The e-car revolution may be proving a challenge for Germany’s diesel-besotted automakers, but for another quietly booming industry it’s more than welcome. Chipmakers have never had it so good, especially Germany’s leading manufacturer Infineon.
The company, a leading global player, makes so-called performance semiconductors. These are used in many areas of carmaking, but play a much more important role in electric cars and charging systems than in conventional vehicles.
As a result, the switch to e-cars is set to spark a huge increase in sales. The market research firm Strategy Analytics has calculated that a combustion engine vehicle uses performance semiconductors worth $17, but an electric car $455 worth. That’s a massive 26-fold increase. Hybrids come in at around $300.
“Our performance semiconductors are in eight out of the ten biggest-selling electric cars and plug-in hybrids around the world,” Peter Schiefer, the head of Infineon’s automotive division, told Handelsblatt.
Infineon and beyond
The company supplies almost all the world’s carmakers, including Tesla. It sold performance semiconductors worth €2.4 billion ($2.7 billion) last year, making up a third of group revenue. Infineon has a market share of 26 percent, which it says gives it market leadership in the segment. It’s followed by ST Microelectronics in second place and Bosch in third.
Performance semiconductors are also used in solar and wind power plants. Infineon expects these renewable power sources to continue growing, not least because it makes no sense to switch to electric cars if the power that feeds them comes from coal-fired plants.
“People are increasingly aware that an electric car is only particularly environmentally friendly if it is run on regenerative power,” said Mr. Schiefer.
Infineon is also poised to benefit from the expansion in e-car charging points, the most modern of which use performance semiconductors worth $3,500. Even a simple charging system with two connections requires chips worth $40, Infineon has estimated.
Experts at Aurora Energy Research predict that up to 4 million charging points will be built in commercial and industrial sites in Germany in the coming 20 years, with investment totaling between €3 billion and €8 billion.
Infineon is preparing for the expected surge in demand by building a new chip factory in Villach, Austria. Construction starts next month and the company expects to invest €1.6 billion in it by 2025. The factory is projected to generate some €1.8 billion in revenue per year. Existing performance semiconductor plants in Dresden and Kulim, Malaysia, are also being expanded.
Infineon recorded 7 percent growth in the fiscal year that ended on 30 September, and CEO Reinhard Ploss has promised investors 10 percent growth in the year that’s just started. Operating earnings are expected to be about 17 percent.
However, Infineon’s share price has fallen by some 20 percent since the start of the year, with investors fearing that the overall chip market will decline in the coming quarters.
Analysts are not so spooked. “The structural driving forces remain intact and the short-term fears are exaggerated,” said Jerome Ramel of Exane BNP Paribas. And Sebastien Sztabowicz, an analyst at Kepler Cheuvreux, said that Infineon’s outlook for the coming year was bright.
Joachim Hofer covers the sports, leisure and IT sectors for Handelsblatt. To contact the author: firstname.lastname@example.org