Infineon has managed to conclude a profitable quarter, but this does not mean the company is out of the woods now. EE Times explains which challenges the company has to master in the year ahead.
MUNICH, Germany; Infineon has managed to conclude a profitable quarter, but this does not mean the company is out of the woods now. EE Times explains which challenges the company has to master in the year ahead.
First, the company still has some way to go to improve its profitability. While the quarter was profitable and the result even surpassed most analysts' estimations, the figures for the entire FY 2009 still were written in solid red ink. A German saying is "A swallow does not yet make a summer" transferred to Infineon's situation this means that the company has yet to prove that its recovery is sustainable.
Second, the recovery in the automotive market stands on very weak legs. While CEO Peter Bauer already states that the recovery is here to stay, the automotive industry itself is not so sure: The large industry associations currently refrain from providing more than a very vague outlook the visibility is still very low, and in my opinion the crisis in this industry is by no means over. Also two other major markets for Infineon, industry automation and chip cards, are currently not the most robust ones.
Third, Infineon's product portfolio still has gaps which could serve as gateway for competitors. This holds true in particular in the wireless segment; potential customers who seek for across-the-board solutions that include WiFi or Bluetooth will have to turn for another vendor.
Fourth, the company's strong exposition to one vendor. According to analysts sales to Apple could amount to as much as 148 million (about $222 million) it would be a blow difficult to digest if Infineon would lose such a large customer. Rumors that this could be the case surface on a regular basis, albeit the company denies them.
Predictions are difficult, in particular if they refer to the future, a poet said. Nevertheless, it seems like Infineon has quite a long way to go towards its goal of sustainable profitability. While it does not seem impossible to reach that goal, against the background of the still weak market conditions it is not certain the company will make it.
Infineon CEO Peter Bauer knows the challenge. At the presentation of his company's figures, he used a comparison from the alpinist world. "We have arrived at the base camp. The top is in sight but there is still a hard time ahead", he said.
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