Memory products push Infineon back into the black

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Infineon beat expectations for the second quarter on Tuesday, as strong sales in its memory products and automotive and industrial segments drove a recovery from four quarters of losses.

The German chipmaker reported strong prospects for the memory products business, which it plans to float as a separate company called Qimonda next month, but said combined revenues and profits in its two logic segments would decline in the third quarter.

“The second quarter results demonstrate that both the memory products business and the logic business are well-positioned to operate successfully as separate companies in the future,” said Dr Wolfgang Ziebart, Infineon’s chief executive.

Earnings before interest and tax swung from a €122m loss in the previous quarter to a profit of €28m in the three months to March, while net losses narrowed from €183m to €26m. Revenues rose 19 per cent from the preceding quarter to €1.99bn.

STMicroelectronics, Europe’s second largest chipmaker, also reported a return to quarterly profit this week, and forecast high single-digit growth in the semiconductor market.

The greatest surprise for Infineon was in the automotive, industrial and multimarket (AIM) segment, where operating profits grew 45 per cent from the previous quarter on strong demand for power semiconductors and security and chip-card products.

Sales of memory products grew 37 per cent to account for nearly half of total revenues, helped by higher shipments and pricing of the DDR2 chips, used in personal computers, that are slowly gaining ground over older generation technology.

However, Infineon said it expected flat revenues in the AIM division next quarter, and widening losses in its communications segment as surging demand for broadband access products slackens.

“Signs of operational improvement are becoming more visible at Infineon following a lengthy period of restructuring,” said Sean Murphy, analyst at Nomura, but he called the outlook disappointing and said more clarity on the Qimoda transaction was needed to change investor sentiment.

Infineon’s shares, which trade at discount to the sector due to its recent earnings performance, gained 1.5 per cent to €9.59 by mid-morning.

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