German chipmaker Infineon has signed a non-binding memorandum of understanding (MoU) with global automotive manufacturer Stellantis ( STLA-US ) to supply silicon carbide semiconductors for many years, the company said in a statement on Monday (14).
Under the agreement, Infineon will set aside capacity from 2025 to 2030 to supply power semiconductors directly to Stellantis suppliers.
Infineon said the agreement could involve more than 1 billion euros ($1.03 billion) worth of chips, adding that the chips will be used in Stellantis-branded electric vehicles.
Stellantis CEO Carlos Tavares told French newspaper Le Parisien last month that he expects the semiconductor supply chain to remain tight until the end of next year.
Infineon spends 5 billion euros to expand production, the largest single investment in its history
Infineon Technologies AG is raising its target operating model and reporting its results for the fourth quarter and full fiscal year ending Sept. 30, 2022.
"Decarbonization and digitalization are leading to a structural increase in demand for semiconductors. Thanks to its strategic positioning, Infineon will benefit greatly from this development. This dynamic is further accelerating, so now is the right time to define our more ambitious target operating model," said Jochen Hanebeck, CEO of Infineon.
"Furthermore, by planning investments in new plants, we will continue to consistently execute our strategy and broaden the basis for our accelerated profitable growth trajectory in a forward-looking manner. We are pleased with the political support for our investment in the Dresden plant (Germany), which we are counting on to be fully funded through the European Chip Act. We ended a very successful and challenging fiscal 2022 with a strong fourth quarter, and we are off to a good start in fiscal 2023. Given the ongoing macroeconomic and geopolitical uncertainty, the next few quarters will require heightened vigilance. We are prepared to act quickly and flexibly if necessary."
Infineon sees growing dynamics and strong structural growth drivers in its target markets automotive, industrial and IoT applications, as well as in renewable energy. As a result, the company is upgrading its target operating model, which defines financial targets for the entire cycle. Going forward, average revenue growth is expected to exceed 10% at $1.00 to the euro, up from 9%+ previously.
According to Infineon's forecasts, the company's growth will be driven in particular by electric vehicles, autonomous driving, renewable energy, data centers and the Internet of Things, and this growth is accompanied by a significant increase in profitability: the segment result margin is expected to reach an average of 25%, compared to 19% so far. The main factors influencing revenue growth will be the increased proportion of system solutions, a higher value product/technology portfolio due to portfolio management, the expansion of cost-effective 300 mm production, and operating expenses that are growing at a slower rate than revenues from digitalization and economies of scale.
For the first time, Infineon has included an explicit free cash flow target in its target operating model, replacing the previously used investment-to-sales ratio. Free cash flow, adjusted for major investments in front-end buildings, should be between 10 and 15 percent of revenue over the full cycle.
According to Infineon, the company plans to continue to expand its 300 mm manufacturing capacity to achieve the expected accelerated growth in analog/mixed-signal and power semiconductors. The intended location is Dresden (Germany). The investment decision requires sufficient public funding. The planned total investment of EUR 5 billion will be the largest single investment in Infineon's history.
With this investment, Infineon will strengthen the company's position as a global semiconductor leader for power systems. When operating at full capacity, the planned plant will have the potential to generate an annual revenue comparable to the level of investment. The new plant is expected to create up to 1,000 new highly qualified jobs and is on track to be ready for production in the fall of 2026.
