Global automotive chip leader Infineon is once again in the spotlight.
According to the latest research by TechInsights, the global automotive semiconductor market is expected to grow by 16.5% in 2023, reaching a record $69.2 billion. Infineon’s total market share increased by one percentage point, from nearly 13% in 2022 to about 14% in 2023, solidifying the company’s leading position in the global automotive semiconductor market.
At the same time, Infineon has finally achieved an unmatched share in the automotive MCU sector, surpassing Japan’s Renesas, and has reached the top of the global MCU market for the first time. In their FY24Q1 earnings briefing, Infineon stated that over the past two years, customers placed more orders than they actually needed, with the biggest growth driver coming from automotive MCUs, even surpassing that of silicon carbide.
Traditionally low-key and perceived as quietly amassing wealth, Infineon is once again flexing its muscles. How did Infineon achieve this? Here, we will review Infineon’s performance over the past year and the changes in the related market.
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01
MCUs Selling Out, Automotive Chips Leading the Way
Today, Infineon is the world’s largest automotive chip manufacturer, firmly holding the top spot in both power semiconductors and automotive MCUs.
In 2023, Infineon’s revenue from power devices slightly decreased to 52%, while MCUs surged to 37%, with memory down to 5% and sensors down to 6%. Infineon’s automotive MCU sales increased by nearly 44% compared to the previous year, accounting for about 29% of the global market, and the company expects automotive MCU revenue to exceed 3 billion euros in the 2024 fiscal year.
Beating NXP, ST, and Renesas, why are Infineon’s MCUs and automotive semiconductors selling so well?
First, Infineon’s safe MCUs dominate the intelligent driving sector. Infineon claims that in the TriCore series MCUs, Infineon ranks second in market share for chassis applications related to braking and EPS, and first in occupant safety applications. The TriCore series MCUs are the elite of high-performance automotive MCUs, with most body domain, chassis domain, and power domain controllers on the market using the TC2xx and TC3xx series MCUs.
IHS previously disassembled the MCUs used in Audi’s luxury SUVs, finding that the power domain used two Infineon MCUs; in the chassis and safety domain, besides Renesas, NXP, Microchip, and TI’s MCUs, one Infineon MCU was also used.
As early as 2012, Infineon announced the delivery of its 100 millionth TriCore MCU, which has been selected by over fifty automotive brands, meaning that almost every two cars have one TriCore MCU. By 2022, the shipment of TriCore MCUs exceeded 1 billion units. It is rumored that Infineon’s latest TC4xx series MCUs will begin mass production in early 2024.
During the chip shortage period, an automotive MCU that usually costs $10-30 reached prices as high as 6000 RMB, making Infineon’s automotive chips the target of competition among major automakers. In early 2023, demand for Infineon’s automotive MCUs in the spot market surged again, with some models of the TC2xx and TC3xx series being in short supply, including SAK-TC233LP-32F200N AC, SAK-TC222S-16F133N AC, etc., with prices rebounding to the high levels of 2022.
Secondly, Infineon has a comprehensive layout of automotive products. According to Infineon’s estimates, the semiconductor value in each vehicle exceeds 800 euros (about 6000 RMB).
In 2022, the cost accounting for automotive semiconductors shows that Infineon covers over 40 different applications in new vehicles from Chinese automakers, spanning all areas: Advanced Driver Assistance Systems (ADAS), inverters, Battery Management Systems (BMS), standard safety and comfort systems, etc. It provides hundreds of different products, including over 20 microcontrollers (MCUs) and their software.
System Solutions (P2S) leverage comprehensive solutions that combine Infineon’s product advantages, such as motor control MCU + driver + MOSFETs; signal preprocessing + radar MCU. It can be said that the realization of various functions in vehicles relies on Infineon’s exclusive MCU packages, and its analog chip “supermarket” is strongly linked with MCUs.
In the power semiconductor field, Infineon leads the market by a wide margin, and the cost of power semiconductors in new energy vehicles is the highest among all semiconductors. Many Chinese new energy vehicle companies are customers of its silicon carbide products.
Infineon continues to expand its advantages in the automotive semiconductor field, all thanks to Infineon’s ability to simplify and maintain focus.
After spinning off from Siemens in 1999, Infineon has repeatedly streamlined its operations, divesting departments such as DRAM and wireless solutions. At the same time, it has continuously strengthened its layout depth, focusing on power semiconductors, 32-bit processors, and powertrain and safety/ADAS.
By acquiring International Rectifier (IR), it strengthened its market position in power semiconductors; acquiring GaN Systems solidified its standing in the power semiconductor field, and acquiring semiconductor giant Cypress enhanced its technical strength and market share in MCUs, power management chips, sensors, etc. Cypress focuses on body and infotainment, allowing Infineon to have a perfect 32-bit microcontroller product portfolio.
In 2020, Infineon became one of the world’s top ten semiconductor companies, and since then, its four major business units have formed, namely Automotive (ATV), Industrial Power Control (IPC), Power and Sensor Systems (PSS), and Connected Secure Systems (CSS). Infineon’s latest FY2024Q1 financial report shows that its automotive business (ATV) accounts for as much as 65% of revenue, more than all other businesses combined.
02
Weak Demand in the Chip Spot Market
Looking Forward to the Chinese Market
Infineon’s automotive chip market remains relatively resilient, with the company quietly amassing wealth in recent years. From 2020 to 2023, Infineon has led the global automotive semiconductor manufacturers in revenue.
Company financial reports, units: 100 million USD, euros converted at an average exchange rate of 1.0845, yen converted at an average exchange rate of 140. Source: ZuoSi Automotive Research
Infineon is positioned at the forefront of global electrification and the rising penetration of new energy. Since the 2016 fiscal year, Infineon’s revenue has maintained high growth. From 2021 to 2023, Infineon’s revenue has jumped significantly, surpassing 11 billion euros for the first time in the 2021 fiscal year, a year-on-year growth of 29%. In the 2022 fiscal year, revenue reached 14.218 billion euros, also a year-on-year growth of 29%. In the 2023 fiscal year, Infineon set new records for revenue and profit, with revenue growing by 15% year-on-year and profit growing by 30% year-on-year.
Source: Infineon FY2024Q1 Investor Report
In 2023, Infineon’s automotive business accounted for 56%, leading NXP (56%), ST (41%), and TI (25% in 2022). NXP expects automotive business growth in 2024 to not exceed 5%, while Infineon expects a slight increase of over 10%. TI saw a decline in industrial-related demand for three consecutive quarters in Q4 2023, and automotive demand has just begun to shrink.
Infineon’s growth momentum in the automotive sector remains strong. Research agency TechInsights observed that Infineon maintains the top position with nearly 14% market share, and its automotive semiconductor revenue grew over 26% year-on-year, expanding its lead over the second and third competitors by 4 percentage points.
If Infineon’s advantage in automotive semiconductors is attributed to its technological accumulation and innovation capabilities, then the biggest growth driver in the future will come from China.
Infineon sees strong demand in the Chinese market, with one-third of electric vehicle revenue coming from China. In the 2022 fiscal year, Infineon’s automotive business (ATV) sales in China grew by 35% year-on-year, and in the 2023 fiscal year, it grew by 20% year-on-year.
Source: Infineon FY2024Q1 Investor Report
With a broad customer base and product layout in the electric vehicle sector, although the sentiment in Western countries is currently weak, China remains the largest electric vehicle market, continuing to lead. According to data from the National Bureau of Statistics, in March 2024, China’s automotive production reached 2.608 million units, a year-on-year growth of 11.2%, achieving the highest production and sales since 2019.
Demand for electric mobility in China is very strong. Infineon expects the automotive sector to resume growth after inventory digestion in H2 2024, driven by two factors: electric mobility and microcontrollers.
03
Conclusion
With power semiconductors, MCUs, sensors… Infineon holds multiple automotive semiconductor trump cards and is experiencing a positive trend, but the environment in which Infineon operates is full of challenges. Infineon expects revenue growth to slow slightly in the 2024 fiscal year.
The global electric vehicle market is slowing down, and as automotive chips are no longer in widespread shortage, the heat of terminal demand is dissipating in various aspects. In such a complex environment, the challenges for the spot market will be even greater. Even Infineon’s largest distributor in the automotive sector in Greater China, Yinheng Technology, has seen a decline in both revenue and profit growth in 2023, indicating intense competition among different brands and schemes, as well as the impact of the upstream integration of the supply chain.
Chip manufacturers must closely monitor the trends and changes in the automotive industry, and adapt to market environment changes by expanding customer bases and diversifying product lines. Infineon’s chip market will be redefined and reassessed.
