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Infineon Technologies (ETR:IFX) has announced plans to cut approximately 1,400 jobs and reduce its sales forecast for the third time this year. The German chipmaker is grappling with an inventory glut that has led to fewer orders for chips used in smartphones, cars, and industrial machinery. The company now anticipates sales of around €15 billion ($16.37 billion) for the fiscal year ending in September, down from a previous forecast of approximately €15.1 billion and significantly lower than the €16.31 billion reported for fiscal 2023.
The segment result margin, a critical profitability measure, is projected to be around 20%, a sharp decline from 27% in the prior year.
Strategic Workforce Adjustments
To address profitability issues, Infineon plans to cut 1,400 jobs globally and redeploy another 1,400 positions to countries with lower labor costs. This initiative is part of a broader strategy to bolster profitability by fiscal 2028, as outlined by Chief Executive Jochen Hanebeck during an earnings call. The company, which had approximately 59,300 employees worldwide as of the end of March, aims to streamline its operations and reduce costs through these workforce adjustments.
Industry-Wide Inventory Glut
The semiconductor industry is currently facing an inventory surplus. Manufacturers of consumer devices, electric vehicles (EVs), and industrial equipment had stockpiled chips in anticipation of continued high demand, but the actual order volume has not met these expectations. Infineon has already lowered its forecasts twice this year due to weak demand, particularly from the automotive sector, which has traditionally been a strong market for chipmakers.
Impact on Financial Performance
Infineon's financial results for the three months ending in June reflected these challenges. The company reported sales of €3.70 billion, a 9% year-over-year decline and below the €3.80 billion forecasted by analysts according to a Vara Research consensus. The automotive division, a key revenue driver, contributed €2.11 billion, a 1% year-over-year decrease.
Net profit fell dramatically by 52% to €403 million. The segment result, Infineon's preferred profitability measure, dropped to €734 million from €1.07 billion, resulting in a margin of 19.8%. Analysts had expected a profit of €447 million and a segment result of €717 million on an 18.9% margin.
Future Projections
For the current quarter, Infineon anticipates sales of approximately €4 billion and a segment result margin of about 20%. Despite these projections, the broader semiconductor industry continues to face significant hurdles. Tesla, a major player in the EV market, reported a profit decline for the second consecutive quarter, indicating ongoing difficulties in the EV sector. Similarly, European chipmaker STMicroelectronics, which supplies to companies like Apple, Samsung Electronics, and Tesla, has also cut its annual sales forecasts twice this year.
