Infineon Says Shutdowns, U.S. Storms Hold Back Sales Growth

(Bloomberg) -- Infineon Technologies AG said manufacturing constraints at its sites in Malaysia and Texas are holding back its ability to grow revenue, despite a global shortage in semiconductors.

Revenue rose 25% to 2.72 billion euros ($3.2 billion) in the third quarter from a year earlier, the company said in a statement on Tuesday. That compared with the average 2.78 billion-euro estimate of analysts surveyed by Bloomberg.

Automotive and power and sensor systems were primarily affected and the company was only able to increase its sales by 1% from the previous quarter even with heavy demand, Infineon said. Malaysian production capacity was held back by Covid-19-related measures and the company is still dealing with the aftermath of the winter storm in Texas.

“Inventories are at a historic low; our chips are being shipped from our fabs straight into the end applications,” Chief Executive Officer Reinhard Ploss said in the statement. “Under these circumstances, any pandemic-related restrictions on manufacturing, such as those recently imposed in Malaysia, are especially grave.”

Key Insights

• The company said full-year sales are expected to hit 11 billion euros, matching the average analyst forecast.
• Manufacturing bottlenecks in Malaysia are likely to continue to weigh on sales in fourth quarter, the company said.
• Still, the company believes that the plants should be running at normal capacity later this month, Ploss said in a call with analysts. The total impact from the shutdown was in the “high double-digit” millions of euros, he said.
• Net income in the fiscal third quarter, which ended in June, hit 245 million euros.
• The company is a major supplier to automakers, which have been hard hit by a global chip shortage caused by a combination of diminished manufacturing capabilities during the Covid-19 pandemic and underestimated demand.
• Tight supply in the industry could last into 2022, Ploss said. The shortage has led to sales growth across the industry, as electronics makers bought up as many chips as semiconductor companies could produce.
• Infineon’s Chief Marketing Officer Helmut Gassel said in May that the shortage would prevent about 2.5 million cars from being built in the first two quarters.
• In response, Infineon and others are working to increase manufacturing capabilities. The world’s top chipmaker, Taiwan Semiconductor Manufacturing Co., is spending $100 billion over three years to meet surging demand.
• This reaction has stoked some concerns that the industry will overshoot demand. Last month, Texas Instruments Inc. warned that revenue could fall short of some analysts’ estimates.

Market Reaction

• Infineon shares fell less than 1% to 33.19 euros at 12:13 p.m. in Frankfurt trading after earlier dipping as much as 5%.
• The stock has gained 5.7% so far this year. That compares with a 27% gain in the Stoxx Europe 600 Technology Index.
• Investors will watch chip stocks tied to the auto industry after the Chinese government said it’s probing some semiconductor sellers over allegations of pricing manipulation.

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