Infineon Tech AG

Good morning everyone and welcome to the conference call for Analysts and Investors for Infineon's 2025 Fiscal Second Results. Today's call will be hosted by Alexander Fultin, Executive Vice President, Finance, Treasury and Investor Relations at Infineon Technologies. As a reminder, this call is being recorded. This conference call contains four 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. 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 developments, financial conditions, performance, and strategy may therefore differ materially from what is discussed in this conference call today. Beyond disclosure requirements stipulated by law, Infineon does not take... and the obligation to update these forward-looking statements. At this time, it's my pleasure to hand over to Infineon. Please go ahead.

Good morning, ladies and gentlemen. This is Radio Infineon with the 100th broadcast of quarterly earnings in our corporate history. On the mics today, you have our CEO, Jochen Hanebeck, our CFO, Sven Schneider, and our CMO, Andreas Orschitz. Jochen and Sven will provide a comprehensive overview on the market situation and divisional performance, key financials, and our revised 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, infineon.com investor. There you will also find a recording of this conference call, including the slides, a copy of our express release, as well as our investor presentation. And now, Jochen, over to you.

Thank you, Alexander, and good morning, everyone. What a difference a quarter can make in terms of macro and geopolitical events shaping the environment in which we operate. Looking through these external factors for a moment, the underlying business dynamics are largely unfolding for us as predicted. We are past the cyclical trough with customers and distributors in most of our target markets in the process of ending their inventory corrections. Besides normalizing inventory levels, the other key ingredient needed for a cyclical recovery is end demand picking up. And it is here where the headwinds from tariffs are expected to come in. An impact on demand over the remaining course of our running fiscal year is likely, but nothing is yet visible in our order book. For Infineon, we therefore focus on managing what we can control, staying agile in the face of shorter market changes, and simultaneously work on innovation and structural improvements to optimally set up our company for continued future success. let's now look back at our march quarter which has been an inline one we recorded revenues of 3 billion 591 million euros five percent up compared to the previous quarter positive volume effects were partially offset by annual price declines as expected currency played a minor role the average actual us dollar euro exchange rate was 105 in comparison to 107 in the quarter before The segment result amounted to 601 million euros. The corresponding segment result margin of 16.7% is the same as in the prior quarter, which was supported by a compensation payment from a customer of a mid-double-digit million amount. We were thus able to compensate for the kicking in of annual price adjustments in a fairly robust way. Our order backlog at the end of March was standing at around 20 billion euros, constant quarter over quarter in spite of annual price adjustments and a significantly weaker US dollar at the end of Q2 compared to the end of Q1. Now to our divisional review beginning with automotive. In the second quarter of 2025 fiscal year, automotive achieved revenues of 1,858,000,000 euros. This reflects healthy sequential growth of 6% and confirms the underlying improvement of the inventory digestion by customers throughout the quarter. Please note that all reporting figures reflect the transfer of the Sense and Control business line from ATV to PSS as of January 1st, 2025. All comparisons provided are adjusted accordingly on a like-for-like basis. The segment result of ATV amounted to 385 million euros, corresponding to a segment result margin of 20.7%. This represents a sequential improvement driven by higher volumes and a favorable currency effect, which more than offset annual price adjustments and slightly increasing idle cost. We are very pleased to share the latest study from Tech Insights, which confirms once more the exceptionally strong traction of our automotive semiconductor business in the market. Based on numbers for 2024, we continue to be in the number one global automotive semiconductor provider, with a market share of 13.5%. We have improved our regional positions further and climbed to number one in Europe and number two in US. We also continue to hold the pole position in China as well as in Korea and the number two spot in Japan. Our market share in automotive MCUs has risen to 32%, bringing us even to the global number one position across the entire MCU market for all applications. Now to the present situation. While our recent business performance was slightly better than our initial expectation, the geopolitical environment has become significantly more volatile in recent weeks. Recently implemented US import tariffs are likely to create headwinds for global vehicle production. In response, market researcher S&P Global has recently lowered its forecast for this year to around 88 million units. Turning now to our recent achievements. We are pleased to share several notable milestones for the ATV business. For example, we won several slots with our Aurix and Traveo microcontroller franchise in one of the lead platforms of a European premium OEM. the lifetime of this platform lasts well into the 2030s more than half of all microcontroller sockets in the respective vehicles will be supplied by infineon resulting in an average content value of several hundred euros per car solely from our microcontroller solutions Another success includes the usage of our latest Aurex TC4 microcontroller as a safety companionship for the next generation of a leading autonomous driving platform. This high-performance processing unit requires an extraordinarily capable safety host. Together, they enable high-speed ADAS calculation and central compute operations in a secure and dependable way. Moreover, this design win also incorporates Infineon's automotive-grade OptiRec PMIC, providing a complete power management solution. Lastly, we are proud to highlight a significant milestone in battery management system. A leading Chinese EV manufacturer has selected our new 18-channel battery management system, marking the first design win for this next-generation solution. The setup from the previous 12-channel design enables more compact battery management systems, which is especially important for the upcoming 800-volt battery systems. This innovation sets a new industry benchmark for high-precision sensing and intelligent fast charging capabilities. Finally, on April 8th, we announced the signing of an agreement to acquire the automotive Ethernet business of Marvell for a purchase price of 2.5 billion US dollars. This strategic acquisition marks an important step in strengthening our market-leading microcontroller franchise, particularly in the context of zonal controllers laying the foundation for software-defined vehicles. Besides this, Ethernet will play a key role in other highly promising future application fields such as humanoid robots. The business to be acquired is experiencing strong growth, is highly profitable and will thus be accretive to ATV growth and gross margin upon integration. The transaction is subject to customer regulatory approvals and we expect closing to occur within the calendar year. Let's now move to in green industrial power. From the very low revenue level of the December quarter, GIP recorded the expected sequential growth. Revenues increased by 17% quarter over quarter to 397 million euros. All applications areas contributed to this growth, hinting at the anticipated gradual recovery of industrial markets setting in. That being said, the fact that GIP's revenue level is 15% below last year's is showing that such recovery has still a long way to go. The segment result of GIP came in at 38 million euros in the second quarter of our 2025 fiscal year, leaving the segment result margin at a depressed level of 10%. Essentially, annual price declines offset sequential volume increases, while underutilization charges remain a burden. From a cyclical perspective, industrial markets are at the early stage of a gradual recovery. Customer inventories are trending downwards, but have not yet normalized. Orders in the value chain are picking up slowly, but have yet to translate into broader demand for power semiconductors. Rising tariffs, whether threatened or enacted, are adding a layer of uncertainty. In this environment, pricing pressures are persisting, and particularly for standard power components in China. Therein, silicon carbide is seeing a dynamic evolution of prices, not least driven by declining substrate prices in a more and more commoditizing market where we benefit from our well-diversified supplier base. In addition, market participants apply forward pricing on the anticipated transition to 200 millimeters. As a consequence, pricing pressures will dampen market expansion in the near term. Therefore, we adjust our projection and now estimate a low annual growth rate for our fiscal 2025 silicon carbide revenues on group level before any tariff impact. Meanwhile, structural growth drivers are unabated. Globally rising power and efficiency requirements support demand for energy generation from renewables, as these are oftentimes the most economical sources. Related to this, continuous power infrastructure investments are driven, for example, by capacity extensions of key players in China and government initiatives in Europe. This affects area like transmission and distribution, energy storage systems or uninterruptible power supplies, not least to support AI data center build outs and also EV charging infrastructure. With our unrivaled offering of power solutions, we are applying a key role in these areas. Now to our power and sensor systems segment. PSS recorded revenues of 979 million euros in the March quarter essentially flat compared to the previous quarter. These numbers include the mentioned automotive sensor business line transfer from ATV to PSS. While we noted continued strong growth momentum for our power solutions for AI servers, most consumer-related applications saw the expected price downs. Revenue for smartphone components as well as for our sensor portfolio were flat quarter over quarter. The segment result of PSS decreased to 138 million euros, corresponding to a segment result margin of 14.1%. Please keep in mind that the previous quarter's numbers contained a compensation payment of a mid-double-digit million euro amount received from a customer. In other words, like for like, the underlying margin has slightly expanded sequentially. Looking at PSS target markets, we see that from a cyclical perspective, consumer computing and communication applications have left the trough behind. This is confirmed by business indicators such as rising short-term orders backlog building, low cancellation rates, and not normalized channel inventories. AI is poised to remain an engine of growth. The build-out of AI data centers and related infrastructure is continuing at a fast clip, and we see our business scaling up dynamically along the lines we had predicted. A key factor driving Infineon's success in this market is the unrivaled breadth and depth of our product offering. Instead of just focusing on individual power conversion steps, we are closely working together with the development teams of all top customers to realistically design and optimize the entire power flow from grid to core. By bringing together the best silicon, silicon carbide, and gallium nitride dies with leading-edge packaging technologies like chip embedding, we achieve superior power density, energy efficiency, and thermal performance. As an example, beyond power stages, we are now designed into the intermediate bus converters or IBCs of one of the platforms of a leading AI processor company. With our optimal six in a five by six millimeter dual side cooling package, we are setting a new industry benchmark fitting optimally into the constraint space of AI servers for accelerated compute. To complete the divisional review, let's take a look at a connected secure system. CSS recorded quarterly revenues of €356 million, representing a 3% increase compared to the December quarter. Driven by higher revenues and some structural effects, the segment result of CSS rose to €40 million, corresponding to a segment result margin of 11.2%. IoT and security markets remain close to the bottom as macroeconomic uncertainties continue to weigh on consumer sentiment and corporate spending. Against this backdrop, we continue to innovate and deliver cutting-edge products that lay the foundation for future growth. Executing on our development roadmap, we have further expanded our PSOC microcontroller portfolio. Following the successful launch of PSoC Control, we introduced PSoC MultiSense family. This new lineup enhances Infineon leading CapSense capacitive sensing technology by integrating proprietary inductive sensing as well as non-invasive liquid sensing solutions. These advancements provide developers with unparalleled flexibility to create advanced HMI and sensing applications, ranging from sleek metallic product designs with touch-on metal buttons to waterproof touch interfaces and innovative liquid sensing technologies. In addition, we are driving the adoption of AI-enabled application with a piece of Edge family. By integrating NVIDIA's TAO models into a comprehensive development ecosystem, including tools, libraries, and documentations, we enable developers to accelerate innovation and shorten time to market for Edge devices. This positions Infineon as a key player in the very dynamic Edge AI space. Sustainability continues to be a core focus for Infineon. And we are proud of the strides we are making in this area. With Sikora PayGreen, we are leading the way in sustainable payment technologies. This solution enables the production of fully recyclable dual interfaces, contactless payment card bodies that eliminate the need for an additional card antenna. Our innovation has been recognized by both customers and industry leaders, including MasterCard, which has added Infineon to its greener payments partnership. Now over to Sven, who will comment on our key financial figures.