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Infineon cuts sales forecast again on weak China outlook
Reuters | 2019/3/29

FRANKFURT -- German chipmaker Infineon cut its 2019 revenue forecast on Wednesday for the second time in as many months, pointing to a weakening Chinese light-vehicle market.

The news came shortly after industrial firms in China, the world's second-largest economy, posted their biggest slump in profits since late 2011 in the first two months of this year, hurt by trade tensions with the United States.

"Macroeconomic uncertainties are stretching out," Infineon CEO Reinhard Ploss told analysts, adding that the company would implement a temporary hiring freeze by the end of June to get a handle on costs.

Infineon now expects sales of 8 billion euros ($9 billion) in the fiscal year ending Sept. 30, plus or minus two percent. That would represent a year-on-year increase of 5.2 percent, down from a previous forecast of 9 percent.

"A number of end markets continue to be sluggish; in particular, the trend of declining vehicle sales in China has accelerated in February, causing dealer inventories to increase sharply," Infineon said.

China weakness
The slowdown in China and a slump in sales of the Apple iPhone have rippled through semiconductor supply chains in recent months. 
Samsung Electronics on Tuesday also said first-quarter profit would likely miss market expectations.

Infineon, whose automotive division accounts for two-fifths of revenues, cut its revenue guidance in February, but at the time forecast a better second half.

With indicators of industrial activity, such as purchasing managers indexes, showing further weakness since, hopes for a 'V-shaped' recovery appear to be receding at the Munich-based company.

"Another semiconductor company to push out the date of the 'hope' recovery," Mirabaud analysts wrote in a note.

At the mid-point of its guided revenue range, Infineon expects a segment margin -- its measure of operating profitability -- of 16 percent in the current fiscal year, down from 17.5 percent previously.

Revenues in the quarter ending March 31 will be flat, quarter on quarter, in line with earlier expectations. But there will be a lower-than-expected revenue increase in the second half of the year, the company said.

Infineon, which last year decided to build a new chip making plant in Villach, Austria, said it would keep its investments at the projected level of around 1.5 billion euros to address supply bottlenecks in areas such as electro-mobility.

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