet to show signs of consistent improvement.
Speaker Change: The inventory depletion is progressing its space being a function of end demand such end demand defense by application for core industrial like factory automation as well as for major home appliance. It it still needs to show a clear reversal.
In renewables underlying structural demand remains intact due to globally rising power and efficiency requirements.
Speaker Change: Solar and wind are the most economical ways of energy generation in many regions on the energy infrastructure side demand for items like transmission energy storage. So.
Speaker Change: Systems, our uninterruptible power supplies is robust driven among others by AI data center build outs.
Speaker Change: Also rail transportation is seeing continuous investments in infrastructure and electrification.
Speaker Change: Although we are expecting a gradual recovery to set in the second half of 2025 with a cutting edge offering of power solutions, we will fully benefit from.
Speaker Change: Upswing.
Speaker Change: Now to power and sensor systems PSS recorded revenues of 820 million euros of comparatively mild sequential decline of 5%.
While consumer and smartphone related businesses saw a typical negative seasonality in our power solutions for AI servers are on unabated strong trajectory.
Speaker Change: The segment result of PSS increased to 149 million euros corresponding to a segment result margin of 18, 2%.
Speaker Change: Before mentioned compensation payment we received from our customers included here recorded as other operating income.
Speaker Change: Now to an organizational change effective first of January 2025, we have transferred our automotive sensor business line covering radar magnetics men's and others from a TV two P. S S.
Speaker Change: With N P. S. S. It will be combined with existing sensor in radiofrequency or RF business.
Speaker Change: By combining our sensor and RF expertise.
Speaker Change: Dedicated unit we.
Speaker Change: We are strengthening our focus on these promising product families, while increasing competitiveness by leveraging R&D synergies to ultimately accelerate innovation to customer value.
Speaker Change: Our overall segment in our reporting structure will not change the annual revenue of the automotive sensor business line in fiscal year 'twenty four was around 700 million euros. It segment result margin roughly in line with the ATV average.
Speaker Change: For modeling purposes, you will find the quarterly revenues numbers in our press release.
Speaker Change: Looking at PFS target markets, we see that consumer computing and communications applications, which entered the long correction first half now bottomed out and some like consumer electronics and battery powered tools are beginning to show first signs first positive signals.
Speaker Change: For this quarter inventory destocking with it will still be a headwind the picture looks brighter for our industry, leading silicon microphones going into smartphones and accessories and.
Speaker Change: N P. C's, we expect traction from a refresh cycle kicking in this year.
Speaker Change: But by far our strongest dynamic is in the area of power solutions for AI service, a highly attractive structural growth trends.
Speaker Change: Dressing the entire PA flow from grid to car with our unique product offering we see our business scaling up very dynamically and we are happy to firm up our near term target. Once again, we will achieve around 600 million euros of AI related revenue in this fiscal year and as said before we will cross the.
Speaker Change: The 1 billion Euro revenue line within the next two years.
Speaker Change: To complete the divisional revenue, let's take a look at connected secure systems.
Speaker Change: Segment record quarterly revenues of 344 million euros down 15% from the September quarter, most application areas.
Speaker Change: Saw sequential declines, reflecting the ongoing weakness in consumer and Iot markets driven by lower revenue. The segment result of CSS went down to 30 million corresponding to a segment result margin of eight 7%.
Speaker Change: Iot and security markets are currently trending around the bottom as macro uncertainties continue to affect consumer sentiment and corporate spending.
Speaker Change: That said inventories are normalizing in booking patterns show initial positive signals I'll buy it on a still low level.
Speaker Change: This supports our view of a modest recovery in the second half of 2025, we are preparing for future growth with continuous innovation with piece of control. We have launched a new family of industrial microcontrollers, enabling highly efficient and secure motor control and power conversion systems such.
Speaker Change: Systems are found in a diverse range of applications like home appliances, industrial dryers robots light electric vehicles or solar appliances.
Speaker Change: As more and more wideband Gan power components are adopted in these applications faster control loops are required to improve performance and system efficiency.
Speaker Change: Furthermore, security has become increasingly important as a key enabler infineon has achieved a milestone under way to quantum resilient world in collaboration with the German Federal office for information security.
Speaker Change: We are the first company ever to receive the common criteria six and industry, leading certification level for the implementation of a post quantum cryptography algorithm and a security controller, such cryptography enhanced security for ECM, five GSM and smartphone applications, including personal it is paid.
Speaker Change: <unk> cards and Ehealth cuts now.
Speaker Change: Now over to <unk>, who will present, our key financial figures.
Speaker Change: Thank you Johan and good morning, everyone.
Speaker Change: The adjusted gross margin in the December quarter came in at 41, 1% compared to a slightly restated level of 43, 3% from the previous quarter.
Speaker Change: Line with market practice from the beginning of our 2025 fiscal year, we've changed our cost allocation method and regroup certain expenses from cost of goods into research and development. Prior periods have been adjusted such that our like for like comparison is possible.
Speaker Change: The decline of around 200 basis points quarter over quarter is essentially related to the noticeably lower sales volume. Besides this slightly unfavorable mix and price effects were offset by positive currency impacts idle charges continue to burden our margin that's fabulous.
Speaker Change: <unk> levels remained subdued as part of our cycle management also the reported gross margin decreased quarter over quarter from restated 40, 142 39, 2%.
Speaker Change: On the Opex side research and development expenses increased slightly from 522 million euros in the September quarter to 544 million euros in the December quarter, selling general and administrative expenses were 395 million euros tightly managed to stay flat comps.
Speaker Change: Not only to the preceding quarter, but also to one year ago.
Speaker Change: The net other operating expense amounted to 86 million euros therein, we recorded impairment charges and provisions totaling 113 million euros related to manufacturing equipment, becoming obsolete in connection with the restructuring of production processes and the opt.
Speaker Change: <unk> of the fab footprint under our step up initiatives.
These charges are part of the non segment result, which amounted to minus 255 million euros for the December quarter.
Speaker Change: The financial results for the first quarter of our 2025 fiscal year. It was minus 17 million euros off the minus 26 million euros in the quarter before.
Speaker Change: Income tax expense for the first fiscal quarter amounted to 60 million euros equivalent to an effective tax rate of 20% cash taxes for Q1 were 152 million euros containing payments made for prior years adjusting for these and for PPA effects there.
Speaker Change: <unk> tax rate would be 23% a typical level given that tax loss carry forwards have been fully utilized.
Speaker Change: Our Q1 investments into property plant and equipment other intangible assets and capitalized development costs increased slightly to 731 million euros also depreciation and amortization, including acquisition related non segment result effects when slightly up to 487 million euros.
Speaker Change: <unk>.
Speaker Change: Our reported free cash flow showed the usual seasonal pattern and came in at minus 237 million euros and the quarter before it had reached 1.145 billion euros, driven among others by cash ins from fundings, the scheduled receipt of customer prepayments and.
Speaker Change: Positive working capital effects as expected these factors fell away or reversed in the December quarter. In addition, the operating result went down sequentially and as usual in this quarter a large part of annual variable income payment was made.
As we had flagged in our last earnings call short term market conditions make inventory management quite challenging in the near term as planned our inventories have gone up over the course of the December quarter. The reach increased also on the back of the lower revenue 290 days towards the.
Speaker Change: And of our running fiscal year, we target to be at the reach level similar to the one at the end of our last fiscal year channel inventories at distributors have Meanwhile, normalized or are about to do so for many of our product categories.
Speaker Change: Now to our liquidity and leverage our gross cash at the end of December stood at a bit above $1 9 billion euros in line with our recently updated finance policy of having gross liquidity of at least 10% of revenues on average throughout the year.
Speaker Change: Our gross debt amounted to $4 9 billion euros equivalent to a gross leverage of one four times net debt. Consequently amounted to 3 billion euros corresponding to a net leverage of <unk> eight times.
Speaker Change: I'm pleased to report that our investment grade rating of Triple B plus stable has been confirmed by S&P Global a few weeks ago. Among other things the rating agencies honored our conservative financial policy and a clear commitment to keeping our strong liquidity position.
Speaker Change: To further strengthen the letter we have just signed a 2 billion euro committed standby revolving credit facility for a five year tenure with a group of international banks. This highlights the strong trust, which we are enjoying from our financial partners and provides us with additional financial flexibility.
Speaker Change: Finally, our after tax reported return on capital employed for the first fiscal quarter of 2025 came in around 5% remaining at an unsatisfactory level.
Speaker Change: Before handing back to Johan let me quickly remind you of our annual shareholders' meeting on the 20th of February exploiting the benefits of the online format I hope to virtually meet many of our shrike shareholders. They're now back to Johan who will comment on our outlook.
Johan: Thank you Sven with more than three months into our 2025 fiscal year, our markets are developing along the lines of the playbook, we had envisioned for our guidance in November.
Johan: Inventory corrections are continuing especially in automotive and industrial slowly getting less intense stock levels in many consumer markets have normalized but a higher than normal share of turns business is still limiting visibility.
Speaker Change: Hey, I related investments in HCV in China remained the bright spots.
Speaker Change: Addicting, the exact timing of the momentum of the cycle is challenging there.
Speaker Change: Some signs of demand returning but until they are getting stronger it is prudent to assume a modest recovery in line with our guidance rather than a sharp rebound.
Speaker Change: External factors like geopolitical tensions or regulatory changes affecting tariffs and trades can have significant influence.
Speaker Change: Our focus remains on managing what we can control and ensuring infineon is in the optimal shape for the market recovery.
Speaker Change: In the meantime, our secular content drivers will continue to support our growth momentum.
Speaker Change: For the currently running second quarter of our 2025 fiscal year, we expect revenues of around $3 6 billion euros. This is based on an assumed U S. Dollar exchange rate of 105, as we had already mentioned in our earnings call back in November we expect the inventory reduction by our automotive and industrial customers to continue throughout this quarter.
Speaker Change: Before abating sometime in spring hence.
Speaker Change: Hence, we calculate that our March quarter is burdened by about 200 million of inventory correction.
Speaker Change: On a divisional level ATV is expected to trend along the same lines as the group, whereas CIP should see a stronger sequential increase, albeit from a very low base.
Speaker Change: Revenue levels NPS essence, he is as I expect it to remain roughly constant.
These predictions assume that the aforementioned transfer of the automotive sensor business line from ATV <unk> had already happened. So it is a like for like comparison.
Speaker Change: For the March quarter segment result margin, we expect a mid teens percentage level.
Speaker Change: Positive fall through effects from volume gains will be offset by the well known price adjustments for 'twenty or 'twenty five kicking in and fall away of the one of the one time are recorded in Q1 customer negotiations vindicated our initial assumption about annual price declines.
Speaker Change: Coming to our outlook for the full 2025 fiscal year, we now assume revenues to come in flat to slightly up compared to the prior fiscal year. This revision from our previous forecast of slightly downward trending revenues is essentially due to a changed currency assumption we are now assuming.
Speaker Change: <unk> a U S dollar Euro exchange rate of 105 for the remainder of the fiscal year. Instead of 110. This change together with a slightly better actual U S. Dollar exchange rate in Q1 adds approximately $450 million to our top line, we stick to our prediction of a modest recovery setting in during the second half.
Speaker Change: Our fiscal year rising incoming orders confirm our reading, but it's too early to call for a sharp rebound we need to keep monitoring business indicators closely to allow for a range of scenarios prepare and act. Accordingly, a prime example for such a scenario would be and escalating trade conflicts sparked by terrorists in.
Speaker Change: Counterterrorists like the ones announced by the U S over the weekend.
Speaker Change: On Mexico, Canada, and China, while direct impacts on us might be limited given our geographically diversified supply chain. Our base case does not include potentially significant indirect impacts arising from trade wars on customer demands.
Speaker Change: By Division, we expect the year over year revenue development of both ATV and <unk> to be broadly in line with the group's four Gi PV continue to foresee a pronounced annual decline.
Speaker Change: Whereas PSS revenue should significantly grow and particularly on the back of our AI related product offering success in the marketplace.
Speaker Change: Our margin assumptions for the 2025 fiscal year stay in place for now we continue to expect our full year adjusted gross margin to come in at around 40% in our segment result margin to end at mid to high teens percent level.
Speaker Change: The stronger U S dollar it makes it more likely to land at the better end of this range.
Speaker Change: Clinical idle charges of around 1 billion euros for the fiscal year continue to be a margin headwind of around 500 basis points.
Speaker Change: These charges plus the revenues and margin potential from currently underutilized capacities. So our underlying profitability. Once the market is back. In addition, we are putting in significantly efforts to improve our structural profitability through our step up initiatives.
We're very pleased with all of the measures identified on the step up are progressing and confirm what we said before we are going to reap the benefits in the current fiscal year expect further meaningful impacts coming in the 2026 fiscal year and then the fall high triple digit million effect from 2007.
Speaker Change: Onwards.
Speaker Change: Our guidance for investments depreciation and free cash flow for fiscal 'twenty five stays unchanged investments are predicted to amount or a $2 5 billion euros, including capitalized development expenses.
Speaker Change: Depreciation and amortization, we continue to anticipate a value of around 2 billion euros, including around 400 million, resulting from purchase price allocations, which will hit our non segment result.
Speaker Change: Yeah.
Speaker Change: Our adjusted free cash flow net of investments into a major front end buildings is expected to come in at around $1 7 billion euros for the reported free cash flow, we expect a level of around 900 million euros.
Speaker Change: Ladies and gentlemen, let me summarize before we got.
Speaker Change: Go into Q&A, our markets have bottomed inventory corrections in particular by automotive and industrial customers are progressing in the near term powering AI data centers in China HCV are notable exceptions.
Speaker Change: The start into our 2025 fiscal year was slightly better than predicted.
Speaker Change: Revenues of $3 4 billion euros in a segment result margin of 16, 7%.
Speaker Change: Our key assumptions for how our business will unfold are proving to be correct, including the perspective of a modest recovery in the second half of our 2025 fiscal year <unk>.
Speaker Change: On the back of the stronger dollar we are raising our revenue guidance for fiscal 'twenty five to flat to slightly up.
Speaker Change: The outlook beyond the cyclical recovery looks highly attractive based on how well Infineon is index to secular trends.
Cycle management and focusing on the things we can control remain key to navigate the near term at the same time, we are strengthening our innovation power and leverage structural improvements from the step up program to make sure. Our company is an optimal shape for the years to come.
Speaker Change: Thank you Johan and Swan, Ladies and gentlemen, this concludes our introductory remarks, and we are now opening the call for your questions.
Speaker Change: With a well filled pipeline of analyst, we kindly ask you to limit yourself to one question and one follow up operator, please start the Q&A session now.
Speaker Change: Thank you our question and answer session will be conducted electronically. If you would like to ask a question simply press star followed by the number one on your telephone.
Speaker Change: Using a speaker phone. Please ensure that your mute function is turned off and we will take our first question from the mindset was soft from Bernstein. Please go ahead.
Speaker Change: Thanks, very much for taking my question.
Speaker Change: One of your peers talked about automotive outlook deteriorated into Q4.
Speaker Change: And clearly you're sort of calling a bottom here can you talk about the dynamics of that and specifically, China, you're calling out a strong they were talking about European automotive market.
Speaker Change: Weaker can you just talk about what you are seeing and what gives you confidence that the trajectory into 2025.
Speaker Change: Yeah, I would like to answer that question for automotive, but also for in general.
Speaker Change: For the company.
Speaker Change: While I cannot explain in Erith.
Speaker Change: Our results in.
Speaker Change: In detail for our competitors, but I can tell you why infineon might.
Speaker Change: <unk> be better off.
Speaker Change: As compared to competition. So first of all there is the exposure to Idose, who can take us.
Speaker Change: Gross drivers.
Speaker Change: Being the AI powering AI topic and relating to your question the HCV in China, where we are teaming up with the winners secondly, it's about market shares we will see the numbers in April about automotive.
Speaker Change: Microcontroller market shares.
Speaker Change: But given our revenue development I'm optimistic to see favorable development.
Speaker Change: Yeah for us.
Speaker Change: And that.
Thats true.
Speaker Change: Maybe two other segments of the micro controller.
Speaker Change: Space.
Speaker Change: Thirdly.
Speaker Change: We are not exposed over proportionately to individual customers.
Speaker Change: So our customer base is broad based.
Speaker Change: There is.
Speaker Change: Some competitors might depend more on.
Speaker Change: On individual customers, which has always been our direction to be here.
Speaker Change: Broad based.
Speaker Change: Last but not least.
Speaker Change: We have.
Speaker Change: <unk> seen in the past behaviors in the market that.
Speaker Change: Some market participants.
Speaker Change: Pushed volumes into.
Speaker Change: The customers are.
Speaker Change: Offering sometimes also special deals, which we are not doing.
Speaker Change: You see in turn then a higher fluctuation on our end in terms of inventory.
Speaker Change: This.
Speaker Change: Pushing off.
Speaker Change: <unk> into customer hands.
Speaker Change: In my mind just.
Speaker Change: Reduces the visibility and last but not least again on your specifics on automotive.
Speaker Change: I mentioned, it but I am happy to repeat we saw a quarter on quarter increase by 10% of our automotive revenue in China to an all time high.
Speaker Change: Last quarter.
Speaker Change: Okay.
Speaker Change: Great that's really helpful and maybe on a follow up on Silicon carbide.
Speaker Change: Is it safe to assume you are expecting growth in silicon carbide for 2025 is that partly because you have.
Larger component that is industrial and a wide customer base or any dynamic on silicon carbide for 25.
Speaker Change: In November we said that we will grow by a low double digit number and we are confident to deliver and again our.
Speaker Change: <unk>.
Speaker Change: Our customer base is a broad based customer base is.
Speaker Change: Many many applications and again you see of course the success in our automotive Silicon carbide also in China, but also I think a very.
Speaker Change: Nice design win which I quoted before with our setup.
Speaker Change: Great. Thank you very much.
Speaker Change: Next question comes from the line of Johannes Schaller from Deutsche Bank. Please go ahead.
Johannes Schaller: Yeah. Good morning, Thanks for taking my question and congratulations on the good results.
Johannes Schaller: Wonder if we could zoom in a little bit on the AI. So the pellet side I mean, it looks like you've got some additional odyssey, it's progressing quite nicely and the 1 billion numbers is inside.
Speaker Change: Once you are that the 1 billion do you feel like you're at kind of achieve your desired market and from there it's going to be more growth in line with the market.
Speaker Change: And how sticky are your design wins I mean, we've obviously seen a bit of design changes over the last 12 months I would say so from what you have negotiated with your customers. How sticky do you think those wins are and then just as a quick follow up on pricing things seem to be developing in line with your plan automotive down low single digit that's probably better.
Speaker Change: And then what your peers are suggesting so maybe you can help us a bit to understand why that is developing quite quite nicely for you. Thank you.
Andreas: Let me start with the second part and then I'll hand over to Andreas on powering AI.
Andreas: As we explained at other occasions, there is a wide range of price development and we sum it up in the for the company.
Andreas: To low to mid single digits and are all the EPA negotiations are in line with that that doesn't mean that they're all corners of the business.
Andreas: We have higher price reductions.
Andreas: For example.
Andreas: And China also to defending our market share somewhere in the company.
Andreas: But on the other hand, if you think about automotive microcontrollers very sticky business.
Andreas: And the balance out of these two extremes.
Andreas: The rest of the whole portfolio then.
Andreas: Leading towards this low to mid single digit, which we deliver it.
Andreas: As predicted and Andreas on AI.
Speaker Change: Yes Johannes.
Speaker Change: Here as you know well we power AI so.
Speaker Change: So meaning in fitness in this unique position in the us.
Speaker Change: Has put itself in a position over more than a decade.
Speaker Change: We can provide a complete power flow solution entailing all required power semiconductors from grid.
Speaker Change: AC 360 volt two core typically about seven board.
Speaker Change: D C in order to <unk> GPU as many step down conversions happening in between the grit and what we call the core of the GPU.
Speaker Change: In that regards we are of the conviction customers are confirming that.
Speaker Change: We are kind of are ahead of all the major U S and also Japanese competitors, we entail all the required material systems for policy Emmis Ie silicon based semiconductor silicon carbide, but also gallium nitride, which step by step ship.
Speaker Change: She proliferation in this high efficient driven.
Speaker Change: [noise] powerful market also around the AI, we used to be and still are in the pioneer digital power, which are typically starts playing out a lot related to wide bandgap semiconductors, such as gallium nitride. It's an additional advantage we have module technology as chip embedding technologies in house in our hands, we don't depend on antibody.
Speaker Change: Els and used to be over 20 years market leader in data centers as such so.
Speaker Change: Summing it all up I think it is intuitively understandable that from being a leader in data centers and powering data centers, we know.
Speaker Change: Migrate our position and then also in the area of artificial intelligence based Datacenters reasonably there has been a lot of rumors in the industry.
Speaker Change: About infineon, taking further share in the powering AI, but I.
Speaker Change: I can confirm it despite the environment that we continue to take share.
Speaker Change: So to say in all the major sockets at the major players and with this we see on the near to midterm. Our market shares are also in the area of I have continued to raise and.
Probably go in a different direction like we used to have market share wise in the Hyperscale data centers the last 10 years.
Speaker Change: Very clear thank address thank you all.
Speaker Change: The next question comes from the line of <unk> from Bank of America. Please go ahead.
Speaker Change: Yes, good morning, and let me add my congratulations on a really impressive printer and guidance.
Speaker Change: Just wanted to come back to your full year guide.
Speaker Change: I think.
Speaker Change: Perhaps you are leaving some sort of upside for the second half. If you just run us through the puts and takes but FX kalia benefits you highlighted that you've got AI servers as well are you, suggesting that ATV or.
Speaker Change: When you talk of CSS, perhaps a bit lower than you would have anticipated at the time of the <unk>.
Speaker Change: Timber quarter.
Speaker Change: Or are you just being cautious I'm just looking at the Delta coming from FX NII versus the rest of your guide.
Speaker Change: <unk>. Thank you for your question.
Speaker Change: Well I'll answer it so first of all I tried the same math as I did last time.
Speaker Change: To help you to understand the development between first half and second half if we if we now take the reported numbers for first and second quarter. That's 7 billion. If we wanted to be flat to slightly up we need to generate a bit more than $8 billion in the second half.
Speaker Change: That's not the real picture you have said it in his introductory remarks, there is the inventory digestion impact on behalf of our customers, which we expect to be in a magnitude for 600 million for the first six months.
Speaker Change: When you compare 762, a number which is slightly above eight that gives you a <unk>.
Speaker Change: Normal seasonality of 7% to 8% second half to first half. So I think that is from our perspective, given how we read the market currently.
Speaker Change: Right level secondly, there is no change to the assumptions regarding businesses.
Speaker Change: Or the expectation that there will be a modest recovery once this inventory depletion as happened in second half compared to November the one the only major difference between now and November is currency and as we said there is the impact in Q1 and now <unk> at least assumed for.
Speaker Change: The remainder of the year, but please do not forget and I would like to mention it here again, although it has been said.
Speaker Change: And the internal we are living in a world, where we see lots of moving pieces I mean over the weekend. We heard first of all the tariff announcements now we hear overnight that at least for two countries. They seem to be at least pushed out four months, it's very hard to really predict.
Speaker Change: What's going on it depends.
Speaker Change: What's the.
Speaker Change: <unk>.
Speaker Change: We'll lead through and therefore, if there are no major tariff.
Speaker Change: Hikes or issues, then I think our guidance holds but as we said.
Speaker Change: Tariff is answered by another tariff ended escalates it could have potentially a significant impact and that is not factored into your guidance, maybe so much to your.
Speaker Change: Assumption of being prudent and conservative to you.
Speaker Change: Yes, it makes total sense I suppose.
Speaker Change: Perfectly understandable.
Speaker Change: Follow up for me so on your on your first quarter.
Speaker Change: China was the stand out while your revenues were pretty much flattish the rest of the the other geographies were down sequentially.
Speaker Change: Obviously not trying to.
Speaker Change: Finally rain, causing your print, but do you feel like this is genuine demand in China or do you think there was perhaps a risk of a pull in ahead of those tariffs that you mentioned.
Speaker Change: As we.
Speaker Change: As I said.
Speaker Change: Automotive China revenue contributed.
Speaker Change: Significantly our all time high quarter.
Speaker Change: And the consumption.
Speaker Change: This takes place still mainly in China for sure very little if not zero in United States.
Speaker Change: I cannot exclude completely that there is a pull in effect, but I.
Speaker Change: I would think it's minor in automotive is certainly.
Speaker Change: Yeah, rather clearly on the native demand in China.
Speaker Change: Okay. Thank you so much.
Speaker Change: The next question comes from Alexander Duval from Goldman Sachs. Please go ahead.
Alexander Duval: Yes, hi, there.
Speaker Change: Thank you so much.
Speaker Change: The question congrats on the strong execution.
Speaker Change: We see there's been a lot of discussion about <unk> in a mixed environment.
Speaker Change: Wondering if you could just give some color on the extent to which.
Speaker Change: Your strong delivery here is actually a function of your robust position hybrids as opposed to <unk> and also can you just help us understand.
Speaker Change: Is that all your strong execution in China more important and then secondly in the discussion of our AI you referenced your positioning in multiple materials, obviously gan seems to be becoming more important within the mix I Wonder if you could talk to the strategic advantages that could give you more broadly across.
Speaker Change: Your business. Thanks.
Speaker Change: Yeah.
Speaker Change: I would say on the <unk> side, it's really the broadness of our product portfolio and our customer base.
Speaker Change: We are not.
Speaker Change: Exposed to one OEM over proportionally.
Speaker Change: Which I also mentioned at the beginning so it's the offering it's the offering comprising silicon silicon carbide bad I discrete modules and it's our position across the.
Speaker Change: The globe and if you follow our announcement on on design wins that they range from Japan, China.
Speaker Change: Anyway of course always for US Korea, but also now.
Speaker Change:
Speaker Change: Europe, Germany, North America so.
Speaker Change: It is really this broadness of customer base plays out as well in terms of gallium nitride, we feel versus the next revolution.
Speaker Change: In terms of power semiconductors, we feel that the market model is of a.
Speaker Change: Various market research firms are conservative.
Speaker Change: Right now of course, the adoption the early adoption happens in and Chargers adapters and more consumer related businesses, but.
Speaker Change: The interesting things are coming onboard Chargers coming.
Speaker Change: Certain architectures in solar.
Speaker Change: And we will also likely see an extension of gallium nitride beyond the current voltage a scheme of 100 to 650 volt there are options to expand that and that will make gallium nitride clearly.
Speaker Change: The power semiconductor technology of the future and Thats why we are investing heavily into it.
Yes.
Speaker Change: Thanks.
Speaker Change: The next question comes from the line of swap moving from UBS. Please go ahead.
Speaker Change: Thank you very much two quick question and clarification on what you said previously is the first one is on the on the AI and Andre you talked about your design win there.
Speaker Change: Cindy.
Obviously, I'm very short product cycles.
Speaker Change: So you see a productive almost every five to six months and then you know when you look at your recent success this short cycles.
Speaker Change: It makes people you know are wondering how sustainable this market share is so maybe can you confirm that with all the products that might come to market. This.
Speaker Change: This share.
Speaker Change: From major players you don't have any duration of market share I mean, do you feel that.
Speaker Change: Similar increasing across all the product portfolios.
Speaker Change: You know if we mentioned.
Speaker Change: Our Vega GPU player launching a product in the second half of the year is it going to be the same market share as a trough. For example are we confident about that just wanted to clarify first on that.
Speaker Change: Yeah.
Speaker Change: So first of all Youre right.
Speaker Change: The product cycle is quick and that also effects.
Speaker Change:
Speaker Change: In some cases the power flow architecture.
Speaker Change: I think what we have achieved over.
Speaker Change: The last.
Speaker Change: One two years is that we have become the leading partner.
Speaker Change: The partner in terms of power flow for all of the relevant GP.
Speaker Change: <unk> makers and the relevant.
Speaker Change: Hyper scaler, which are engaged in their own.
Speaker Change: GPU.
Speaker Change: That gives us a position.
Speaker Change: Not only.
Speaker Change: To see.
Speaker Change: <unk>.
Speaker Change: Let's say discuss an influence.
Speaker Change: The roadmap on the powerful architecture with all these customers, but it also gives us a.
Speaker Change: Confidence that despite of product cycle.
Speaker Change: Changing.
Speaker Change: We will maintain.
Speaker Change: Revenue basis across platforms or even.
Speaker Change: Growing our <unk>.
Speaker Change: None of that is totally exclusive so that will be always shares.
Speaker Change: Four four other.
Speaker Change: Other players, but we will have the major shares and please remember why is that because.
Speaker Change: We have the system Knowhow carats over also from the times of the classical servers, which Andreas related too.
Speaker Change: We have the broadest product portfolio.
Speaker Change: Andreas mentioned and we deliver quality with our automotive.
Speaker Change: The degree that makes us the prime partner for all of these players.
Speaker Change: Okay. Thank you and my follow up would be on them.
Speaker Change: On the tariff across trade war.
Speaker Change: I understand that it's difficult for you to know the impact of this history shows that when you have a.
Speaker Change: And then certain key coming to market.
Speaker Change: The your customers tend to build up inventories just to in case, you know because it's a.
Speaker Change: Very uncertain for them so they might want to build a bit of a buffer in case, you have tariff and prevent any supply chain.
Speaker Change: Issues. So since you had the tariffs this last weekend basically.
Speaker Change: Have you seen any you know our customers are cutting you may be saying like okay. After all we need to to increase.
Speaker Change: The increase a bit of inventories are still declining at least because it would be very risky to do that in the current environment.
Speaker Change: None of these calls obviously.
Speaker Change: As we are still in the inventory digestion period. This quarter inventories are on the on the high side and it's very very difficult to predict which exact supply chains are or might be effective right.
Speaker Change: May know that in the semiconductor world normally terrorists are applied to the land of diffusion, meaning the front end.
Speaker Change: And not to the land.
Speaker Change: The country of the package dime.
Speaker Change: Thats can theoretically change there are no indications to that but it's it's a major <unk>.
Speaker Change: Factor and in that regard for example, the tariffs on Mexico, and Canada would not have affected us materially in a direct way but of course.
Speaker Change: You can assume that.
Speaker Change: The price of cars will go up in the U S. If those tariffs are implemented and therefore, the volume will go down and of course, then we would be affected but it's very very complex network.
And.
Speaker Change: I can only say as when highlighted it might be overall insignificant it might be significant.
Speaker Change: Uh huh.
Speaker Change: We have not included anything material in our outlook as the number of combinations is simply.
Speaker Change: Two vast and therefore would not lead you in the.
Speaker Change: Correct way.
Speaker Change: Alright, Thank you very much.
Speaker Change: Next question comes from the line of Sandeep Deshpande from Jpmorgan. Please go ahead.
Sandeep Deshpande: Hi, Thanks for letting me on.
Sandeep Deshpande: My first question is about EV and hybrid a.
Speaker Change: Hi, Blake.
Speaker Change: You see our revenue from these markets increasing in 2020, FY 'twenty five or how is it progressing into yet.
Speaker Change:
Speaker Change: Our market model.
Speaker Change: For this year suggests.
Speaker Change:
Speaker Change: Growth.
Speaker Change: May.
Speaker Change: Mainly in the battery electric vehicles, but also in the plug in electric vehicles, but we.
Speaker Change: We know that these numbers are.
Speaker Change: <unk> tend to be dynamic and depending on individual models, but as we speak.
Speaker Change: Would see think we will see more growth in.
Speaker Change: In cars, we will see more growth in cars on battery electric vehicles than on.
Sandeep Deshpande: Plug in hybrids does that answer your question Sandeep.
Sandeep Deshpande: This translate into revenue for Infineon as well, despite all that inventory et cetera.
Speaker Change: Yes, we see a healthy ship through in China.
Sandeep Deshpande: As a as we hinted that right with the growth in revenue in China for automotive in the last quarter. I was also talking about significant order increased by a let's say a prestigious Chinese.
Sandeep Deshpande: Our model.
Sandeep Deshpande: But of course overall automotive.
Sandeep Deshpande: Sure.
Sandeep Deshpande: We'll see also other effects in other parts of the.
Sandeep Deshpande: On the portfolio and battery electric vehicle as it's trending towards Silicon carbide is of course, a bigger growth driver than a plug in hybrid based on IGT, but I think this you any way Noah already.
Speaker Change: And one quick follow up for Sweden.
Speaker Change: Your days of inventory in the quarter increased quite significantly what are you comfortable with in terms of inventory and why did it increase in the quarter is it just the revenue decline that caused this increase.
Speaker Change: I was sure that you were asked the question so it's spot on it.
Speaker Change: <unk> and <unk>.
Speaker Change: Nominated denominator topic, so on the one hand, you have the significantly.
Speaker Change: Significantly reduced revenues and Cox from $3 9 billion to $3, 413% down.
Speaker Change: One is that we had some significant supply, especially on the raw wafer site, which came in in Q1 and so both together led to the increase from slightly above 150 to 190 days.
Speaker Change: That said number which we consider to be too high and therefore once the revenues are expected to come back in the next quarters, we will work down and Thats why our forecast for the end of the fiscal year's that we end at the around the level of the previous year end.
Speaker Change: And it will probably then take until 2026 to go back to the two.
Speaker Change: To this pre inventory build situation. So it's still some way to go but it's important for us to manage the cycle the fab loadings and the inventory in sync and Thats, what we are doing.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Next question comes from Josh Rebel Halter from TD Cowen. Please go ahead.
Speaker Change: Hey, guys congrats on the results and thank you Peter.
Speaker Change: Taking my question apologize for asking another one on inventory.
Speaker Change: It sounds like there was a little bit of a change in how you were thinking about how much downstream inventory needed to come out in the first half of the year. I think you went from I think you're originally expecting to take out around $400 million in the first quarter and you wound up taking.
Speaker Change: $200 million out.
Speaker Change: Was that a function of market conditions or a change in that philosophy.
Speaker Change: What you thought was needed to come out because of.
Speaker Change: What youre hearing from your customers. Thank you.
Speaker Change: Yes, Joshua so and here again, so I think we have been pretty bold in November and giving any number given that there is really limited visibility. So youre right. We said for the first half it could be in magnitude of 600 to 700 million give or take 400 for the first.
Speaker Change: Quarter 200 for the second quarter. The 200, we just reconfirm now you can ask you about your Q1 was a bit better to $100 million higher revenues half of that is currency. So half must be volume is that now new volume or is the 100 million volume coming out of inventory nobody can tell you, but broadly speaking.
Speaker Change: No change of our basic assumptions of the inventory effects and also not of the length. So we expect it to gradually fade out and maybe there is a small impact in Q3, but from today's perspective, then we should be back.
Speaker Change: And please remember that a part of the inventory is due to our activities in terms of optimizing our manufacturing footprint and there might be more news to come in that regard.
Speaker Change: Okay understood. Thank you I appreciate the color there.
Speaker Change: I can also on surprisingly wanted to follow up on the data center.
Speaker Change: Any granularity.
Speaker Change: You can give us on what's driving the upside in your new forecast across.
Speaker Change: Your major sockets, maybe in the server versus the rack versus after the grid because you are offering a wide range of power solutions for AI be curious to hear on again on a socket basis. If there's anything you can help us. Thank.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: We do not talk about individual.
Speaker Change: Platforms of individual customers in tendency of course are the.
Speaker Change: Growth for this fiscal year is cost more on the power stage.
Speaker Change: Sites, but we also have very nice.
Speaker Change: Development on the PSU site and again across all mainly for.
Speaker Change: For big customers, but they're also second tier customers. So it's again, it's a broad based story, but andreas anything to add.
Speaker Change: So basically.
Speaker Change: Maybe what gives you some indication to substantiate your models.
Speaker Change: The higher the power requirement goes in any given cervarix system.
Speaker Change: The more it plays into the camp of Infineon strength, if you will and to what I'm talking about this again in finance competencies and complete that in portfolio for both.
Speaker Change: Switch mode power supplies converting power from the grid to DC in a given the server system.
Speaker Change: With the increase of power requirements in this ever Rick also the power of these power supplies goes up and as a function of this all these materials that infineon has in its portfolio start playing out even better than we tend to take share on the other side the more power goes up driven by the process.
Speaker Change: Sure.
Speaker Change: The density requirements increase but also the reliability needs go through the roof and again. This is a few thousand feet on this.
Speaker Change: Classical a strong player in what customers love to go with US. So having said that these are elements you may put into the equation in terms of Infineon.
Speaker Change: Gaining share going forward and also a function of increasing power.
Speaker Change: Thank you.
Jordan manner: The next question comes from the line of Jordan manner from Jefferies. Please go ahead.
Jordan manner: Hi, good morning, Thanks for taking the question and congratulations on a great set of results.
Jordan manner: I guess one question on the gross margin maybe when you could just address how you see the gross margins moving over the next three or four quarters, because you've done about 41% margin in the first quarter Youre guiding.
Jordan manner: 440%.
Jordan manner: So is it that you see underutilization charges being quite a big headwind in coming quarters.
Jordan manner: What is it I mean, we do not see some improvement in gross margin alongside segment margin.
Jordan manner: Towards the latter part of the year and I have a brief follow up.
Jordan manner: Yes, Jonathan Thank you for the question. So first of all there is a short term effect and then there is the full year effect of short term effects.
Jordan manner: The running.
Jordan manner: Second quarter, Yes, there is some positive fall through from more revenues, but there are the typical price effects from the from the EPA is kicking in.
Jordan manner: And there is no one timer repeating which was in the books for Q1. So that's that explains why gross margin wise. This quarter is a bit below Q1 like on the segment result margin for the remainder of the year.
Jordan manner: You are right I mean, we expect the modest recovery, we expect positive contribution from our step up initiatives and others and therefore for the full year. We have set now around 40%. We have also set on the segment results mid to high teens and there was one important sentence in.
Jordan manner: Johann said the more the longer the dollar stays longer the higher the probability is that we are at the higher end of that range and I would probably transfer that also to the gross margin, let's let's stop there John and I think you understand what I mean.
Jordan manner: Okay.
Jordan manner: And one follow up on the AI power.
Jordan manner: Have been raising your expectations for 2025. This is the second time now that you've raised your guidance for 2025 in the last few months.
Jordan manner: But you still haven't changed your target for reaching 1 billion euros of revenue, which seems to continue to be in 2027.
Speaker Change: I'm just wondering is there anything any kind of headwind that you see in 2026 or is it just a lack of available to you don't want to say anything that far out and if all goes well and given andrea's comments on how well it's going how can we expect that by 2027, you should be comfortably above the 1 billion level rather than at 1 billion.
Speaker Change: Yeah look it's a market that is very dynamic and just see the announcement of deep seek which might temporarily reduce the momentum on the infrastructure build out but also could be that.
Speaker Change: As a smaller models.
Speaker Change: <unk> become.
Speaker Change: Less expensive that the usage of AI is is even accelerating and therefore needs than more infrastructure than we have the trend of cloud AI versus not only edge AI, but also on premise AI has showcased.
Speaker Change: <unk>.
Speaker Change: At CES and then we have the topic of.
Speaker Change: Besides of course market shares we have the topic of our vertical power stages lateral power stages. There also potentially hybrids of the two.
Speaker Change: A possible so a lot of variables and we would like to see here a more clearer trends before we come up.
Speaker Change: With a number but on more numbers, but given.
The general momentum in AI, I think we will see continuous growth over the next years to come.
Speaker Change: And would there be any difference between influencing and training from your point of view of an opinion.
Speaker Change: Because of the higher power requirements on training have an advantage or do you think it would be have similar market shares of intrinsic as well.
Speaker Change: Sure. The training is the high performance and high performance.
Speaker Change: The product offering in the market is typically a smaller quality is even more important.
Speaker Change: But that with this statement I would not like to say that we are we will not be present with a good market share.
Speaker Change: <unk> World.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Lee Simpson Morgan Stanley. Please go ahead.
Lee Simpson: Great. Thanks for thanks for letting me on and congratulations to everyone for what looks like a very solid print.
Lee Simpson: I'll, maybe repeat some of the questions, but maybe just from a slightly different angle.
Lee Simpson: Looking at Q1, and the margin structures you did mention that idle charges are still part of the factor here.
Lee Simpson: Under utilization effects and that we might however have an offsetting benefit from this.
Lee Simpson: Our program as we go through the rest of the year. So I wonder if you could maybe quantify those three main elements. The underutilization idle charges step up effect really as we roll through the rest of this year and what that means for gross margin.
Lee Simpson: And maybe you'd rather than ask.
Another AI server question.
Lee Simpson: I think I'll, maybe turn to Iot it looks you're giving some indication here the Iot maybe at the start.
Lee Simpson: Of let's call it a modest inflection here and I Wonder if you could point to where we are with software tool box development engagement with the developer community more broadly in the use of <unk> to.
Lee Simpson: To deliver end market solutions as you currently see things and whether this 26 or 'twenty seven.
Lee Simpson: Ramp up story thanks.
Lee Simpson: So I take your first question on the idle and step up in Yahoo will talk about Iot in the second so.
Lee Simpson: On the idle cost as we said, we still guide for give or take $1 billion of idle costs.
Lee Simpson: The split is.
Lee Simpson: Still 60 40, roughly spoken so 60% of the idle in the first half 40 in the second half, which also explains that a little bit the margin development in the in the.
Lee Simpson: The Q3, and Q4 quarter the peak from today's perspective, but it may slightly shift by a couple of weeks, but from today's perspective, the peak should be from idle in this fiscal quarter, given how we forecast the recovery the modest recovery in the second half on the step.
Lee Simpson: Contribution.
Lee Simpson: You are aware that there are various components some are leaving others are lagging.
Lee Simpson: Initiatives, so efficiency in central functions portfolio management tactical pricing excellence and cops.
Lee Simpson: Some take a little bit longer others are more short term effective so I'm happy to say that we would expect.
Lee Simpson: Course, the high triple digit in 2007 assets give or take half of the contribution should be there in 2006, and our first meaningful contribution, meaning a low triple digit million euro amount should come through this year.
Lee Simpson: As much as I can say on the step up contribution.
Lee Simpson: Yeah, and thank you very much Lee for your question on Pizza.
Is it is a different one.
Speaker Change: First of all within the Pizza Assembly there three subfamilies one is.
Lee Simpson: Edge. Another one is control and the third one is connect.
Speaker Change: And we are making pretty significant investments in all three and the question is of course.
Speaker Change: How to differentiate on the edge side, it's exactly as you hinted at it's the AI trend, where we feel that.
Speaker Change: That edge.
Speaker Change: AI will play a more significant role in that context, we also.
Speaker Change: <unk> acquired the company of emerging market because again there.
Speaker Change: It correctly, it's <unk>.
Speaker Change: Only partially about the hardware, it's a lot about the toolbox its the software ecosystem. So I think there are AI.
Speaker Change: I will make a difference on the control side and I mentioned in my script, we feel that the.
Speaker Change: The move from Silicon to Wideband gap material will increase in many applications the frequencies and therefore will call for different control loops and a.
Speaker Change: A case in point is for example.
Speaker Change: Our robotics.
Speaker Change: You can then realized much smaller motors.
Speaker Change: Particularly suitable for robotics and thirdly on the connect side of course, it's the strength of.
Speaker Change: The former Cypress portfolio on Wi Fi and also a Bluetooth low energy, which we combine with micros.
Speaker Change: All of these families are full steam in development.
Speaker Change: And they are doing.
Speaker Change: Doing a great job in bringing all of these devices typically design in periods for these <unk>.
Devices.
Speaker Change: Take some time, so I think that will only have a smaller impact next year, but.
Speaker Change: Years from there onwards will play.
Speaker Change: Nice contributor to our growth.
Speaker Change: That's great. Thanks for the details.
Speaker Change: Our last question comes from the line of Andrew Gardiner from Citi. Please go ahead.
Andrew Gardiner: Good morning, gentlemen, thanks for taking the question.
Speaker Change: Two follow ups to some of the comments you've been making first on margins in FX and then secondly, just a bit about history lesson on that.
Andrew Gardiner: On the AI side and data and so I would say.
Speaker Change: FX.
Speaker Change: Is it still the case that the rough rule of thumb should be a $25 million and 10 million euro impacts.
Speaker Change: Water.
Speaker Change: Again in the FX rate.
Speaker Change: So a rough rule of thumb still holding and if indeed it is I suppose to the point that you made about.
Speaker Change: Being at the higher end of the margin range.
Speaker Change: Yeah.
Speaker Change: The reason why youre not sort of using that rough quantification to lift the guidance is it just prudence or is there something else we need to keep in mind, that's holding you back on that front.
Speaker Change: Yeah, Andrew So first of all yes, you know as well the sensitivities work as you said 25 and 10.
Speaker Change: That's why if you translate 110 to one five and <unk>.
Speaker Change: Tailwind in Q1, the add up to the $450 million on the revenue side and there is then the incremental contribution on the segment result side and I would really leave it there.
We said there is a higher likelihood to end at the higher end of the range. When the dollar really comes in at these levels because there is a positive contribution as you hinted that.
Speaker Change: Okay. Thank you and then just on the AI point Andreas you mentioned that you would expect over time.
Speaker Change: Market share in.
Speaker Change: In terms of an AI powered.
Speaker Change: Trend towards where he had been historically data center and Hyperscale, it's more broadly.
Speaker Change: Just a clarity.
Speaker Change: Where is that where has that been historically isn't a renter.
Speaker Change: So the market that <unk> had across power or has it been higher than that.
Speaker Change: With higher than typically we have in our power semiconductors.
Speaker Change: 10 to answer the question in the area of.
Speaker Change: 35 to 40 percentage points.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thanks, everyone. It is now time to wrap up we have been already.
Speaker Change: Generous overtime, which is indicative of the high interest of our analysts, but also of comprehensive management answers. Thanks. All for your questions. We are concluding the first fiscal quarter conference call. He with being cognizant that there are further analysts in the Qs.
Speaker Change: IR team here in Munich is happy to answer their questions, everyone take care and have a good day bye bye.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.