Stefan Mileschin

Hurting profit margins

German chipmaker Infineon said that a slump in demand had led to an inventory pile-up that would only plateau this summer, keeping the pressure on profit margins.

Infineon makes high-performance power chips used in everything from cars to server farms and smartphones and has been hit by a China-led slowdown to lower its revenue guidance twice already this year.

CEO Reinhard Ploss stood by his view that sales would rise five percent to 8 billion euro in the year to 30 September as Infineon reported flat sequential sales in the second quarter and said margins had held up better than expected.

Ploss said he expected inventories to peak in the summer. “But at the end of the year, we still assume a high level of inventories compared to our target inventory level”, he told analysts in a conference call.

Automotive accounts for more than two-fifths of Infineon’s top line and here, weakness in China - the world’s largest car market - continued through the three months to March even if the pace of its contraction slowed.

Infineon is basing its forecasts for fiscal 2019 on an expected low- to mid- single digit percentage decline in unit car production.

Semiconductor companies have scaled back their expectations of a rebound in demand, leaving market valuations looking stretched after a steep rally in technology stocks this year.

https://fudzilla.com/news/pc-hardwar...cked-inventory