Q3 2025 Infineon Technologies AG Earnings Call - Press Conference
Florian Martens: Good morning and welcome to the conference call on the results of the third quarter of fiscal 2025 of INFINEON TECHNOLOGIES. I'm Boris Sisko, and I'm your operator. I would like to let you know that all participants are going to be in listener status and that the conference call will be recorded. After the presentation, you'll have the opportunity to ask questions by pressing star one on your keypad. Should you need the assistance of an operator, please press star zero on your keypad. The conference may not be recorded for publication purposes. I'd like now to hand the floor to Florian Martens. Please go ahead, sir. Thank you very much. Good morning, ladies and gentlemen, dear colleagues and coworkers. I would also like to welcome you to our conference call on the results of the third quarter of fiscal 2025.
Good.
Good morning and welcome to the conference call on the results of the third quarter of fiscal 2025 of Infineon Technologies.
I'm Bis, and I'm your operator. I would like to let you know that all participants are going to be in listener status, and that the conference call will be recorded. After the presentation, you'll have the opportunity to ask questions by pressing star 1 on your keypad.
Should you need the assistance of an operator, please press *0 on your keypad.
Florian Martens: Participating at this conference, as usual, representing the management board of INFINEON is Jochen Hanebeck, CEO, and Dr. Sven Schneider, CFO. Dear listeners, as usual, Mr. Hanebeck will start by giving you an overview of the business performance of INFINEON. After that, both members of the management board will be available to answer any questions you may have. Our conference call will end punctually at 8:45. Of course, our press team, headed up by Andre Tauber and myself, will be available to you after the press conference. And now I'd like to hand over to Jochen Hanebeck.
The conference may not be recorded for publication purposes. I'd like now to hand the floor to Florian Martens. Please go ahead, sir. Thank you very much. Good morning, ladies and gentlemen, dear colleagues and co-workers. I would also like to welcome you to our conference call on the results of the third quarter of fiscal 2025.
Participating at this conference, as usual, representing the management board of Infineon are Jochen Hanebeck, CEO, and Dr. Sven Schneider, CFO.
Jochen Hanebeck: Thank you, Florian. Hello and welcome. Listeners, in the third quarter, in a very volatile environment, INFINEON has again produced sound results. The semiconductor markets are recovering slowly from the long downturn of the signal correction, which affected the different end markets at different times. There are signs of an upward trend at last. This is reflected in our figures. The past quarter was the second in the sense that we recorded sequential growth. Adjusted for currency effect, it was more than 9%, in fact. And in the current fourth quarter, we expect a further increase in revenue. It's likely to be the first quarter for two years in which, compared to the previous year's quarter, INFINEON has grown even on adjusted for currency effects. The dynamism is affected by the geopolitical and macroeconomic turbulences because of US tariffs. Customers are ordering at short notice.
Dear listeners, as usual, Mr. Hanebeck will start by giving you an overview of the business performance of Infineon. After that, both members of the management board will be available to answer any questions you may have. Our conference call will end punctually at 8:45. Of course, our press team, headed up by André Tava and myself, will be available to you after the press conference. And now I'd like to hand over to Jochen Hanebeck. Thank you, Florian. Hello and welcome.
Listeners.
In the third quarter, in a very volatile environment, in vinion has again, put your sound results to semi Dr. Markets are recovering solely from the long downturn of the cyclical correction, which affected the different end markets at different times. There are signs of an upward Trend at last
Jochen Hanebeck: And so far, we are seeing that the inventories are being built up on a broad basis, which means that we are also encountering headwind for our business development. And we're countering that with our cycle management. What's of decisive importance is that we are different from our competitors and create noticeable added value for customers. And there, our matching competition, different complementary product groups, form the basis. Measured by fiscal 2024, about 40% of our total revenue is due to power semiconductors. And here, our unbeatably broad offering of all three relevant technologies: silicon, silicon carbon, and gallium nitride, we are in an excellent position. Another 30% of revenue is accountable by analog semiconductors and sensors. These include original drivers, DC converters, and smart power switches, and a broad range of sensors and special memories.
This is reflected in our figures. The past quarter was the second in which we recorded sequential growth, just from currency effects. It was more than 9% in fact, and in the current fourth quarter, we expect a further increase in revenue. It's likely to be the first quarter in 2 years in which, compared to the previous year's quarter, finance has grown even accounting just for currency effects. The dynamism is affected by the geopolitical macroeconomic turbulence; due to the U.S., customers are ordering at short notice. So far, we are seeing that the inventories are being built.
Up on a broad basis.
Which means that we are also encountering headwinds for our business development, and we're accounting for that with our cycle management.
Lots of design important is that we are different from our competitors, and create notes of added value of a customers and their matching competitors and different complimentary product groups, forming the basis.
Measured by fiscal 2024.
Jochen Hanebeck: The remaining 30% of our products come in the product category of control and connectivity. This includes our microcontrollers for the field of application in automotive, security in the industry, and a broad range of wireless and wired products. The latter is being strengthened by our purchase of the automotive Ethernet business of Marvel. I'll say more about the status of takeover later on. Thanks to our competitive product portfolio and our system competence, with the newly appearing semiconductor application, we are creating considerable added value for our customers and for INFINEON. We are seizing opportunities in strategically important growth fields, for example, in software-defined vehicles, power supply solutions for AI data centers, and power infrastructures. And I'll give you some examples later on. Let's, first of all, as usual, look back at the development of business in the third quarter.
About 40% of our total revenue is due to power semiconductors. Here, we have an unbeatable broad offering of all three relevant technologies: silicon, silicon carbide, and gallium nitride. We are in an excellent position. Another 30% of revenue is accounted for by analog semiconductors and sensors. These include drivers, DC converters, and smart power switches, along with a broad range of sensors and special memories.
The remaining 30% of our products come in the product category of control and connectivity. This includes our microcontrollers for applications in automotive security and industry, as well as a broad range of wireless and wired products.
The latter.
Is being strengthened by our purchase of the automotive Ethernet business of Marvell.
I'll say more about the status of the takeover later on.
Thanks to our competitor product portfolio and the system competence.
With the newly appearing semiconductor applications, we're creating considerable added value for our customers and for Infineon. We are seizing opportunities in strategically important growth fields, for example, in software design for vehicles, power supply solutions for AI data centers, and power infrastructures. I'll give you some examples later on.
Jochen Hanebeck: There, INFINEON achieved revenue of €3.74 million, which is about 3% more than in the previous quarter. And that's despite a considerably negative currency effect. The average exchange rate of the US dollar to the euro in the past quarter was 1.14. In the previous quarter, it had been 1.05. To put this in perspective, with a constant exchange rate, the increase in revenue would have been more than 9%. The strong increase in our sales, and especially in the field of green energy power and power and sensor devices, reflects the fact that the customers have digested their excessive inventories. The segment result was €668 million, and the segment result margin increased to 18%, following 16.7% in the previous quarter. The improvements were in particular to the growth in quantities and declining costs from capacity underutilization in production. These effects have more than compensated the unfavorable currency development.
Let's first of all, as usual, look back at the development of the business in the third quarter.
There in finance, Chief Revenue of €3 billion, which is about 3% more than in the previous quarter, and that despite a considerably negative currency effect.
The average exchange rate of the US dollar to the euro in the past quarter was 1.25 in the previous quarter. It had been 105.
To put this in perspective: with a constant exchange rate, the increase in revenue would have been more than 9%.
The.
Jochen Hanebeck: Free cash flow in the third quarter rose to €208 million, outfalling €174 million from the previous quarter. The development is due to increased revenue with stronger margins. Also, income from the sale of our factory in Austin and lower investments. The results in the fourth quarter, automotive, achieved revenue of €1,870 million, which is a slight increase of 1% compared to the previous quarter. And the segment result margin of ATV was €371 million, and the segment result margin was 19.8%, after 20.7% in the previous quarter. The slight decline is due to currency and product mix effects, and they overcompensated the positive effect from the lower costs of capacity underutilization. The global car sales in the June quarter showed healthy growth, too many to the strong markets in the US and China.
Uh uh sales and especially in the field of Greenville power and power sensor. The business reflects the fact that the customers have digested, the excessive inventories the segment result was 668 million euros and the segment result margin increased to 18% following 16.7, the previous quarter, the improvements you in particular to the growth in quantities, and declining costs from capacity, under the utilization in production, these effects of more than compensated the unfavorable currency development.
Free cash flow in the third quarter rose to €28 million, compared to €274 million in the previous quarter. I wanted to focus on increasing revenue with stronger margins, including income from the sale of the factory in Austin and lower investments.
The resulting force that Quarter Automotive achieved revenue of €1.87 billion, which is a slight increase of 1% compared to the previous quarter.
And the signals out. Imagine that ATV was €371 million. The second result margin was 19.8%, down from 20.7% in the previous quarter, with slight declines due to currency and product mix effects that overcompensated the positive effect from the lower costs of capacity underutilization.
The global.
Car sales and the June quarter.
Showed Healthy Growth.
Jochen Hanebeck: There were problems of the possible tariff weakness in the USA and the negative news about the dropping of the scrappage incentives in China. That means that the further development of the automotive to the end of the calendar year must be viewed cautiously. Another point is that we can see the risk that some manufacturers are continuing to reduce their target inventories of semiconductors because of the considerable financial restrictions. That means that there is risk that their inventories will drop to a subcritical level. In this environment, we are expanding. We are relying on our unique strengths in the semiconductor portfolio for automotive markets. And the takeover of the Ethernet business of Marvel means that we can offer our customers even more comprehensive system solutions for software-defined vehicles.
To many, the strong markets in the U.S. and China were overshadowed by concerns over possible tariffs. We observed a weakness in the U.S. and negative news about the dropping of the scrappage incentives in China.
That means that the further development of the automatic, to the end of the calendar year, must be viewed cautiously.
And the point is that we can see the risk that some manufacturers.
They are continuing to reduce their target inventories in semiconductors because of the considerable financial risk restrictions. This means that there is a risk that the inventories will drop to a subcritical level. In this environment, we are expanding. We're relying on our unique strengths in the semiconductor portfolio for automotive markets. The takeover of the Ethernet business of Marvell means that we can offer our customers.
Jochen Hanebeck: We've already received the necessary authorities' approvals for the transaction, and in a very short time, we expect the closure of the transaction in the near future and look forward to welcoming a few hundred Ethernet experts from Marvel in the INFINEON team. Together with them, we shall continue to develop further growth-orientated fields of application in physical AI, for example, humanoid robots. Some of the automotive divides the line wins now. We're glad to inform you that the most advanced active suspension system has been achieved from the US company, Clear Motion. It's a 48-volt high-end application using our ORX microgrid combined with the OptiReg switches. It's a mix which is used in a premium sports car manufacturer, including an innovative vehicle in China, such as the NIO 89. In addition, we are using this active product in a new series of vehicles from a European premium auto manufacturer.
Even more comprehensive system solutions for software-defined vehicles.
We've already received the necessary authorities and approvals for the transaction, and in a very short time, we expect...
Closure of the transaction in the near future, and we look forward to welcoming a few hundred experts from Avil to the Infineon team. Together with them, we shall continue to develop further growth-oriented fields of application in physical AI, for example, humanoid robots and some automotive devices. Now we're glad to inform you that we have the most advanced active suspension system.
Has been achieved with the U.S. company Clear Motion. It's a 48-volt, high-end application using our Oryx micro combined with the Opter egg switches. It's a mix.
Which is used in a premium.
Sports car manufacturer, including an innovative vehicle in China, such as the new 89. In addition, we are
Not using this active.
Jochen Hanebeck: The innovative vehicles will use a wide range of smart power supply components, including our Profit power switches, which means that we'll have a total volume of the mid-three-digit millions. Now, in green industrial power, the division achieved revenue of €131 million, which is 9% more than the previous quarter. The second result was €61 million, and the second result margin was 14.2%, following 9.6% in the previous quarter. Structural growth drivers are strengthening demand and opening additional business opportunities for us, especially in the field of the power infrastructure. In these final markets, inventories at our customers have continued to reach normal levels. Now, one highlight of the past quarter, we are delighted to announce that our power semiconductor modules, together with a major power storage system in the biggest grid-forming project, are being used in China.
Product in a new series of vehicles from a European premium auto manufacturer. The innovative vehicles will use a wide range of smart power supply components, including our profits power switches.
This means that we'll have a total volume in the mid three-digit millions. Now, in Green Industrial Power, the division achieved revenue of €431 million, which is 9% more than the previous quarter. The second result,
Our customers have continued to reach normal levels. Now,
Jochen Hanebeck: The project combines a photovoltaic system with a storage capacity of about 400 megawatt-hours and can supply about 270,000 homes with electricity. With its unique expertise and highly reliable power semiconductor modules, INFINEON is different from the competitors, and this is a prime example of how we've done it. Power and sensor systems, revenue in the third quarter rose to €1.53 million, which has increased by 8% over the previous quarter. The dynamic demand in power supply solutions for A data centers was one of the main reasons for this growth. The second result was €198 million, and the second result margin was 18.8%, following 14.1% in the previous quarter. The increase is due to the larger amounts sold and the lower costs of capacity underutilization, which more than compensated the negative currency effects. Artificial intelligence remains a strong growth factor in INFINEON.
Highlight of the past quarter: we are delighted to announce that our power semiconductor modules, together with a major power storage system, are being used in the biggest grid-forming project in China. The project combines.
A photovoltaic system with a storage capacity of about 400 megawatt-hours can supply electricity to about 217,000 homes.
With its unique expertise and highly reliable power supply, power semiconductor modules, Infineon is different from the competitors. This is a prime example of how we've done it.
Consensus systems reported revenue in the third quarter of €1.533 billion, which has increased by 8% over the previous quarter.
Jochen Hanebeck: Expanding AI infrastructure and setting up AI data centers is presenting great momentum, and we expect that revenue from power supply solutions for AI data centers in this fiscal year will be at €600 million, which is more than twice as much as last year. In the next year, we are likely to reach €1 billion euros. The range of products is the broadest in the whole semiconductor industry. We introduce offer not just solutions for voltage transformation, but work together with our customers to optimize the flow and current from the grid to the AI processor. In May, we announced cooperation with NVIDIA, and together we're developing the first 800-volt DC high-voltage supply structure for AI data centers.
The dynamic demand in Power Supply Solutions for data centers has several main drivers contributing to this growth. The second result was €198 million, with a margin of 18.8%, following 14.1% in the previous quarter. The increase is due to the large amounts sold and the lower costs associated with capacity underutilization, which more than compensated for the negative currency effects. Artificial intelligence remains a strong growth factor for Infineon as it expands AI infrastructure and sets up a...
All right, data centers is proceeding with great momentum and we expect that revenue from power supply solutions for AI data centers in this. If you were will be at 600 million Euros which is more than twice as much as last year. In the next year, we are likely to reach a billion euros.
The range of products is the broadest in the whole semiconductor industry. We introduced not just solutions for voltage transformation, but work together with our customers to optimize the flow from the grid to the AI processor. In May, Winners Corporation teamed up with Nvidia, and together we are developing the first 800-volt solution.
Jochen Hanebeck: The new system architecture improves the power efficiency of power distribution in data centers, and it makes it possible to convert the electricity direct on the AI chip, which means that we are taking account of the growing demands for AI data centers. Now, AI data centers have more than 100,000 individual AI chips, which means the need for efficient power supply is growing. In 2040, we expect that the AI centers will need more than 1 megawatt per IT rack. Another highlight is in our sensor portfolio in the automotive applications. Our radar chips are being used increasingly in modern driver systems, especially the new central radar architecture in the car. This means that the radar data are evaluated solely in the central unit, and the high-frequency radar chip is linked via Ethernet to the central computing unit.
DC high voltage supply structure for AI data centers. The new system architecture improves the power efficiency of power distribution in data centers and makes it possible to convert the electricity directly on the chip, which means that we are taking into account the growing demands for AI data centers.
Now, AEI data centers.
We have more than 100,000 individual AI chips, which means the need for efficient power supply is growing. By 2013, we expect that the AI centers will require more than 1 megawatt per unit ranked.
Another highlight is, in our sensor portfolio, in the automotive applications. Our radar chips are being used increasingly in modern driver assistance systems, especially the new central radar architecture in the car.
Jochen Hanebeck: And you can see that the new architecture has been introduced very successfully in China. With our radar solutions, we are in a very good position to benefit from this development. Now, connected secure systems. In the third quarter, the division achieved revenue of €349 million, which is almost the same as the previous quarter. The second result was €39 million, and the second result margin was 11.2%, which was stably on the level of the previous quarter. Macroeconomic uncertainty is still depressing the mood in consumers and investors. The demand for IoT and security solutions is moving sideways. Innovation in this environment remains the key to success, either by continuous improvements to our products or with completely new solutions. One example for continuously further developed products are our security controllers based on our Integrity Guard system security architecture used in electric passports, payment cards, and smartphones.
This means that the day radar data is evaluated solely in the central unit, and the high-frequency radar ship is linked via Ethernet to the central.
Computing unit and you can see that new architecture has been into this very successfully in China with our radar Solutions. We are in a very good position to benefit from this development. Now, connected secure systems and the third quarter, the division achieve revenue of 349 million Euros which is almost the same as the previous quarter. The second result was 39 million euros and the second result margin was 11.2% which is stably on the level of the previous quarter.
Macroeconomic uncertainty is still depressing the mood among consumers and investors.
The demand for IoT and security solutions is moving sideways. Innovation in this environment means the key to success, either by continuous improvements to our products or with completely new solutions. One example of continuously further developed products.
Jochen Hanebeck: Since the product was launched, we have supplied more than €10 billion of the security controllers in view of the rapid increase in the number of cyberattacks. The importance for security is growing constantly, and we are providing the answer. An example of the innovativeness in future-oriented technologies are the security chips, which cannot be hacked even by quantum computers. Six months ago, I reported on that at this point, and now we've achieved the first major design win with the OptiGuard security chips, which has a post-quantum cryptography to protect firmware, and it will be integrated in the next version of gaming consoles. Now, listeners, I've come to the outlook. We see an increase in the demand for semiconductors due to the technical development. Inventories are being reduced to a healthy level, and the indications of demand suggest a slight recovery, especially with industrial applications as close to consumers.
Uh, uh, security control is based on the Antiquity guard system. Our security architecture is used in electronic passports, payment cards, and smartphones. Since the product was launched, we have supplied more than 10 billion of the security controllers in view of the rapid increase in the number of cyber attacks. The importance of security is growing constantly, and we are providing answers. For example, the innovativeness in future-oriented technologies are the security chips which cannot be hacked, even by quantum computers.
And there was an optogate in the next version of gaming consoles. Now, listeners, I'm coming to the Outlook; we see a...
An increase in the demand for semiconductors due to technical development has led to inventories being reduced to a healthy level.
Jochen Hanebeck: Setting up the AI infrastructure will increase the demand for our power supply solutions for data centers. In the automotive sector, security, or the visibility is not so clear. And we also see that macroeconomic and geopolitical uncertainties are being more important than the recovery. We've not seen the worst-case scenario regarding tariffs, but the latest rumors in the USA, Japan, and the US suggest that the tariffs will be higher compared to the existing ones. Negative consequences remain probable. So that is a brief summary of our forecast for the current fourth quarter of our fiscal year. In view of the weaker US dollar, we are adjusting our assumptions regarding exchange rates from 1.125 to 1.15.
And the indications of demand suggest a slight recovery, especially with industrial applications. Those close to consumers setting up the AI infrastructure will increase the demand for our power supply solutions for data centers in the automotive sector. The visibility of the security aspect is not so clear, and we also see that microeconomic and geopolitical uncertainties remain.
Being more important than the recovery, we've not seen the worst-case scenario regarding tariffs.
The latest version USA, Japan and the US suggests that the tariffs will be higher compared to the existing ones. Negative consequences, remain, probable, that is a brief summary of our forecast for the current fourth quarter of our fiscal year.
And view of the weaker U.S. dollar.
Jochen Hanebeck: Taking into account the adjusted exchange rate, we expect revenue in the fourth quarter of about €3.9 billion, which corresponds to growth of about 5% compared to the previous quarter, which means the fourth quarter, as usual, will be the strongest quarter in the fiscal year. As I mentioned in our last quarterly talk, the indirect effects of tariffs and trade conflicts are difficult to assess. Taking into account, even so, in our last forecast on revenue for the fourth quarter in May, we applied a general reduction of 10% and expect that the consequence of tariffs in the fourth quarter will be less pronounced than expected at that time. But at the same time, the development of business will still suffer from the negative currency effects. The segment result margin is expected to be in the high teens in percentage terms.
We are adjusting our assumptions regarding exchange rates from 1.125 to 1.15.
Throughout the adjusted exchange rate, we expect.
Revenue in the fourth quarter of about €3.9 billion, which corresponds to growth of about 5% compared to the previous quarter, means the fourth quarter is, as usual, the strongest quarter in the fiscal year.
As I mentioned in our last quarterly talk, the indirect effects of terrorists and trade conflicts are difficult to assess segments around even. So in our last forecast and revenue for the fourth quarter, we applied a general reduction of 10% and expect that the consequences of terrorism in the fourth quarter will be less pronounced than expected at that time. But at the same time, the development of the business will still suffer from the negative currency effects.
Jochen Hanebeck: We assume that the positive effect will be solid up by higher revenue and the cost of capacity underutilization. For fiscal 2025, we expect revenue of €14.6 billion, which is slightly lower than in the previous year. The percentage segment result margin ought to be in the high teens now. Previously, it's at the mid-teens. The cost of capacity underutilization still plays a burden on the margin to the tune of about €1 billion. It is encouraging that our STEP-UP program for structural improvements is advancing more quickly than expected. Investments in fiscal 2025 have been reduced slightly to about €2.2 billion. Previously, we'd spoken about €2.3 billion. Expectations for free cash flow are being increased as follows. The reported free cash flow will probably be about €100 billion higher and is likely to reach €1 billion. This is expected to better the development of business.
Segment result margin is expected to be in the high teens in percentage terms. We assume that the positive effect will be.
swallowed up by higher revenue and the
cost of
Capacity and utilization for physical 2025 is a revenue of €14.6 billion, which is slightly lower than in the previous year.
The percentage segment result for March is in order to be in the high teens. Now,
Previously, we said the mid-teens cost of capacity underutilization still plays a burden on the margin.
To the tune of about €1 billion. It is encouraging that our Step Up program.
No, for structure. Improvements are advancing more quickly than expected.
Investments in fiscal 2025 have been due slightly to about €2.2 billion.
Previously, we spoke about €2.3 billion.
Expectations for free cash flow.
Is being increased as follows.
The reported free cash flow will probably be.
About €100 billion higher, and it's likely to reach €1 billion.
Jochen Hanebeck: Taking into account the expected closure of the acquisition of the Ethernet business of Marvel in the automotive sector and the payment of the purchase price of €2.5 billion, the free cash flow would then be about minus €1.2 billion. The adjusted free cash flow, adjusted investments in front-end business, will be about €1.7 billion compared to €1.6 billion, which I respect. With that, I've come to the end of my remarks. And together with Sven Schneider, I'll be happy to answer your questions.
This is like the better development of business, taking down the expected closure of the acquisition of the Eastern business of Marvel in the automotive sector and the payment of the purchase price of €2.5 billion. So, free cash flow would then be about minus €1.2 billion.
The adjusted free cash flow. Adjustable investments in front-end business will.
Florian Martens: Thank you, Mr. Hanebeck. Ladies and gentlemen, we are now opening the Q&A session. If you'd like to ask a question, please press star one on your keypad. You will then hear a tone that indicates that you're going to be added to the queue. If you'd like to withdraw a question, please press star two on your keypad. Participants are asked to use their handset when asking a question. So if you have a question now, please press star one. We're going to wait a little bit for the first question to come through.
At €1.7 billion compared to €1.6 billion, with due respect, I come to the end of my remarks. Together with Spanish, I'd be happy to answer your questions. Yeah, yeah. So.
Ladies and gentlemen.
We are now opening the Q&A session. If you'd like to ask a question, please press.
Star 1 on your keypad.
You will then hear a tone that indicates that you are going to be added to the queue. If you'd like to withdraw a question, please press *2 on your keypad. Participants are asked to use their handset when asking a question. So, if you have a question, please press *1. We're going to wait a little bit for the first question to come through.
Jochen Hanebeck: Und die erste Frage kommt von Christoph.
Florian Martens: The first question comes from Christoph Röhrmeier from DPA. Please go ahead, sir. Good morning, and thank you for allowing me to ask a question. I have a question, or rather a series of questions. Now, I know this may be difficult to answer, but could you tell us how much the tariffs cost you in Q3 and perhaps also prospectively what that situation will be like? Now, the job cuts, it looks like you're making good progress here. 2,300 employees have been cut from last year, if I've understood your communication correctly. Does that bring an end to the downsizing or not? Thank you very much. Thank you very much, Mr. Röhrmeier, for your questions. With respect to the tariffs, well, with respect to the direct effects on semiconductors, we can say that they're still minimal.
The first question comes from Christopher. Please go ahead, sir. Good morning and thank you for...
allowing me to ask a question. I have a question, or rather a series of questions. Now, I know this may be difficult to answer, but could you tell us?
How much did the tariffs cost you in Q3? And perhaps also prospectively, what will that situation be like?
now, uh, the job cuts.
Uh, it looks like you're making good progress here. 2,300 employees have been cut from last year.
If I've understood your communication correctly,
Does this bring an end to the downsizing?
Or not. Thank you very much. Thank you very much, Mr. [Name], for your questions. With respect to the tariffs.
Florian Martens: Semiconductor tariffs are always calculated based on the front-end site or the wafer site, which would be Dresden in the context of INFINEON. Today, we only have tariffs on products where wafer manufacturing is conducted in China, and this therefore affects us to a very minor degree. As a result of that, these effects are negligible. The indirect impacts were set out in my presentation. I told you that it was very difficult to estimate them, but we see that the market is very nervous, and I believe that you receive reports about the automotive industry on a daily basis. With respect to our job cuts, we're right on schedule. In the past, we said that we would reduce the workforce by 2,400 positions, and we would also shift positions from high-cost to low-cost countries. We're making very good progress in this program.
Well, with respect to the direct effects on semiconductors, we can say that there's still minimal semiconductor tariffs. These tariffs are always calculated based on the front-end site or the wafer site, which would be addressed in the context of Infineon. Today, we only have tariffs on products.
Uh, where wait for manufacturing is conducted in China, and this therefore affects us to a very minor degree.
As a result of that.
These effects are negligible.
The indirect impacts were set out in my presentation. I told you that it was very difficult to estimate them, but we see that the market is very nervous.
And I believe that.
You receive reports about the automotive industry on a daily basis, with respect to our job cuts. We're right on schedule.
In the past, we said that we would reduce.
Florian Martens: On top of that, our headcount is being reduced by the sale of factories, including the 1,000 employees at Austin, for example, that we sold to contract manufacturer Skywater. So in a nutshell, it's safe to say that in Europe, we're basically done. We have reached agreements with all affected employees. And having said that, of course, this has been done in a socially acceptable manner without laying people off. And we also have termination agreements, which are by mutual consent if that actually applies. And that means that we can actually then put the pedal to the metal to prepare ourselves for the future. Thank you very much. The next question is from Joachim Hofer from Handelsblatt. Please go ahead, sir. Good morning. I also have two questions. I would like to know how you are progressing with STEP-UP. You said that you are progressing faster than anticipated.
the workforce by 2,400 positions, and we would also shift positions from high-cost to low-cost countries. We're making very good progress in this program. On top of that, our headcount is being reduced by the sale of factories, including...
The 1,000 employees.
At Austin, for example.
That we sold to contract manufacturer Skywater. So, in a nutshell, it's safe to say that in Europe, we're basically done.
We have reached agreements with all affected employees.
And having said that, of course, this is
has been done in a socially acceptable manner without laying people off.
and,
Uh, we also have the termination agreements, which are by mutual consent. If that actually applies, it means that we can put the pedal to the metal to prepare ourselves for the future.
Thank you very much.
The next question.
Is from Hunter's Blood. Please go ahead, sir. Good morning.
I also have 2 questions.
Florian Martens: Could you express that in figures? Second, you said that you have idle costs, underutilization. That is, are there areas in which you have bottlenecks where you are doing really well? Oh, and I have a third question. You talked about the sale of a factory in the United States. Do you also have plans to invest in sites and factory sites in the United States as well? Thank you very much. Thank you, Mr. Hofer. For the first part of your set of questions with respect to STEP-UP, I would like to hand over to my colleague, Sven Schneider, and then I will get back to you on the two other parts of your series of questions. Good morning, Mr. Hofer.
I would like to know how you are progressing with step-up. You said that you're progressing faster than anticipated. Could you express that in figures?
Second.
You said that you have idle costs underutilization. Are there areas in which you have bottlenecks where you are doing really well? Oh, and I have a third question. You talked about the sale of a factory in the United States. Do you also have plans to...
Invest in, uh, sites and factory sites in the United States as well.
Thank you very much.
Thank you, Mr. Hoffer
Florian Martens: With the STEP-UP program, we have communicated that a high triple-digit million euro amount in terms of saving effects are being targeted through to the first half of 2027. Your specific question was what happened in 2025 as opposed to the original plan. In summary, I can tell you that almost half of the savings potential has already been lifted in 2025. And this is slightly above the previous expectations. We would have estimated that we would have been at about a third, but we're now moving towards half. In 2026, we will reach two-thirds, and then from the first half of 2027, we'll be at completion. Yes, exactly. We are very happy about the success rate of STEP-UP. With respect to the idle costs, as we said before, it's about €1 billion in the profit and loss account, which is quite a lot.
For the first part of your set of questions, with respect to Step Up, I would like to hand over to my colleague, Sven Schneider, and then I will get back to you on the two other parts of your series of questions. Good morning, Mr. Hoffa, with the Step Up program.
We have communicated that a high triple-digit million euro amount in terms of savings effects is being targeted through to the first half of 2027. Your specific question was what happened in 2025, as opposed to the original plan, in summary? I can tell you that almost half of the savings potential has already been listed in 2025.
And this is slightly above the previous expectations. We would have estimated that we would have been at about a third, but we're now moving towards half.
Florian Martens: We also have bottlenecks in the area of AI power supply solutions. Here, the customers are basically ripping the products out of our hands, and we're developing the most modern products for solar inverters, which achieve very high levels of performance. There, all our products are sold out. So we do have some bottlenecks, but we would like to have even more because we would prefer to work on bottlenecks than underutilization. With respect to the United States, what I can tell you is that the semiconductor industry lives off of economies of scale. From a commercial point of view, it is not a lot of fun to buy, excuse me, to build a series of small factories. That is why primarily we continue to channel our investments into the major sites that you are all familiar with.
We're very happy about the success rate of step-up. With respect to the idle costs, as we said before, it's about €1 billion in the profit and loss account, which is quite a lot. We also have bottlenecks in the area of AI and Power Supply Solutions here. The customers are basically ripping the products out of our hands, and we're developing the most modern products for solar inverters.
Which achieve a very high levels of performance there; all our products are sold out.
Uh, so we do have some bottlenecks, but we would like to have even more because we would prefer to work on bottlenecks than, uh, underutilization with respect to the United States.
What I can tell you is that the semiconductor industry lives off of economies of scale.
Uh, from a commercial point of view, it is not.
Florian Martens: When it comes to local markets and meeting local demands, be this regulatory or in terms of tariffs, we will service these markets using contract manufacturers. In this vein, we are building out our network of contract manufacturers both in China and the United States of America with resolve so that we can service these markets in an economically feasible manner. May I ask a follow-up question? Yes, go ahead. You don't really import a lot of your semiconductors into the United States. Is that correct? And if you do import into the United States, you import these products as part of finished products. Is that correct? Well, the share of revenue accounted for by the United States is at around 11%. Yes, my colleagues are nodding off on this. So that's good. That's correct. We also deliver assembled products to the United States.
A lot of fun to buy, uh, excuse me, to build, uh, a series of small factories. That is why, primarily, we continue to channel our investments into the major sites that you're all familiar with.
When it comes to local markets and meeting local demands, be this regulatory or in terms of tariffs, we will.
Uh, we are servicing these markets using contract manufacturers. In this vein, we are building out our network of contract manufacturers, both in China and the United States of America, with resolve, so that we can service these markets in an economically feasible manner.
I may ask on a follow-up question. Yes, go ahead.
You.
You don't really import a lot of your semiconductors into the United States, is that correct?
And if you do import into the United States, you import these products as part of finished products, is that correct?
Well, the, uh, share of revenue accounted for by the United States is at around 11%. Yes, my colleagues are nodding off on this.
So, that's good.
That's correct. We also deliver
Florian Martens: But once again, the decisive point is not whether we are a European company or a US company in terms of tariffs, but rather where wafer manufacturing is located. If an American company has a factory in Germany, then it will be affected by tariffs just as we would be when delivering wafers from Dresden. So this is what the semiconductor industry looks like in these terms. Second, it is quite important to see that we do deliver to the United States. And I'm talking here about volumes of fully assembled chips, which in turn, in Mexico, continue to be used in the automotive industry. They are then integrated further so we can ship them in transit to Mexico without tariffs. Furthermore, it is our intention, should there be any tariff impacts or should there be direct tariffs on semiconductors, we intend to pass them through to the customers.
Assembled products to the United States. But once again, the decisive point is not whether.
We are a European company or a U.S. company in terms of tariffs, but rather, where manufacturing is located. If an American company has a factory in Germany.
Then it will be affected by tariffs just as we would be when delivering wafers from Dresden. So this is what the semiconductor industry looks like.
In these terms.
Second, it is quite important.
To see that we do deliver to the United States. And I'm talking here about volumes of, uh,
Uh, fully assembled chips, which in turn, in Mexico, continue to be used in the automotive industry. They're then integrated further.
So, we can, uh, ship them in transit to Mexico without tariffs.
Furthermore, it is Our intention
Should there be any tariffs impacts?
Florian Martens: This is a very complex equation, and that's why it's so difficult for us to give you more precise estimates. But we will do all we can to stave off any negative effects on the company and, of course, minimize them. Okay. Thank you very much. As a reminder, if you'd like to ask a question, please press star one on your keypad now. The next question comes from Hakan Ersin from Thomson Reuters. Please go ahead, sir. Good morning. I have two questions. First of all, you said that based on constant exchange rates, the quarter-on-quarter growth would have been 9%. I would like to know what growth would have looked like compared to the previous year based on non-constant currency exchange rates. Second, what is your forecast for revenue generated by products for AI data centers? You said 600 million roughly in May.
Or should there be direct tariffs on semiconductors? We intend to pass them through to the customers. This is a very complex equation, and that's why it's so difficult for us to give you more precise estimates.
But we will.
Uh, do all we can.
To stave off any negative effects.
Uh, on the company.
And, of course, minimize them. Okay, thank you very much.
As a reminder, if you'd like to ask a question, please.
Press star 1 on your keypad. Now the next question comes from Hakan Elson from Thomson Reuters. Please go ahead, sir.
Good morning.
I have 2 questions.
First of all,
You said that based on constant exchange rates, the quarter-on-quarter growth would have been 9%. I would like to know what growth would have looked like compared to the previous year, based on non-constant currency exchange rates. Second, what is your forecast for revenue?
Florian Martens: Is that figure still accurate, or is there an update there? Thank you very much for the questions. I'll field the second one, and Mr. Schneider will then answer the first one. You're absolutely right. The figures that we published related to the last fiscal year, we're talking about €500 million in revenue. This year, we're at about 600 million. Next year, we'll be at about €1 billion. So this is a very, very dynamic business. And it is safe to expect that as long as AI infrastructure continues to be expanded at the planned rate, that this business will continue to be very pleasing for us. In the interim, Mr. Schneider can perhaps answer the first question, the year-over-year issue. Yes, thank you. We have the very same revenue in nominal terms, 3702 compared to 3704, adjusted for currency effects.
Generated by products for AI data centers, you said 600 million roughly in May? Is that figure still accurate or is there an update there? Thank you very much.
For the questions.
First 1.
You're absolutely right.
The figures that we published.
Related to the last fiscal year, we were talking about €500 million in revenue.
This year, we're at about 600 million; next year, we'll be at about 1 billion. So, this is a very, very dynamic business.
Florian Martens: A year ago, we assumed an exchange rate of 108, and now we're at 114. So we have a difference of 5 to 6 cents. So we're talking about 115 to 150 that we lost due to currency effects. But like for like, we're talking about growth quarter on quarter. Thank you. Ladies and gentlemen, there don't appear to be any further questions at present. Therefore, I would like to hand the floor back to Mr. Hanebeck for his concluding remarks.
And it is safe to expect that. As long as AI infrastructure, continues to be expanded at the planed rate that this business will continue to be very pleasing for us, uh, in the interim. Mr. Schneider can perhaps answer the first question the year-over-year issue? Yes, thank you. We have the very same Revenue in nominal terms 3702 compared to 3704, uh, adjusted for currency effects. A year ago, we assumed an exchange rate of 108 and now we're at 1:14 so we have a difference of 5 to 6 cents. So we're talking about uh uh about a 115 to 150 that we lost and for due to currency, uh effects. But like for like we're talking about growth quarter on quarter.
Thank you.
Ladies and gentlemen.
There don't appear to be any further questions at present. Therefore, I would like to hand the floor back to Mr. Hanebeck for his concluding remarks.
Jochen Hanebeck: Right, ladies and gentlemen, then I'll sum up. INFINEON has completed the third quarter of fiscal 25 right on plan in terms of revenue, probably at the upper end of the expected range, despite the weaker dollar. The expansion of the reduction of the excessive inventories and target milestones at once, we've seen headwinds because of the effects of tariffs in the particular automotive industry. We are driving cautiously. The effects of these tariffs in the fourth quarter were less serious than expected, but it has been reduced by the unfortunate currency developments. In this volatile environment, our cycle management is being continued, and we expect in the current quarter a further sequential growth in revenue. At the same time, we are seeing our strength in the highly attractive growth markets, Artificial Intelligence, power infrastructure, and software-defined vehicles.
Right, ladies and gentlemen, then I'll sum up.
Infineon has completed the third quarter of our federal 25, right? On plan. In terms of revenue, profitability is, uh, the upper end of the, uh, expected range. Despite the weaker dollar, the expansion of the, uh, reduction of the excessive inventories. In target, MERS Advanced, we've been seeing headwinds because of the, uh, effects of tariffs. And the particular, all of us industry, we are driving cautiously the effects of these tariffs. And the fourth quarter was less serious than expected. But
It has reduced the been reduced by the unfortunate currency developments in this volatile environment. Uh, cycle management is being continued and we expect in the current quarter a further sequential growth.
Jochen Hanebeck: And INFINEON, with its product portfolio of power semiconductors, analog semiconductors, and sensors, and controlling connectivity, INFINEON is in an excellent position to serve the markets and to advance innovation. Thank you for your interest, and see you next time.
Revenue. At the same time, we are seeing our strength in the highly attractive growth markets: artificial intelligence, power infrastructure, and software-defined vehicles. Infineon, with its product portfolio of semiconductor power, analog, mixed-signal, and sensors and control connectivity, is in an excellent position to serve the markets and to advance innovation. Thank you for your interest, and see you next time.