Infineon Tech AG

Good morning everyone. Welcome to the conference call for analyst and investor for 2025 first fiscal quarter results of Infineon. Today's call will be hosted by Alexander Fulton, Executive Vice President, Finance and 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 expectation resting upon currently available information and present estimates. There are subject to a multitude of uncertainties and risks, many of which are partially and entirely beyond of Infineon's control. Infineon's actual business development, financial condition, performance, and strategy may therefore differ materially from what is discussed today in this conference call. Beyond disclosure requirements stipulated by law, Infineon does not undertake any obligation to update forward-looking statements. At this time, it's my pleasure to hand over to Infineon. Please go ahead.

Many thanks, operator, and good morning, ladies and gentlemen. Thank you for joining our first earnings call in 2025. On this call, you have our CEO, Jochen Arnebeck, our CFO, Sven Schneider, and our Chief Marketing Officer, Andreas Urschitz. Jochen and Sven will provide a comprehensive overview on the market situation and divisional performance, key financials, and our outlook. After that, we will start our Q&A session. As usual, the illustrating slideshow, which is synchronized with a 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. 2025 marks the 25th anniversary of Infineon as an independent stock listed company. During a quarter of a century, we have transformed our business towards the most attractive strategic opportunities. It has always been key to distinguish near-term, often cyclical market behavior from long-term structural patterns. The same applies today. At the beginning of the year, the cycle trough is dragging on. The rolling correction in many of our target markets such as automotive and industrial is continuing. A modest recovery is in the cards for the second half of our fiscal year as predicted in November. Near-term cyclical headwinds aside, secular trends provide us with undiminished growth opportunities. A case in point is the continuing and immense momentum we are seeing for our solutions for powering AI servers. Like in the past quarter of a century, while we manage the here and now, we simultaneously focus on innovation and structural improvements to successfully shape the future. Now let's take a closer look at the start of our 2025 fiscal year, where our revenue and margin numbers came in slightly ahead of expectations in the December quarter. Group revenues amounted to €3,424,000,000, while corresponding to a steep quarterly decline of 13%, revenues came in about €200,000,000 ahead of our prediction. About half of this was currency related as the actual US dollar exchange rate for the quarter was 107 compared to the assumed guidance rate of 110. We also noted a slightly better volume development than originally anticipated. The segment result came in at 573 million euros, equivalent to a segment result margin of 16.7%, reflecting the meaningful revenue contraction compared to the previous quarter and correspondingly high underutilization charges. Included in the margin is a one-time compensation payment from a customer of a mid-double-digit million amount. Our order backlog at the end of December was standing at around 20 billion euros, practically unchanged quarter over quarter, considering the stronger US dollar. Now let's take a closer look at our divisions, beginning with automotive. In the first quarter of 2025 fiscal year, the segment achieved revenues of €1,919,000,000. As expected, customers brought down their inventories significantly, compounding normal seasonal effects. Yet the quarter-over-quarter decline of 11% was a little lower than initially anticipated, even accounting for the stronger US dollar. In particular, our sales volume in China increased by 10% quarter-over-quarter, stronger than forecast. The segment result of ATV came in at €363 million, with a corresponding segment result margin of 18.9%, reflecting mainly the decline in sales under loading charges and some adverse mix effects. In the near term, inventory destocking across the automotive supply chain will remain the major drag on revenue development. Vehicle production numbers are forecast to stay flat in 2025 amid lingering tariff and trade uncertainties. Yet structural content growth is set to continue. Assisted and semi-autonomous driving features should keep proliferating at a healthy pace. The adoption of electric vehicles will continue to differ by region. In China, by far the world's largest and by now also the most innovative global XCV market, the extension of scrappage and trade-in policy schemes is expected to support strong, genuine customer demand. Conversely, the new U.S. administration will likely curb EV growth. Overall, we anticipate electric vehicles to grow globally at a mid-teens percentage rate, somewhat more cautious than market analysts like Standard & Poor's. With our unrivaled portfolio breadth and worldwide customer reach, we will continue to lead the global automotive semiconductor market from the pole position and nurture our structural growth drivers around e-mobility and software-defined vehicles. This is well received by our customers. For example, a key Chinese OEM recently increased its silicon carbide Molyneux orders significantly. Furthermore, we are happy to announce another major silicon-carbide design win at the German Tier 1 ZF, using our latest 1200V KULSIC IDPEC discrete devices with four dies per package. This unique product is an established form factor dedicated to high-current, high-power applications, allows the scalable integration into the next generation of traction inverters. We will be supplying ZF with a mid-triple-digit million-euro volume serving two premium OEMs. Looking at the silicon carbide market in general, Infineon was the fastest-growing major company in 2024, according to third-party market research, with revenues growing more than twice as fast as the market, leading to a market share of around 20%. The current market dynamics let us conclude that we will likely outgrow the other established silicon carbide players over the coming years. A key highlight for the quarter is the continuation of our excellent collaboration with the leading Chinese EV manufacturer BYD. We are proud to report new design wins ranging from zonal control units to steering applications. The design wins extend over multiple years and cover a wide range of Infineon products, including cutting-edge Optimus 7 power management ICs, TMR-based sensors, as well as microcontrollers comprising both the Aurex and Traveo family. Looking at other regions, we achieved new design wins for zonal control for a Japanese and for a French OEM for a total volume north of €300 million. Now moving to green industrial power. Coming from a revenue level of 500 million euros in the preceding quarter, GIP witnessed the anticipated steep decline in the December quarter. 340 million euros correspond to a sequential contraction by 32%. The persistently weak market momentum and the reduction of elevated supply chain inventories aggravated the usual seasonality, impacting all application areas. As a consequence of significantly lower volumes and unfavorable price changes, the segment result of GIP deteriorated to 34 million euros, reducing the segment result margin to 10%. The cyclical market weakness affecting industrial applications is continuing into 2025. Global PMI reading remains soft. Macro data points have yet to show signs of consistent improvement. The inventory depletion is progressing, its space being a function of end demand. Such end demand differs by application. For core industrial like factory automation as well as for major home appliances, it still needs to show a clear reversal. In renewables, underlying structural demand remains intact due to globally rising power and efficiency requirements. Solar and wind are the most economical ways of energy generation in many regions. On the energy infrastructure side, demand for items like transmission energy storage systems or uninterruptible power supplies is robust, driven among others by AI data center build-outs. Also, rail transportation is seeing continuous investments in infrastructure and electrification. Overall, we are expecting a gradual recovery to set in in the second half of 2025. With a cutting-edge offering of power solutions, we will fully benefit from an upswing. Now to power and sensor systems. PSS recorded revenues of 820 million euros and comparatively mild sequential decline of 5%. While consumer and smartphone-related businesses saw typical negative seasonality, our power solutions for AI servers are on an unabated strong trajectory. The segment result of PSS increased to 149 million euros, corresponding to a segment result margin of 18.2%. The aforementioned compensation payment we receive from a customer is included here, recorded as other operating income. Now to an organizational change. Effective 1st of January 2025, we have transferred our automotive sensor business line covering radar, magnetics, MEMS and others from ATV to PSS. Within PSS, it will be combined with the existing sensor and radio frequency or RF business. By combining our sensor and RF expertise in a dedicated unit, we are strengthening our focus on these promising product families while increasing competitiveness by leveraging R&D synergies to ultimately accelerate innovation to customer value. Our overall segment and reporting structure will not change. The annual revenue of the automotive sensor business line in fiscal year 24 was around 700 million euros, its segment result margin roughly in line with the ATV average. For modeling purposes, you find the quarterly revenue numbers in our press release. Looking at PSS target markets, we see that consumer computing and communication applications, which entered the long correction first, have now bottomed out, and some, like consumer electronics and battery power tools, are beginning to show first positive signals. For this quarter, inventory destocking will still be a headwind. The picture looks brighter for our industry-leading silicon microphones going into smartphones and accessories. In PCs, we expect traction from a refresh cycle kicking in this year. The by far strongest dynamic is in the area of power solutions for AI servers, a highly attractive structural growth trend. Addressing the entire power flow from grid to core with our unique product offering, we see our business scaling up very dynamically, and we are happy to firm up our near-term target once again. We will achieve around 600 million euros of AI-related revenue in this fiscal year, and as said before, we will cross the €1 million revenue line within the next two years. To complete the divisional review, let's take a look at connected secure systems. Segment recorded quarterly revenues of €344 million, down 15% from the September quarter. Most application areas saw sequential declines, reflecting the ongoing weakness in consumer and IoT markets. Driven by lower revenue, the segment result of CSS went down to €30 million, corresponding to a segment result margin of 8.7%. IoT and security markets are currently trending around the bottom. as macro uncertainties continue to affect consumer sentiment and corporate spending. That said, inventories are normalizing and booking patterns show initial positive signals, albeit on a still low level. This supports our view of a modest recovery in the second half of 2025. We are preparing for future growth with continuous innovation. With PISO Control, we have launched a new family of industrial microcontrollers, enabling highly efficient and secure motor control and power conversion systems. Such systems are found in a diverse range of applications like home appliances, industrial drives, robots, light electric vehicles, or solar appliances. As more and more wide bandgap power components are adopted in these applications, faster control loops are required to improve performance and system efficiency. Furthermore, security is becoming increasingly important as a key enabler. Infineon has achieved a milestone on the way to a quantum resilient world in collaboration with the German Federal Office for Information Security. We are the first company ever to receive the common criteria EL6, an industry-leading certification level for the implementation of a post-quantum cryptography algorithm in a security controller. Such cryptography enhances security for eSIM, 5G SIM and smart card applications, including personal IDs, payment cards and eHealth cards. Now over to Sven, who will present our key financial figures.