INFINEON TECHNOLOGIES, Europe’s second-biggest semiconductor maker, will reduce spending to cope with slowing chip demand that’s pulling down its sales and profit.
The shares rose the most in almost a year. The company will cut investment in the year starting October 1st to about €500 million, Reinhard Ploss, Infineon’s designated chief executive officer, said yesterday on a conference call.
Based in Neubiberg, Germany, Infineon is investing about €900 million this fiscal year. The company said in a statement it also suspended staff increases as of this month.
Infineon has more than enough capacity to meet current demand, said Niels de Zwart, an analyst at ING Groep in Amsterdam. That gives some leeway for Mr Ploss, who is set to take over from Peter Bauer on October 1st, to try to improve margins even as customers scale back orders amid a slowing global economy.
“It’s positive that they’re adapting their model to the current growth environment,” said Mr De Zwart, who recommends investors buy the stock. “They have enough capacity to cater to their needs in 2013 and still have enough flexibility to raise investments if demand turns out to be stronger than expected.” Infineon advanced as much as 8.7 per cent to €6.04, the biggest intraday gain since August 11th.
The shares gained 7.9 per cent yesterday. They had lost 20 per cent in the past year through yesterday. The spending cuts will mean trimming capacity expansion rather than delaying development of technologies such as 300mm wafers, Mr Ploss said.
Investments in development and production allow Infineon to bring out new types of chips that replace mechanical parts in cars, manage power in home appliances and wind turbines, and secure passports and contactless payment cards. The investment reduction will be partly offset by expected larger depreciation and amortisation on assets, Infineon said. Sales this quarter will be “flat to down slightly” from the period ended June 30th, the company said.
Operating profit in the third quarter fell to €126 million, Infineon said. Revenue fell 5 per cent from the year-earlier period to €990 million. – (Bloomberg)
