Infineon benefits from the ongoing semiconductor crisis

Infineon benefits from the ongoing semiconductor crisis

05 October 2021Reading time: 4 minutes

For some time now, supply bottlenecks in the semiconductor sector have been a well-known problem. With this year's International Motor Show (IAA), which took place beginning of September in Munich, the resulting difficulties became clearly visible for the automotive industry. According to PWC about four million fewer cars had been built than originally planned in the first half of the year.

Several causes lead to this complicated situation

In order to better understand the overall situation and thus also possible beneficiaries of the situation, it might be worth taking a look at the causes. There seem to be several causes for the continuing chip shortage. According to a report in the German newspaper Süddeutsche Zeitung, geopolitical tensions between China and Taiwan, one of the world's largest chip suppliers, have led to major supply problems. Another main point mentioned in the report is the corona crisis. Due to rising numbers of infections, there was an increase in production stoppages. In addition, automakers canceled their semiconductor orders due to declining orders at the beginning of the pandemic. The free capacities were taken up directly by the communications industry and the consumer electronics manufacturers, whose demand for semiconductors increased significantly in the last years. In addition, there is the general problem that semiconductors are also in greater demand in an increasingly digital world, while capacity expansions can be made rather slowly. PwC expert Tanjeff Schadt explained before the start of the IAA auto show that the expansion of semiconductor production facilities would take up to two years, the construction of new plants even up to five years.

More production capacities in Europe

In order to keep up with the growing demand, Infineon is also trying to increase its production capacities. The company opened a new factory mid-September in Villach, Austria, to produce microchips. The decision to expand production in the Austrian state of Carinthia was made three years ago and could now bring major benefits to the Munich-based company. The company does not expect shortages to ease until next year, according to Board Member Jochen Hanebeck. Infineon has invested about EUR 1.6 billion for this purpose: the largest single private-sector investment in Austria to date. Further sites are currently being run by the company in Dresden and Regensburg. With its strategy, Infineon also wants to reduce its exposure to global supply problems in Asia or in the USA. According to an article in the German newspaper Handelsblatt, Peter Schiefer, head of the company's automotive division, thus also welcomes the initiative of EU Internal Market Commissioner Thierry Breton, who wants to push ahead with the expansion of further capacities in Europe. According to the article, U.S. chip manufacturer Intel is also currently considering a new chip factory in Germany. Schiefer does not see any danger of future overcapacities here. Due to the increasing demand for electric cars the demand will continue to increase in his opinion. This increasing demand from the car industry should also greatly improve the negotiating position of semiconductor manufacturers vis-à-vis the automotive industry.

Positive outlook possible in the long term

While sales in the third quarter were still burdened by various factors and they still rose by about EUR 22 million to EUR 2.722 billion. Infineon expects stronger sales growth to about EUR 2.9 billion in the current quarter, with profits also rising. Reinhard Ploss, Infineon's CEO, expects total annual revenues of about EUR 11.0 billion and a profit margin of more than 18 percent due to full order books. According to the German newspaper Süddeutsche Zeitung, this would also make Infineon the largest European chip producer in terms of sales. Infineon has also been among the world's ten largest semiconductor companies since the acquisition of the American Cypress Semiconductor Corporation in April 2020.

Stock price development

The Infineon Technologies AG share is closed at EUR 35.665 on 09/20/2021. The 52-week high was reached on 09/06/2021 when the stock traded at EUR 37.915 and its 52-week low on 09/25/2020 when it traded at EUR 22.970. According to Bloomberg, 24 analysts issued a buy opinion on the stock, 6 a hold opinion and 0 analysts a sell opinion.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Don’t miss any investment idea. Subscribe now to the Vontobel newsletter!

Vontobel products on Infineon are tradable at DEGIRO.

Discover Vontobel’s product on our Website.

Important legal information:
This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.
Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.

Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner. 

24/01/2022 01:40:24