March 27, 2019 / 2:05 PM / 2 months ago

Infineon cuts sales forecast again on weak China car market

FRANKFURT (Reuters) - German chipmaker Infineon cut its 2019 revenue forecast on Wednesday for the second time in as many months, pointing to a weakening Chinese car market, the world’s largest, which it supplies.

A close-up of a the Infineon microcontroller kit XMC 4700 is pictured at an exhibition during the semiconductor manufacturer Infineon's annual shareholder meeting in Munich, Germany February 21, 2019. REUTERS/Andreas Gebert

The news came shortly after industrial firms in China, the world’s second-largest economy, posted their biggest slump in profits since late 2011 in the first two months of this year, hurt by trade tensions with the United States.

“Macroeconomic uncertainties are stretching out,” Infineon Chief Executive Reinhard Ploss told analysts, adding that the company would put in place a temporary headcount freeze by the end of June to get a handle on costs.

Infineon now expects sales of 8 billion euros ($9 billion) in the year to Sept. 30, plus or minus two percent. That would represent a year-on-year increase of 5.2 percent, down from a previous forecast of 9 percent.

Infineon’s shares fell as much as 8.6 percent to their lowest since Jan. 4 and closed down 5.2 percent. U.S. rivals also fell, with Texas Instruments and NXP Semiconductors both down more than 2 percent.

“A number of end markets continue to be sluggish; in particular, the trend of declining vehicle sales in China has accelerated in February, causing dealer inventories to increase sharply,” Infineon said.

CHINA WEAKNESS

The slowdown in China and a slump in sales of the Apple iPhone have rippled through semiconductor supply chains in recent months. Samsung Electronics on Tuesday also said first-quarter profit would likely miss market expectations.

Infineon, whose automotive division accounts for two-fifths of revenues, cut its revenue guidance in February, but at the time forecast a better second half.

With indicators of industrial activity, such as purchasing managers indexes, showing further weakness since, hopes for a ‘V-shaped’ recovery appear to be receding at the Munich-based company.

“Another semiconductor company to push out the date of the ‘hope’ recovery,” Mirabaud analysts wrote in a note.

At the mid-point of its guided revenue range, Infineon expects a segment margin - its measure of operating profitability - of 16 percent for this business year, down from 17.5 percent previously.

Revenues in the quarter to March 31 will be flat, quarter on quarter, in line with earlier expectations. But there will be a lower-than-expected revenue increase in the second half of the year, the company said.

Infineon, which last year decided to build a new chip making plant in Villach, Austria, said it would keep its investments at the projected level of around 1.5 billion euros to address supply bottlenecks in areas such as electro-mobility.

Editing by Tassilo Hummel/Mark Potter/Jane Merriman

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