Infineon FY 2020 User Manual

Second Quarter FY 2020 Quarterly Update

Infineon Technologies AG Investor Relations

Agenda

Cypress becomes part of Infineon

ESG: targets and achievements

Automotive

Industrial Power Control

Power & Sensor Systems

Digital Security Solutions

Selected financial figures

* pro forma figure

1) Based on or includes research from Omdia, "Annual 2001-2019 Semiconductor Market Share Competitive Landscaping Tool – Q4 2019 v2”, March 2020.

2) Based on or includes research from Omdia, "Power Semiconductor Market Share Database – 2018", September 2019. Results are not an endorsement of Infineon Technologies AG. Any reliance on these results is at the third party’s own risk.

Infineon and Cypress create a global top-10 player, and the new #3 in the overall microcontroller market

18.1%

17.6%

16.0%*

12.4%

12.0%

7.8%

1.5%

1.3%

1.2%

1.1%

Renesas

NXP

Infineon

Microchip

STM

Texas Instr.

Samsung

Nuvoton

Silicon Labs

Toshiba

Huada

Semiconductor suppliers

2019 total market: $428bn

MCU suppliers

2019 total market: $17.5bn

16.5%

12.3%

5.3%

4.7%

4.3%

3.4%

3.3%

2.6%

2.2%

2.0%

Intel

Samsung

SK Hynix

Micron

Broadcom

Qualcomm

Texas Instr.

Infineon

STMicro

Nvidia Kioxia

NXP

2.5%

2.6%

3.3%

3.6%

4.5%

4.8%

5.4%

8.9%

19.9%

Semikron

Rohm

Renesas

Fuji

Toshiba

Vishay

Mitsubishi

STMicro

ON Semi

Infineon

Power discretes and modules

2018 total market: $21.0bn

Infineon remains top player in its target markets:

security ICs, NOR Flash, and MEMS microphones

ABI Research, "Smart card & secure ICs", September 2019

8.5%

10.1%

17.4%

24.3%

24.8%

CEC Huada

STMicro

Samsung

Infineon

NXP

(+0.1-pt)

24.0%

23.7%

19.5%

12.8%

10.8%

Winbond

Macronix

Infineon

GigaDevice

Micron

Security ICs

2018 total market: $3.2bn

NOR Flash

2019 total market: $2.2bn

MEMS microphones die supplier

2018 total market: 4.6bn units

4.0%

4.7%

5.2%

37.0%

42.8%

MEMSensing

NJRC

Omron

Infineon

Knowles

Based on or includes research from Omdia, “MEMS Microphone Database 2019”, January 2020.

Based on or includes research from Omdia, "Annual 2001-2019 Semiconductor Market Share Competitive Landscaping Tool – Q4 2019 v2”, March 2020.

ABI Research, “Wireless Connectivity Technology Segmentation and

Addressable Markets", November 2019.

16.2%

14.9%

14.4%

11.2%

9.3%

Media Tek

NXP

Qualcomm

Broadcom

Infineon

Wi-Fi standalone ICs

2018 total market: 917m units

Infineon is focusing on wearables

and IoT but not addressing routers,

PCs, notebooks, tablets.

Two complementary companies in many aspects form a

financially stronger and more balanced player

Complementary

product scope

Broader base

Larger

scale

Value

creation

System solution

leader in high-growth

markets: automotive,

industrial and IoT

power management

security solutions

sensor systems

MCUs connectivity low power differentiated memories software / eco-system

› more structural growth drivers › more balanced geographical mix

› enlarged customer base › higher share of distribution

› combined FY19 revenue of approx. €10bn

› top 10 in the semiconductor industry › leading player in automotive, systems for power management and drives, sensor

systems, connected secure systems, wireless combos, differentiated memories

› expected revenue synergy potential of

> €1.5bn p.a. from FY28 onwards

› expected cost synergies of €180m p.a.

gradually ramping up over approximately three years after closing

› expected to be accretive to adjusted

EPS in FY21

› improved target operating model

– 9%+ revenue growth – 19% Segment Result margin – 13% investment-to-sales

Infineon offers a unique portfolio that links the real

and the digital world

Real-world

applications

Digital

world

Battery-powered devices

Consumer IoT

Power supplies

Drives

Industrial IoT

Connectivity

Software

Ecosystem

Automotive

Sense: sensors

Compute: microcontrollers,

memories

Actuate: power semiconductors Connectivity: Wi-Fi, Bluetooth, USB

Coin cell-powered devices

Smart Home

Information and data

about the real world

Value addition and

optimized use of resources

Infineon now offers the entire system for IoT -

unlocking new markets and applications

air con

auto

telematics

auto

head unit

service

robot

cooking,

washing,

heating,

cooling

shaver,

epilator,

toothbrush

camera

personal

medical

device

smart watch

surveillance

camera

smart

door lock

lifestyle

wearables

smart

speaker

printer

game

console

powersensors

security hardware

security software

RF and

sensors

power

software and ecosystem

connectivity

MCU

motor

light

coil

AC-DC

microph.

pressure

radar 3D ToF current

more ...

DC-DC

more ...

IoT control loop

cloud

Infineon has industry’s broadest product portfolio

covering entire range of auto applications

Body

Cluster/

Infotainment

Chassis Powertrain ADAS/AD

MCU (Embedded Power ICs,

PSoC™, Traveo™)

Application examples

Connectivity

(Wi-Fi, BT, BLE)

Memory

(NOR Flash, SRAM, nvSRAM, F-RAM)

Power (MOSFETs, IGBTs, modules, driver ICs, power ICs, LDOs, PMICs, USB Type-C PD)

MCU (AURIX™)

› HVAC

› door control

› pumps › seat adjustment

› instrument cluster › in-cabin entertainment

› touch control

› in-cabin charging

› braking › steering

› stability program

› suspension

› engine management › transmission

› main inverter

› auxiliaries

› speed control

› emergency braking

› blind spot detection › sensor fusion

Sensors (magnetic, pressure, radar, current, 3D ToF, TrueTouch®, CapSense®)

Connectivity

(USB)

NOR Flash benefits from growing use of flash-less

processing units (MCUs, GPUs, FPGAs, SoCs)

› ADAS/AD

› instrument clusters

› navigation systems › SOTA updates

Automotive Industrial ICT

Consumer

› programmable logic

controller

› GPS board

› 5G infrastructure

(radio heads)

› gateways › scanner, printer

› ear pods

› digital camera

› Advanced process nodes (28 nm and below) no longer offer embedded NOR Flash economically 

trends towards off-chip memory

› Infineon’s high-density NOR Flash is used as

› boot-up memory and

› instant-on program memory › Leader in high-density products (16 Mb – 4 Gb) › Semper™ Flash best positioned in functionally safety (ISO 26262 ASIL-B) and security for ADAS/AD › focusing on safety-critical applications in automotive, industrial, and communications

With the combined portfolio Infineon can offer full

system solutions

Outdoor Unit

Fan +

Compressor

PFC

Indoor Unit

User Interface

MCU

HMI

IPM

Gate Driver

IGBT /

MOSFET

Connectivity

Wi-Fi /

Bluetooth

Frontend

MCU

Connect

Security

(Trust)

Supply (AC-DC)

Infineon heritage Cypress heritage

Indoor Fan

Control

IPM

Main Control

Gate Driver

MOSFET

MCU

Main Control

Sensor

Radar

Proximity

Heater

Motor Louver

Air Quality

MCU

Fan

› Ease of design

 combined portfolio covers all relevant system components

› Superior quality

 integrated solution ensures MCU, power stage and

peripherals work perfectly

together

› Faster time-to-market

 no additional integration or software development costs

Example: air-conditioning system

What makes system solution

attractive to customers?

Touch / Button

LED / LCD

Audio out

Outdoor Fan

Control

MCU

Dual Motor

+ PFC

IPM

Infineon’s and Cypress’ competencies perfectly fit

together; e.g. for smart wearables

Connectivity

Human-machine interface

Wireless charging

Sensing

Device protection

Security

Memory

2 W inductive solution

2.5 W resonant solution

pressure sensor radar IC MEMS microphone

ESD protection battery authentication

Processing

microcontroller

NOR Flash F-RAM

touch interface

voice user interface

eSIM secure element + NFC cloud authentication

Wi-Fi/Bluetooth combo IC RF switches, low-noise

amplifiers, antenna tuners

Cypress heritage

Infineon heritage

IoT platform

ecosystem, software, services

Cypress financial performance*

310

354

411

401

345

229

178

164

158

170

Q1'19** Q2'19 Q3'19 Q4'19 Q1'20

Revenue development [$ m]

MCD MPD

202

199

216

212

196

37.6%

37.3%

37.7%

38.0%

38.2%

30,0%

32,0%

34,0%

36,0%

38,0%

40,0%

42,0%

44,0%

100

150

200

250

Q1'19** Q2'19 Q3'19 Q4'19 Q1'20

Gross profit [$ m], gross margin

gross profit gross margin

114

108

126

118

101

21.1%

20.4%

21.8%

21.1%

19.6%

0,0%

20,0%

40,0%

100

120

140

Q1'19** Q2'19 Q3'19 Q4'19 Q1'20

Non-GAAP operating income [$ m],

Non-GAAP operating margin

Non-GAAP oper. income Non-GAAP oper. margin

111

222

117

Q1'19** Q2'19 Q3'19 Q4'19 Q1'20

Free cash flow*** [$ m]

* Unaudited financials based on US-GAAP; for further details see www.infineon.com/ir/cypress. ** Q1’19 results include the NAND Flash business which was divested in Q2’19. Revenues of the NAND Flash business in Q1’19 were included in MPD. *** Free cash flow is calculated as net cash provided by (used in) operating activities, less net of acquisitions and sales of property, plant and equipment.

539

532

575

559

514

numbers may not add up due to rounding

Allocation of Cypress revenue leads to a more

balanced portfolio

Infineon_old

Cypress

Infineon_new

major product groups

revenue by segment

ATV

~55%

PSS

~10%

DSS

~35%

DSS

18%

PSS

31%

ATV

43%

DSS

~14%

ATV

~45%

IPC

~14%

PSS

~27%

› Traveo

› Automotive PSoC › NOR Flash › SRAM › F-RAM

› USB Type-A

› USB Type-B

› USB Type-C › USB Power Delivery

› PSoC › general purpose MCUs › IoT platform: ecosystem,

software, services

› connectivity (Wi-Fi,

Bluetooth, Bluetooth Low Energy, combos)

IPC

1) in the 12-month period ended March 2020

COGS

› Procurement for materials and manufacturing services

OpEx

› R&D: Optimize portfolio, reduce overhead › S&M: Efficiency gains in account coverage › G&A: Optimize corporate service providers

Expected integration and restructuring costs

equivalent to ~1x cost synergies one-off over time

(A) Near-term revenue synergy ramp up

› Improved customer access and cross-selling › Optimize Cypress digital marketing potential to address

revenue opportunities and grow customer numbers

(B) P2S for long-term revenue synergy ramp up

› Sensor systems and connectivity in IoT applications

› wireless connectivity in automation equipment › Security-hardened controllers and connectivity

› systems for power management and drives › differentiated memories in mission critical applications

FY22e FY25e FY28e

(A) (B)

€1bn

€1.5bn

FY21e FY22e FY23e*

COGS

S&M R&D

G&A

€180m

Short-term reaping of cost synergies, long-term value

creation of revenue synergies

Planned ramp-up of cost synergies Planned ramp-up of revenue synergies

* Expected cost synergies of €180m p.a. gradually ramping up over

approximately three years after closing. Ramp progression adjusted for later closing and COVID-19 implications.

Further improvement of through-cycle

target operating model

Target Operating Model

Infineon financial performance to approach

targets as integration progresses

Revenue

growth

9%+

(up from “9%”)

Segment

Result margin

19%

(up from “17%”)

Investment

-to-sales

13%

(down from “15%”)

Well-defined roadmap how to capture the value of the

deal (delayed by unpredictable COVID-19 pandemic)

Phase 1

(16 Apr 2020 onwards)

Phase 2

(2023+)

Phase 3

(2025+)

› Full commitment to new target operating model › Several tools in place to track and measure the progress of the integration

› highest priority:

ensure stability of Cypress’

business performance and

standalone operation

› harvest one-time cost synergies

(e.g. delisting) and overhead savings

› share existing IP and R&D

roadmaps to cancel/avoid

redundant development efforts

› launch customer

portfolio management and kick-off G2M push programs

› have streamlined global shared

service center set-up in place

› generate sustainable

procurement effects

› have aligned and prioritized

product roadmap with joint P2S concepts in place

› establish one interface to the

customer (OITC)

› build on full leverage of revenue

synergies

› launch new wave of P2S

products

› identify additional adjacent and

completely new target applications to fuel longer-term growth

Continuous implementation of planned cost and revenue synergy measures,

e.g. harvesting early cross-selling opportunities, streamlining opex structures, optimizing manufacturing footprint

› Arranging and syndication of acquisition facility

After successfully completing the equity part of the

refinancing, focus will now shift to the debt part

2019

› Initial equity de-risking in two steps:

› €1.5bn via ABB › €1.2bn via dual-tranche hybrid bond

2020

 



 

› Refinancing of remaining acquisition facility with maturities from

March 2022 to June 2024 through debt capital markets

› Liquidity: keeping gross cash target of €1bn plus at least 10% of

combined revenue

› Deleveraging: return to target level ≤ 2x gross debt / EBITDA

over mid-term



› Drawdown of acquisition facility and usage of raised funds › Investment grade rating of BBB- by Standard & Poor's › Completion of equity part via €1.0bn ABB

Infineon with moderate financial leverage post

Cypress closing

1) does not include hybrid bond; considered as equity under IFRS

2) based on an exchange rate of $1.0977 for €1.00

3) assuming conversion values of Cypress convertible instruments

4) excluding stock options and accelerated vested restricted stock units (RSU)

5) Cypress FCF calculated – in alignment to the FCF definition of Infineon – as total of net cash provided by operating activities and net cash used in investing activities

6) figure contains Infineon financial information prepared in accordance with IFRS as well as Cypress financial information prepared according to US-GAAP. Neither US-GAAP / IFRS conversion has been performed, nor purchase price allocation effects have been considered

Aggregated unaudited combined EBITDA, 12-month period ended March 20206): €2.3bn

Sources [EUR bn

]

Acquisition financing facilities

− bridge

3.9

− term loan

3.0

Infineon gross cash

2.5

total

9.4

Uses [EUR

]

Cypress shares

8.1

Cypress gross debt effective 1.3

total 9.4

Pre closing Post closing

Assumpt.: all pre-existing Cypress debt paid off

Acquisition financing

Infineon per 31 Mar 2020

[EUR

bn]

gross cash

4.6

gross debt

1.5

net cash

3.1

Cypress per 29 Mar 2020

[EUR

bn]

gross cash

0.8

gross debt reported

1.0

gross debt effective

1.3

net debt effective

0.5

Infineon per 31 Mar 2020

[EUR

bn]

gross cash

2.9

gross debt

8.4

net debt

5.5

› On an aggregatedunaudited basis, Infineon and

Cypress together generated FCF5)of €0.9bn in the 12-month period ended March 2020

simplified overview; numbers may not add up due to rounding

› net debt/EBITDA: 2.0x › gross debt/EBITDA: 3.2x

Post ABB May 2020 (€1bn)

Infineon per 31 Mar 2020

[EUR

bn]

gross cash

2.9

gross debt

7.4

net debt

4.5

ABB proceeds used to pay off debt

Outlook for Q3 FY20 and FY20 including Cypress

Segment Result margin

Revenue

At the mid-point of the revenue guidance:

positive mid-single digit

percentage

€1.9bn to €2.3bn

Investments in FY20 €1.2bn – €1.3bn**

D&A in FY20 ~€1.0bn***

Outlook FY20*

* Based on an assumed average exchange rate of $1.10 for €1.00 (previously $1.13 for €1.00). ** Formerly ~€1.3bn for Infineon standalone. *** Outlook does not yet include D&A on tangible and intangible assets from purchase price allocation of Cypress acquisition. On the other hand, outlook

includes D&A on tangible and intangible assets from purchase price allocation of about €60m, primarily to International Rectifier.

~ €8.4bn

+/- 5%

At the mid-point of the revenue guidance:

~12%

Outlook Q3 FY20*

Tight customer relationships, based on system know-

how and application understanding

ATV IPC

DSSPSS

Distribution partners

EMS partners

Agenda

Cypress becomes part of Infineon

ESG: targets and achievements

Automotive

Industrial Power Control

Power & Sensor Systems

Digital Security Solutions

Selected financial figures

Our products and innovations together with an efficient

production are key elements to deal with climate change

Our net ecologic CO2benefit is equal to…

The savings of a 1,795 km

photovoltaic powerplant.

The average annual

electricity consumption of

about 86 million people living in Europe.

48,700 fully occupied flights of an Airbus A380 from Munich to Singapore.

We contribute a CO2 reduction of more than 54 million tons

For footnotes please see appendix

Infineon will become carbon-neutral by 2030

1. Avoiding direct emissions and further reducing energy consumption

2. Purchasing green electricity with guarantees of origin for unavoidable emissions

3. Compensate the smallest part by certificates that combine

development support and CO2abatement

1) Namely perfluorinated and polyfluorinated carbon compounds, sulfur hexafluoride (SF6) and nitrogen trifluoride (NF3)

70% CO2emissions reduction target in 2025 (Scope 1 and 2 emissions)

Abatement of Perfluorinated Compounds (PFCs)1)is one of the most important measures avoiding direct emissions.

Normalized PFC emissions rate in tons of CO2equivalent per m² wafer area

1.6

1.7

1.4

1.2

2.2 2.2 2.2 2.2 2.2

2015 2016 2017 2018 2019

Infineon

WSC 2020 target

Historically, Infineon's normalized emission rate has been below WSC 2020 target of 2.2 tons of CO2equivalent per m² wafer area.

Dow Jones Sustainability Index

Ethibel Sustainability Index

Excelence Europe”

ISS-Oekom

Ecovadis

CDP

External recognitions confirm our engagement in

contributing to a sustainable society

MSCI ESG

FTSE4Good Index

Euronext Vigeo Eurozone 120 Index Euronext Vigeo Europe 120 Index

Sustainalytics

AA CCC to AAA 02/2020

B climate scoring

B- water scoring

F to A 02/2020

98thpercentile

“Gold” award

0 to 100 11/2019

79 DJ Sustainability™

World Index listing

0 to 100 09/2019

Index member - 09/2019

C+

Prime Status

D- to A+ 07/2019

Index member - 07/2019

Indices member

06/2019

“Outperformer” level

0 to 100

03/2019

Rating/Score

Scale

Date

+ 55 hidden pages