IN A semiconductor industry that’s been struggling with an oversupply of chips and weak demand, Infineon Technologies navigated its way through the turbulence and offered some hope for the future. At least for now.
The German company’s cautious guidance on Tuesday (Feb 4) – that a favourable exchange rate and market share growth in China might lead to a slight uptick in revenue this year rather than a decline – sent shares surging the most in nine months. Expectations were low after a series of disappointing results from competitors. Dutch chipmaker NXP Semiconductors, Franco-Italian rival STMicroelectronics and the US’s Texas Instruments all missed analysts’ estimates as the industry slump drags on into its second year.
Infineon’s forecast, however, does not include any impact from a potential trade war. US President Donald Trump has threatened Mexico, Canada and China with tariffs that could impact automotive and electronics, the primary revenue sources for Infineon’s part of the chips industry. Extra charges on goods moving between the trading partners may make electric vehicles (EVs) more expensive and depress sales. They could also encourage electronics manufacturers in China to reduce inventory levels, according to Bloomberg Intelligence analyst Ken Hui.
Infineon chief financial officer Sven Schneider said he’s going into 2025 as an optimist. “To be very clear, a major escalation of tariffs is not included in our guidance,” Schneider said on Tuesday. “Because we are still not giving up and advocating for free trade. An escalation of tariffs and counter-tariffs would be a negative.”
NXP, which reported its financial results late on Monday and forecast a 10 per cent revenue decline for the first quarter from a year ago, also did not include a potential trade war in its outlook. Chief executive officer Kurt Sievers said on a call with analysts: “There are so many unknowns, that we could only get it wrong”.
STMicro’s results came before Trump’s formal announcement of sweeping tariffs on the three countries, which are the largest sources of US imports. Still, the company backed off on its usual full-year forecast, giving an outlook for a single quarter and citing a delayed recovery from its industrial and automotive customers.
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Texas Instruments also disappointed investors last week, sending shares down the most in almost five years, after higher manufacturing costs and sluggish demand contributed to a lower-than-expected profit forecast. The US-based chipmaker has recorded nine consecutive quarters of sales declines.
Customers stockpiled the mature chips for cars, smartphones and power solutions the companies produce after a pressing shortage during the Coronavirus pandemic. However, consumer demand faded unexpectedly – especially for EVs that make up their biggest market – leaving extra inventory and depressing sales.
The semiconductor industry has long been a part of the ongoing trade war between the US and China, starting in Trump’s first administration and continued by Biden. The US has increasingly restricted sales of high-tech chips and the machines that produce them in an attempt to hobble Chinese technology development.
Last month, Bloomberg News reported that China will investigate allegations that the US dumps lower-end chips and unfairly subsidises its own chipmakers, in potentially one of Beijing’s strongest retaliatory moves against US sanctions on its tech industry.
China, where EV sales remain robust, has been a bright spot for many of the companies. Infineon said revenue rose in the first quarter from a year earlier in greater China, which includes Taiwan, the company’s largest source of sales and one of the few markets that’s growing.
NXP also profited, with CEO Sievers saying the region grew by 4 per cent in 2024, while the overall business shrank by 5 per cent. He expects this “natural growth” to continue.
While STMicro has lost some share in China in the micro controllers segment, the market remains crucial for CEO Jean-Marc Chery. He stressed last week in an analyst call that he was developing an “exhaustive strategy” to compete in this fastest-growing market for EVs. BLOOMBERG
