Infineon shares slump on Q4 warning, eyes Malaysia expansion

BERLIN (Reuters) - Shares of German chipmaker Infineon tumbled 10% on Thursday after it forecast fourth-quarter revenue would come in below market expectations, weighed down by weak demand from makers of personal computers and smartphones.

While demand for chips used in computers and smartphones has weakened following the pandemic-era, work-from-home boost, chipmakers are investing in factories to prepare themselves for stronger demand from automakers and other industries.

Infineon forecast revenue of around 4 billion euros ($4.37 billion) in the fourth quarter, below expectations of 4.14 billion euros, according to IBES data from Refinitiv.

A slowdown in sales of phones and computers have hit chipmakers ranging from AMD to Qualcomm, and IT research firm Gartner has estimated that shipments will fall for the second straight year in 2023, with phone shipments slumping to a decade low.

However, there have been early signs that the decline is stabilising.

Infineon's inventory has risen to 151 days, which is 24% above normal seasonal levels, JPMorgan analysts wrote in a note. "This though better than companies in the PC, smartphone markets is still worse than Infineon has ever reported in the last 20 years."

Infineon, which gets a large part of its sales from makers of electric cars and solar systems, has seen high demand from that market.

"Semiconductor market trends continue to present a mixed picture with both light and shade," said Chief Executive Jochen Hanebeck.

The company, however, confirmed its revenue outlook of around 16.2 billion euros, which it had raised in May.

Infineon's third-quarter adjusted result was down 10% from the previous quarter at 1.067 billion euros, while its margin came in slightly lower than expected, at 26.1%.

MALAYSIA FACTORY

Infineon said it will invest 5 billion euros over the next five years to build a power chip plant in Malaysia, on top of the 2 billion euros investment it had planned last year.

Infineon's expanded Malaysia plant, which will be one of the world's largest factory for silicon carbide power chips, will generate annual revenue of 7 billion euros, together with its plant in Villach, Austria.

Customers such as Ford, China's Cherry and SAIC have already lined up for sales from the Kulim factory in Malaysia, with commitments covering about 5 billion euros and 1 billion euros in pre-payments, said Infineon.

The maker of chips used in cars and data centres has also started work on a 5-billion-euro semiconductor plant in the German city of Dresden due to start production in 2026.

For the full year, Infineon expects investments amounting to approximately 3 billion euros.

($1 = 0.9149 euros)

(Reporting by Miranda Murray and Christina Amann, Editing by Friederike Heine, William Mallard and Kim Coghill)