Tuesday, June 17, 2008
[Originally for Sramana Mitra's site]
We have, over the past year, presented detailed valuation theses for various mobile chipset vendors namely Qualcomm, Texas Instruments, Broadcom, InterDigital, Marvell and STMicroelectronics. This matrix will not be complete without Infineon – the German Chipmaker.
Infineon shot to the spotlight in the wireless world as it was discovered to be at the heart of the sensational first generation iPhone. I also think that Infineon will continue to hold this socket in the 3G iPhone to be released on July 11th. I am betting that Infineon’s XMM6080 platform and its PMB8878 chip (formerly known as S-GOLD3H and now marketed as X-GOLD608) will be in Apple’s darling product that was announced amidst much fanfare and expectations recently.
While the iPhone has been Infineon’s public face around the world for the last year or so, its business interests are much broader spanning automotives, industrial applications, and memory among others. The company was founded in the summer of 1999 as a wholly owned spinoff of Siemens AG following the latter’s huge losses in the fiscal year 1998. Infineon Technologies AG was listed as an IPO on the Frankfurt and New York Stock Exchanges in 2000. Today, iSuppli ranks Infineon 10th in the list of worldwide semiconductor suppliers.
The company is broadly divided into three business segments –
Automotive, Industrial and multimarket segment designs, develops and manufactures and markets semiconductors and complete system solutions for automotive, industrial, security applications and customer-specific applications. The continuing demand for high power products for industrial applications, increased sales of energy efficient products and an increased demand for government ID applications are attributed as growth drivers for this segment.
The Communication segment offers a range of ICs, other than semiconductors and complete system solutions for wireline and wireless communication applications. Wireless chipsets are a mainstay of this unit. Beaten up over the past two years by the insolvency of BenQ’s German subsidiary, the company is trying to recoup by building its IP and product base mainly through acquisitions. Besides Apple, Infineon phone platform customers include ZTE, Panasonic and LG.
Qimonda was legally separated from Infineon in May 1, 2006 into a stand-alone company manufacturing memory products. This segment has been Infineon’s Achilles’ heel from the day one. In fact, Infineon’s inception was forced because memory price erosion led to a $674 million pre-tax loss posted by Siemens Semiconductor in 1998. Even in 2007, a drastic 29% decrease in DRAM prices hurt Infineon’s prospects. The German chipmaker, realizing this bottleneck is starting to dilute its ownership in Qimonda.
With this brief overview of the company, we will look at the company’s financials, business segments, strategy and valuation in the sequels.