For the IT group, the success of the ID.3 is almost as important as for the car manufacturer. Because the electric vehicles need more chips than combustion engines.
Fewer cars, less sales – until recently that was also true for Infineon. But now the situation is changing: Because there are significantly more semiconductors in the new electric cars than in cars with a combustion engine. This is how Germany’s largest chip manufacturer can grow, even though manufacturers have not sold as many vehicles in the crisis as they did in the past.
These days, the Dax group is particularly hopeful of the launch of the ID.3. With the new model family, VW wants to finally persuade consumers to switch to electric cars – and at the same time put the electricity pioneer Tesla in its place. Infineon supplies power semiconductors in particular. These are chips for the power supply – components that play a central role in electric vehicles.
“The sheer volume is remarkable,” says Stephan Zizala, who is responsible for the power semiconductors in Infineon’s auto division. Because based on the so-called modular electric drive kit, VW wants to bring many more models onto the market.
The Wolfsburg-based company also wants to supply other manufacturers with it. The car group has already found a partner in Ford. Infineon is therefore anticipating ever larger orders for years to come. Zizala: “We are only at the beginning of electromobility. For us, this offers enormous growth opportunities.”
The industry association ZVEI expects chip consumption per car to increase from $560 to $710 in four years. On the one hand, this is due to the increasingly lush assistance systems, on the other hand, due to the electric drive. For example, ZVEI calculates an annual sales increase in automotive semiconductors of 5.3 percent by 2024. The global sales of the industry in this segment will accordingly grow from $50 billion in 2019 to $65 billion in 2024.
Infineon benefits directly from this. Because no one now sells as many auto chips as the former Siemens subsidiary. This spring, Infineon took over the Californian competitor Cypress, thereby overtaking the previous market leader NXP.
Lower plant utilization
For Infineon, electric mobility is already an important source of income. In the past fiscal year, the company generated seven percent of its revenues with electric vehicles. But that should only be the beginning. Because the Munich-based company already has orders for numerous new models. “Over the next two years, 35 more plug-in hybrid and electric cars will be launched with our semiconductors,” said Zizala. The car division accounts for 45 percent of the group’s sales of around eight billion euros.
More and more customers are already securing capacities for e-car power semiconductors in the long term, according to the manager. Apparently the clients are afraid that they will run out of components. Infineon, however, is given planning security. The Danish company Danfoss recently concluded a multi-year supply agreement with Infineon.
“For us as a manufacturer of power modules for electric drives, a long-term secure supply of semiconductors is extremely important,” said Danfoss manager Claus Petersen. “This agreement enables us to meet the high growth expectations of our customers.” Infineon does not supply the automakers directly, but rather their suppliers, i.e. groups like Bosch, Continental or Danfoss.
The good business with electromobility is positive news in an otherwise difficult time for Infineon. Like so many German corporate executives, CEO Reinhard Ploss had to withdraw the annual forecast due to the corona crisis.
In the current fiscal year, which ends on September 30, sales will decline organically by around five percent, the manager warned. Ploss thus clearly misses its forecast from last autumn. At that time, the engineer had promised an increase of five percent. The operating margin will also decrease. The main reason for this is the lower capacity utilization of the plants.
Successful on the stock exchange
Analysts rate Infineon differently. Recent data on car sales in China and electric car sales in Europe and around the world suggested that the company may have had the worst, said Mark Li from Bernstein Research. But the balance sheet is good enough to endure a long period of weakness.
Sebastien Sztabowicz from Kepler Cheuvreux, on the other hand, warns of the chip manufacturer’s weak results – the corona crisis is weighing on the group. This is also feared by Barclays analyst Andrew Gardiner. The reason is the high dependency on the automotive industry. CEO Ploss will present the quarterly results on August 4th.
However, investors are confident: since the beginning of the year, the shares have risen by around 15 percent. This makes the chip manufacturer one of the most successful values in the Dax.
Expanding production for future demand
Many machines are currently idle, but Infineon is still expanding its production. A new plant is currently under construction in Villach, which will also supply power semiconductors for electric cars. “We have to make sure that we ramp up production capacity in good time,” explained manager Zizala.
Already now, in the middle of the pandemic, noticeably more chips would be needed for electric vehicles. Zizala: “We see that governments are launching support programs. This benefits electromobility for both cars and the charging infrastructure. ”
In the first half of the year, the number of new registrations of electrically powered cars in ten major European markets rose by almost 26 percent compared to the same period last year. This resulted in an evaluation of the strategy consultancy Strategy &, which belongs to the consulting company PwC.
Electric drives also made progress in Germany – according to the study, by a quarter in the second quarter. According to the experts, the purchase premiums that have been increased since February and increased again with the corona crisis in Germany could give a longer-term boost. The range of electric cars is still limited and delivery times are long. But that is changing.
As a chip manufacturer, Infineon hopes for customers to order more electric vehicles. With more efficient chips, the range increases and the vehicles become more attractive.
