(Image courtesy of Infineon Technologies).

Infineon Cuts Sales Forecast as Semiconductor Demand Stalls

March 28, 2019
Infineon Cuts Sales Forecast as Semiconductor Demand Stalls

Infineon Technologies, the world's largest supplier of power semiconductors, slashed its sales forecast for the 2019 fiscal year, adding to concerns that the chip industry's current slowdown is far from over. The company blamed weaker-than-expected demand for power devices used in automobiles, factories and other applications. Infineon warned that its growth in the second half of 2019 would be slower than it projected last year.

The company's annual growth is expected to slow from 9 percent in 2018 to 1.5 percent in 2019. Infineon said its annual sales would increase to $9.2 billion this year, plus or minus 2 percent, up from around $9.05 billion in 2018. The lower end of that range would be a slight decline in revenue year over year. Infineon, tapping into the shift to battery-powered cars and electric motors in factories, initally projected 2019 sales in the range of $9.9 billion to $10.1 billion.

The company blamed its ongoing struggles on "macroeconomic woes." Infineon said a slowdown in global car sales, particularly in China, posed one of the biggest threats to its revenue growth. In addition, Infineon's distributors are holding onto its products, specifically power management chips that had been strong sellers in China, for a longer period of time. Other companies, including Texas Instruments and Intel, are also struggling with declining sales in China.

Infineon's adjustment points to a longer-than-expected slowdown in the chip industry. Some companies, including Micron Technology, have said in recent months that they see semiconductor sales turning around in the second half of 2019. Infineon is not so sure: "Despite a continued strong structural growth, Infineon now expects a lower than normal seasonal revenue increase in the second half of the 2019 fiscal year," the company said in a statement.

Infineon said that sales of industrial and automotive chips will grow slightly faster—and its power management and multimarket revenue slightly slower—than the company overall. Infineon plans to boost chip production in areas where its supply still falls short of demand, like the electric vehicle market. The company said it would reduce its output of other types of chips, resulting in increased costs due to having unused factory equipment.

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