Infineon Tech AG

Good morning everyone, welcome to the conference call for analysts and investors for Infineon's 2024 fiscal fourth quarter and full year results. Today's call will be hosted by Alexander Feultin, Executive Vice President Finance, Treasury and Investor Relations at Infineon Technologies. As a reminder, this call is being recorded. This conference call contains forward-looking statements and or assessments about the business, financial condition, performance and strategy of the Infineon Group. These statements and or assessments are based on assumptions and management expectations resting upon currently available information and present estimates. They are subject to a multitude of uncertainties and risks, many of which are partially or entirely beyond Infineon's control. Infineon's actual business development, financial condition, performance and strategy may therefore differ materially from what is discussed in this conference call. Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements. At this time, I'd like to turn the call over to Infineon. Please go ahead.

Thank you, operator, and good morning, ladies and gentlemen. Thank you for joining our earnings call for the fourth quarter and the full fiscal year 2024. On this call, you have our CEO, Jochen Hanebeck, our CFO, Sven Schneider, and our CMO, Andreas Rorschitz. Jochen and Sven will provide an overview on the market situation and divisional performance, key financials and, of course, our long-awaited outlook for fiscal 25. Our prepared remarks will also cover step-up, sustainability achievements and the dividend proposal. After that, we will start our Q&A session. As usual, the illustrating slideshow, which is synchronized with the telephone audio signal, is available at infineon.com slash slides. We will again provide a PDF with Jochen's and Sven's introductory remarks in the course of the call on our website, namely infineon.com slash investor. There you will also find a recording of this conference call, including the aforementioned slides, a copy of our earnings press release, as well as our investor presentation. And now, Jochen, over to you.

Thank you Alexander and good morning everyone. Our fiscal year 2024 lies behind us and we concluded it as predicted and fully in line with our target operating model. What lies ahead is a continuation of a rolling correction to various degrees and timing in many of our target markets. More on this later. We currently focus on three priorities. First, we manage the cycle by focusing what we can control. At the same time, we drive structural margin improvements with our step-up initiative. Furthermore, we are accelerating our innovation to customer value with breakthrough innovations like GAN 300 or super thin silicon MOSFETs for AI to lead in our undiminished structural growth areas. Together, this will ensure that Infineon comes out of this down cycle stronger. Now, let's look first at the September quarter's results. As predicted, the fourth and final quarter saw the highest sales within our fiscal year 2024. Group revenues were 3,919,000,000 euros, 6% up from the previous quarter. All four divisions saw their revenues increase sequentially. The segment result came in a bit stronger than anticipated and amounted to 832 million euros, corresponding to a robust segment result margin level of 21.2%. Quarter over quarter, the US dollar weakened somewhat against the euro from 1.08 to 1.10, having a negative impact on revenue and earnings. For the full fiscal year 2024, we recorded revenues of 14,955,000,000 euros, an annual decline of 8%. Automotive was the only one of our segments that saw its revenues rise year over year, albeit slightly. The full year segment result margin came in at 20.8%. Sven will provide more color in the financial section. Indicative of the short-term order behavior of our customers in a down cycle, our order backlog has been declining further to stand at around 19 billion euros at the end of September. Now let's take a closer look at our divisions. In the final quarter of the last fiscal year, the automotive segment achieved revenues of 2 billion 149 million euros, a further uptick in comparison to the previous quarter. We saw higher volumes, in particular in XCV-related solutions in our microcontrollers. Both the segment result of 551 million euros and the segment result margin of 25.6% showed further slight sequential increases, with positive volume effects being the key driver. Looking at the entire fiscal year 2024, Infini was able to grow its automotive business by 2%. Our clear focus on structural growth areas, our broad portfolio and leading market positions across applications and regions once again allowed us to outperform peers. As you know, the overall sentiment in the automotive space has recently clearly deteriorated in many regions. We see many customers actively managing inventories downwards and anticipate they will even accelerate this towards calendar year end. The lessons learned from the last allocation period seems to be by and large forgotten. At the same time, production numbers continue to trend incrementally down. After a sequence of downward revisions in recent months, the number of light vehicles to be produced in calendar year 2024 is now estimated at 88.5 million by S&P Global, down 2% versus the previous year. In addition, the share of XCV is stagnating in many regions, which is unlikely to reverse in the early course of 2025. China is the notable exception to this trend, with every second car and rising being an electric one. In the longer term, we see our structural growth drivers around e-mobility, including hybrids and ADAS, or more broadly, software-defined vehicles, fully intact. The later one covers our top-notch microcontroller franchise sensors and smart power components for advanced power distribution, enabling software-defined architectures and functionalities such as automated driving. Among automotive semi-providers, Infineas has unrivaled portfolio breadth and a worldwide geographic exposure geared towards winning areas to reap the benefits of these developments. This is underpinned by our market share gains in MCUs and our number one position in China. Our success in China is undiminished, having achieved again significant growth in our fiscal year 2024 and gaining new design wins at an unabated momentum. In line with the strong trajectory, some of our latest design wins. A few days ago, we announced to broaden our collaboration with Stellantis. Infineon will be the key semiconductor supplier for the next-generation platforms. This supply agreement will significantly advance Stellantis' mission to make electromobility for the volume market a reality. In addition to the well-known silicon carbide design win, it will cover AUREX microcontrollers and smart power components, as testimony to our solution-oriented product-to-system approach. On the silicon carbide side, we continue our strong momentum, having achieved a significant first-time silicon carbide design win at a major American OEM through a directed buy. Our 750V CoolSig MOSFETs will be used in the primary traction inverter for an upcoming volume platform. In China, we are happy to announce that we are directly supplying another local key player with our state-of-the-art hybrid pack drive CoolSig 1200V power modules for several new models, some of which are launching as early as this year. These examples illustrate once again our global success also with silicon carbide. Now let's move to green industrial power, which saw revenues increase by 6% quarter over quarter to 503 million euros. The main application fields contributing to this positive seasonal development were renewable energy generation and transportation. The segment result of GIP climbed to 111 million euros in the September quarter, corresponding to a segment result margin of 22.1%. The overall business environment for industrial applications remains weak. Global manufacturing PMIs for the US, the EU and China are all below 50. Inventories remain elevated throughout industrial supply chains. Their digestion is progressing only slowly, such that the timing and extent of semiconductor demand improvements remain uncertain. For core industrial applications like automation and drives, as well as for major home appliances, we continue to foresee a prolonged phase of muted development. In the era of renewables, inventory depletion may take longer than anticipated. That said, underlying structural demand remains strong, further driven up by power requirements for EV charging in AI data centers. We are preparing for the upswing in renewables by finishing the development of cutting-edge modules, which are highly appreciated and anticipated also by our Chinese customers. In the same light, I would like to spend a moment on Infineon's unique competitive setup across all relevant power technologies – silicon, silicon carbide and gallium nitride. Over the past few months, we have been very successfully pushing the boundaries in all three. In silicon, we achieved a technological milestone, becoming the first company mastering the handling and processing of ultra-thin silicon power semiconductor wafers of only 20 micrometers. By reducing wafer thickness from the industry standards of 40 to 60 micrometers, we cut substrate resistance in half, leading to power loss reduction of more than 15%. This makes power conversion more efficient, for example in AI power stages. The technology is already qualified by customers and another proof point that major innovations are still possible in the silicon space. In silicon carbide, we are ramping the world's most competitive device web in Malaysia, in a modular fashion, in line with our customer demands. In terms of silicon carbide substrates, our strategy of not being vertically integrated paid off fully, and we can rely on a diversified and competitive external wafer supply, which is leading in terms of cost and quality also for 200 mm. In terms of silicon carbide market success, we are happy to report that we achieved 650 million euros of revenue in our fiscal year 2024, equivalent to more than 30% year-over-year growth, clearly outgrowing the market and therefore gaining market share. For our fiscal year 2025, we predict our silicon carbide business to grow further in a low double-digit percentage range. In gallium nitride, we recently achieved a breakthrough innovation, developing the world's first 300 mm power GaN wafer technology. This groundbreaking technology will be an industry game-changer and enable us to unlock the full potential of gallium nitride about one year after the acquisition of GaN systems. A significant advantage of 300 mm GAN technology is that it can utilize to a large extent existing silicon manufacturing equipment, allowing accelerated implementation and efficient use of capital. Fully scaled 300 mm GAN production will contribute to gallium nitride cost parity with silicon on RES-on level, which means gallium nitride performance at the cost of silicon. As innovation leader in power systems, we are determined to defend our number one position in silicon and to shape the fast-growing wide bandgap markets. Making predictions which technology will be adopted in which application at what moment in time will not leverage the full potential, we rather team up with our customers to make the best choice in each case. Real-life examples like power supply units for AI data center, RECs, so-called fusion modules for EV inverters are showing that it is the combination of silicon, silicon carbide and gallium nitride products that achieves the cost performance optimum. Now let me continue the divisional review with power and sensor systems. PSS saw another quarter of positive momentum and printed revenues of 861 million euros, a sequential increase of 15 percent. While all business lines contributed to this development, the ramp of our power solution for AI servers clearly stood out, growing by almost 50 percent quarter over quarter. Also of note, with our industry-leading silicon microphones, we could benefit from the launch of new AI-enabled smartphone platforms. Driven by higher revenues, the segment result of PSS increased to 105 million euros after 70 million euros in the previous quarter, corresponding to a segment result margin of 12.2%. Underutilization charges continue to be a burden to margin expansion. Consumer compute communication applications have bottomed out, but the cyclical market recovery is progressing slower than anticipated. Especially in consumer applications, inventory burn remains a headwind. In stark contrast, power solutions for AI servers are booming, and Infineon is at the forefront of this highly attractive structural growth trend. Addressing the entire power flow from grid to core, we are uniquely positioned to power artificial intelligence. The AI revolution is still in its early stages and our business is scaling up very dynamically. We will accelerate our growth based on new sockets and achieve north of 500 million euros of revenue in fiscal year 25, depending on GPU RAMs and shares. Business with all leading AI processor makers as well as hyperscalers using their own custom XPU will drive this. Within the next two years, we will cross the €1 billion revenue line for powering AI solutions. Structural growth is underpinned by several drivers. The fast-growing number of new AI server installations, the rising performance and related power consumption of new processor generations, an increasing bill of material as the industry moves from lateral to more power-dense vertical power supplies, and for Infineon gaining market share on the back of unrivaled capabilities. What we bring to the table is sophisticated digital power control, in-house produced discrete MOSFETs with industry best figure of merits, packaging technologies like chip embedding, a full-fledged wide band gap offering, and very substantial application know-how. Another key success factor valued by our customers is our proven highest quality track record. We look forward to enabling higher and higher compute performance with the most efficient power flow solutions in the market. As a fourth in our row of segments, connected secure systems recorded quarterly revenues of €406 million, up 11% from the previous three-month period. The increase was driven by solutions for trusted mobile connectivity and authentication, as well as general-purpose microcontrollers. In line with higher revenue, the segment result of CSS improved to €62 million, corresponding to a segment result margin of 15.3%, in comparison to 11% in the previous quarter. Demand in most IoT and security markets has bottomed out but is only showing a sluggish recovery as continuing macro uncertainties affect consumer sentiment and corporate spending. Inventories have to come down further to enable a wider recovery. In the meantime, we continue to develop exciting new Edge AI solutions, like our DeepCraft Edge AI software. This new software solution includes the introduction of easily deployable off-the-shelf AI models for sound, gesture, surface and fall detection. This software is tailored to our hardware offering and will provide customers with a wide range of new Edge AI and machine learning models and solutions. Now over to Sven, who will present our key financial figures.