2023-04-19 09:13:48 ET
Summary
- Infineon is the market leader (12.7% share) of the automotive semicon market and is the only company to have a strong presence in the top 3 automotive semicon submarkets.
- Among the top 5 players in the automotive semicon market, it is the only chipmaker based in Germany (the largest automotive market in Europe).
- As a result, we believe the company stands to benefit from the larger European market.
In this analysis of Infineon Technologies AG ( OTCQX:IFNNY ), we focused on the company's dominant position in the automotive semiconductor market. We conducted an in-depth examination of its revenue contribution across product categories, comparing it with market trends. Furthermore, we analyzed Infineon's market share in key product segments such as MCU, power, sensors, and memory. Lastly, we assessed the potential advantage of serving its European customer base by comparing Infineon with top automakers and their regions of origin.
Automotive Revenue is Largely Contributed by Power and MCU
Infineon
Based on the company’s presentation , its Automotive segment comprises four product groups which are power semicon, MCUs, sensors and memory ICs. The chart shows the power semicon segment as the largest among the product groups accounting for around half of the Automotive segment revenue. Whereas MCUs follow power semiconductors as the company’s second largest segment. Following that, its memory ICs and sensors are its next largest product groups.
Company Data, Research Reports, Khaveen Investments
In comparison, we compiled the market sizes of the automotive memory, MCU, power semicon and sensors to obtain the market breakdown for the automotive semicon market. Based on the chart, the power semicon market is the largest market accounting for 58% of the automotive semicon market. Thus, Infineon’s market breakdown, where power semicon is the largest contributor to revenue, is in line with the automotive market.
Furthermore, the second largest contributor is the automotive sensors at 27.6% of the total revenue. Though, Infineon’s second largest segment is MCU which is the third largest segment of the total automotive market at 8.9%. The last is the automotive memory market contribution which is only 5.4%, Infineon’s contribution from its memory ICs segment is also low.
Solid Automotive Semicon Leadership
Gartner, Khaveen Investments
Based on the market share chart of the automotive semicon market, the company is the leading automotive semicon supplier with a 12.7% share. This is followed by NXP at 11.8%, which makes it second behind Infineon. In third, Renesas has an 8.4% share followed by Texas Instruments and STMicro as the fourth and fifth largest companies.
Automotive Sensors | 2018 | 2019 | 2020 | 2021 |
Bosch | 16.4% | 14.1% | 22.2% | 21.4% |
Infineon | 13.4% | 13.5% | 15.5% | 14.1% |
ON Semi ( ON ) | 8.3% | 8.0% | 10.0% | 10.6% |
Analog Devices ( ADI ) | 8.0% | 7.0% | 8.6% | 9.0% |
Melexis (MLXSF) | 7.6% | 6.7% | 7.3% | 8.6% |
Source: Infineon, Strategy Analytics, Khaveen Investments
In terms of market share by specific product groups, the table above shows the shares of the automotive sensor market from 2018 to 2021. Based on the table, Infineon’s share had increased slightly from 2018 to 2021 but remains second to market leader Bosch which had strengthened its market share in 2018. That said, other smaller competitors had also increased their share over the period.
Automotive Power | 2018 | 2019 | 2020 | 2021 |
Infineon | 26.2% | 25.5% | 30.2% | 31.7% |
STMicro ( STM ) | 13.2% | 13.9% | 16.3% | 16.2% |
Texas Instruments ( TXN ) | 9.2% | 9.1% | 10.3% | 10.8% |
ON Semi | 8.2% | 8.2% | 7.1% | 8.0% |
Rohm ( OTCPK:ROHCF ) | 5.4% | 5.4% | 5.9% | 6.0% |
Source: Infineon, Strategy Analytics, Khaveen Investments
In automotive power, Infineon is the undisputed leader with a 31.7% share. This is followed by STMicro at 16.2% and TI at third with a 10.8% share. Over the period, Infineon increased its market share and remained the clear leader of this product group.
Automotive MCU | 2018 | 2019 | 2020 | 2021 |
Renesas ( OTCPK:RNECF ) | 28% | 27.20% | 26.70% | 28.60% |
NXP ( NXPI ) | 28% | 27% | 26.30% | 24.90% |
Infineon | 9.10% | 16.20% | 16.90% | 21.90% |
Texas Instruments | 9.90% | 9.80% | 9.80% | 7.50% |
Microchip ( MCHP ) | 6.30% | 6.60% | 6.90% | 7.40% |
Others | 18.70% | 13.20% | 13.40% | 9.70% |
Total | 100.00% | 100.00% | 100.00% | 100.00% |
Source: Gartner, Khaveen Investments
In the automotive MCU market, Infineon had been gaining market share from 9.1% in 2018 to 21.9% in 2021. Its position has risen from number 5 to the third largest automotive MCU supplier. On the other hand, Renesas continued to maintain its spot as the market leader with a 28.6% share in 2021. This is followed by NXP which has seen its market share consistently decline from 28% to 24.9% in 2021.
Additionally, in the memory market, the company claimed to be the “undisputed leader in the NOR Flash market”. That said, the memory automotive market is the smallest, only contributing around 5% of the automotive market.
Overall, Infineon is the only company to have a substantial presence in the top 3 automotive markets, which are the MCU, Sensor and Power semicon markets. Another major reason that explains why Infineon is the number one player in the automotive semiconductor market is the 31.7% market share in the power semicon market which makes up 58.1% of the total automotive semiconductor market.
Infineon
The picture above shows the product range that Infineon possesses across key automotive semiconductor market segments. The wide variety of products within the Power semiconductor segment is another indicator of their 31.7% market share within the segment.
Benefit From Large European Market
In our previous analysis of Infineon, we highlighted the acquisition of Cypress in 2019 which boosted its market share and its position to claim market leadership. Moreover, we compiled the market share of the top 20 automakers by region. Toyota ( TM ) is the largest automaker in the world followed by Volkswagen ( OTCPK:VWAGY ) and Stellantis ( STLA ). Further, SAIC and General Motors ( GM ) are included in the top 5.
Country | Share % |
Japan | 22.4% |
China | 20.4% |
Germany | 16.0% |
United States | 12.8% |
Other Europe | 9.3% |
Source: Company Data, Khaveen Investments
The table above shows the share of sales by region, Japan holds the lead in terms of the market share at 22.4%, followed by China at 20.4% and Germany at 16%. But when the German market is included with other European automakers, the market share comes up to 25.3%, which is higher than Japan and China. Additionally, the US has the lowest market share at 12.8%.
Infineon
As a chipmaker based in Germany, we believe the company benefits from the large automaker customers’ share of sales in addition to other European countries. Additionally, based on the list of 160 company locations, the majority of its locations are located spread across Europe as well as in the US and Asia. We believe that one factor for Infineon’s market share leadership is attributed to it being the only chipmaker based in Germany which is the largest market in Europe instead of STMicro (Switzerland) and NXP (Netherlands) and Europe as a whole is larger than the US and Japan, providing it an advantage over TI and Renesas.
Risk: Stagnant Automotive Sales
We believe one of the risks for the company is the stagnant growth of the automotive market sales. Based on the table below, the average unit sales growth of the automotive market is only 0.3% in the past 6 years.
Total Automaker Sales by Units | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Average |
Total Market | 86,430,000 | 86,010,000 | 88,000,000 | 73,000,000 | 80,908,600 | 79,400,000 | |
Growth Rate % | 2.6% | -0.5% | 2.3% | -17.0% | 10.8% | -1.9% | 0.3% |
Source: Jato , Khaveen Investments
Verdict
Khaveen Investments
Infineon's Automotive segment encompasses four key product groups, including power semiconductors, MCUs, sensors, and memory ICs. Power semiconductors contribute to approximately half of the Automotive segment's revenue, followed by MCUs, sensors, and memory ICs. Notably, the power semiconductor market represents the largest share of the overall automotive semiconductor market, accounting for 58% of it. Infineon's strong presence as a leading player in the MCU, sensor, and power semiconductor markets provides a competitive advantage.
However, the company's revenue from the automotive memory market is relatively low. As a chipmaker based in Germany, Infineon benefits from a significant share of sales from large automaker customers and other European countries. Our updated valuation, using a discounted cash flow ('DCF') model with a discount rate of 5.8% (company's WACC), a 5-year forward growth rate of 9.8%, and a terminal value based on the average chipmaker EV/EBITDA of 13.13x, indicates an upside of 38% with a price target of $54.79 . Therefore, we rate Infineon as a Strong Buy .
For further details see:
Infineon: Automotive Semicon Market Leader