Chinese auto sales drive profits at chipmaker Infineon | Business| Economy and finance news from a German perspective | DW | 03.02.2011
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Chinese auto sales drive profits at chipmaker Infineon

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.

A microchip in front of an Infineon logo

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 Mercedes S Class

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

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