Chipmaker Infineon cuts its revenue guidance, blaming difficult markets

  • Infineon Technologies cut its forecast for full-year revenue growth on Tuesday to the bottom of its earlier range
  • The maker of high-performance power chips blamed "increasingly difficult" business conditions.
  • Like other chipmakers, the German company faces headwinds from an economic slowdown in China, while trade frictions between Washington and Beijing have also put pressure on auto markets to which it has heavy exposure.
An employee inspects a wafer at the Infineon Technologies AG microchip and sensor manufacturing facility in Regensburg, Germany. Shares of the company are up 15 percent in 2017.
Krisztian Bocsi | Bloomberg | Getty Images
An employee inspects a wafer at the Infineon Technologies AG microchip and sensor manufacturing facility in Regensburg, Germany. Shares of the company are up 15 percent in 2017.

Chipmaker Infineon Technologies cut its forecast for full-year revenue growth on Tuesday to the bottom of its earlier range, as the maker of high-performance power chips blamed "increasingly difficult" business conditions.

Like other chipmakers, the German company faces headwinds from an economic slowdown in China, while trade frictions between Washington and Beijing have also put pressure on auto markets to which it has heavy exposure.

Austrian sensor specialist AMS on Tuesday scrapped its 2018 dividend after a slide in operating profits in the fourth quarter, as the supplier to smartphone giant Apple cited weak demand from a major customer.

"So far we have been able to master the challenges of an increasingly difficult business environment well," Infineon CEO Reinhard Ploss said in a statement.

Shares in Infineon fell by up to 3 percent in pre-market trade but turned positive in early Frankfurt trade, rising 1.5 percent.

Infineon forecast that revenue growth in the year to Sept. 30 would come in at 9 percent, the bottom end of its earlier forecast range of 9 to 13 percent, with a margin of 17.5 percent, assuming a mean exchange rate of $1.15 to the euro.

Infineon expects its automotive division to outgrow the rest of the company on the back of a nascent boom in electric vehicles. Its chips manage powertrains, provide assistance to drivers and run luxury on-board features.

Its power management and multimarket division would grow in line with the group, while its underperforming digital security solutions business would suffer a percentage revenue loss in the low- to mid-single-digits, it said.

Munich-based Infineon said revenues shrank by 4 percent, quarter-on-quarter, to 1.97 billion euros ($2.3 billion) in the first quarter of its business year, versus a forecast of 1.96 billion euros in a Reuters poll of eight analysts.

It reported a segment result, a proxy for total operating profit, of 359 million euros and a margin of 18.2 percent, compared with 400 million euros in the prior quarter and mean expectations of 344 million euros.

For the second quarter Infineon said revenue would be flat with a segment margin, or average margin across its businesses, of 16 percent.

It said it will trim planned investments in manufacturing equipment by 100 million-200 million euros, but will press ahead with the construction of a 1.6 billion euro chip facility in the Austrian town of Villach.