Modern luxury cars are crammed with electronics and computer chips. Rising demand for vehicles in China has boosted profits at semiconductor producer Infineon as a result. Back orders are expected to last through summer.
Chipmaker Infineon is pulling out of a slump
While the surging automobile market in China is good news for Germany's high-end car manufacturers, a less-visible beneficiary has also emerged. Infineon Technologies, a Munich-area semiconductor manufacturer serving the automotive and industrial sectors, reported a first-quarter upswing Tuesday.
Strong Chinese demand for luxury cars - which can contain up to 1,000 built-in semiconductor components each - saw Infineon achieve a net profit of 232 million euros in the three months preceding December 31, 2010, up from 66 million a year earlier.
The company's operational margin lay over 19 percent, and its turnover was at 922 million euros. Its share price jumped more than 3 per cent to 7.98 euros following the release of the results.
With 38 percent of its business in automobile electronics, the company took a hit during the recent recession. But the latest quarterly figures impressed investors because they did more than simply make up for lost ground.
A modern luxury car can contain up to 1,000 semiconductor products
Demand for semiconductors in the automotive sector is increasing between 5 and 8 percent annually simply because advancing technology requires more chips, according to analysts. That, combined with rising automotive sales figures, has filled Infineon's order books and created a backlog expected to last through the summer.
Increased need for semiconductors
Malte Schaumann, an analyst who watches Infineon for Hamburg-based MM Warburg & Co, said he's optimistic that demand for automotive semiconductors won't be lagging any time soon.
"The electronics systems which are now only available in high-end or upper-mid-range vehicle, will eventually be available in economy cars," he told Deutsche Welle. "In the long term what could be interesting is that if electric automobiles really become the standard - they'll need a much larger number of semiconductors."
Infineon ended its accounting year in September with a 20 percent operational margin – more than the 15 percent it had expected. Its rivals, including French-Italian firm STMicro, have announced similarly positive outlooks.
Author: Gerhard Schneibel
Editor: Sam Edmonds