February 5, 2019 / 8:19 AM / 6 months ago

UPDATE 3-Chipmaker Infineon cuts revenue guidance blaming difficult markets

* Revenue growth now seen at 9 pct in 2018/19

* CEO cites "increasingly difficult" conditions

* Predicts recovery from April-June quarter

* To trim investments; new Austrian plant to go ahead (Adds management comments on outlook, demand, inventory)

By Douglas Busvine

FRANKFURT, Feb 5 (Reuters) - Chipmaker Infineon Technologies cut its forecast for full-year revenue growth on Tuesday to the bottom of its earlier range, blaming difficult markets, but expects a better second half as demand rebounds and inventories are worked off.

Infineon is a leading maker of high-performance power chips used in cars, server farms, smartphones and wind turbines. Its products also help drivers avoid accidents and run on-board features in luxury vehicles.

Trimming his forecast for revenue growth in the current year to September to 9 percent, CEO Reinhard Ploss said Infineon faced weakness in its automotive markets, datacentre servers and in phones.

He forecast a difficult second quarter with flat revenue after the top line declined by 4 percent, quarter-on-quarter, in the three months to Dec. 31.

But demand should then recover, helping to reduce a buildup in inventories in the supply chain.

"This gives us confidence that we will return to a growth path in the second half, despite reduced visibility," Ploss told analysts on a conference call.

Like other chipmakers, the German company faces headwinds from an economic slowdown in China, while trade frictions between Washington and Beijing have also put pressure on auto markets to which it has heavy exposure.

Austrian sensor specialist AMS on Tuesday scrapped its 2018 dividend after a slide in operating profits in the fourth quarter, the Apple supplier citing weak demand from a major customer. Its shares fell more than 10 percent.

Munich-based Infineon said revenues shrank by 4 percent, quarter-on-quarter, to 1.97 billion euros ($2.3 billion) in the first quarter of its business year, just above the mean forecast in a Reuters poll of eight analysts.

It reported a segment result, a proxy for total operating profit, of 359 million euros and a margin of 18.2 percent, compared with 400 million euros in the prior quarter and mean expectations of 344 million euros.

It said its book-to-bill ratio, an indicator of how healthy orders are, fell to 1.1 times in the first quarter from 1.5 in the prior quarter.

BEATING THE INDUSTRY

Shares in Infineon moved into positive territory as analysts highlighted the company's relative outperformance on sales and promising outlook as electric car production increases.

Even though Infineon is now guiding for revenues to grow at the lower end of an earlier range of 9 to 13 percent, that still puts it in line with its long-term average and ahead of the global semiconductor market's historic growth rate of 6 percent.

In its mainstay automotive division that accounts for more than two-fifths of revenues, the first annual decline in Chinese car sales for two decades acted as a drag, executives said.

But, they added, the division would outgrow the rest of the company this year even if the global car market posts subdued growth of 1 percent in unit sales this year.

This is because Infineon products used in battery-powered vehicles, assisted driving and connected cars will profit from rapid growth in new-energy vehicles, especially in China and Europe as regulators tighten up on vehicle emissions.

"We can live with very subdued car unit growth in 2019," said CFO Dominik Asam.

Infineon said its power management and multimarket division would grow in line with the group, while its underperforming digital security solutions business would suffer a percentage revenue loss in the low- to mid-single-digits.

It said it will trim planned investments in manufacturing equipment by 100 million-200 million euros, but will press ahead with the construction of a 1.6 billion euro chip facility in the Austrian town of Villach. ($1 = 0.8748 euros)

Reporting by Douglas Busvine; editing by Thomas Seythal/Jason Neely/Susan Fenton

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