March 24, 2017 / 3:50 PM / 6 months ago

Infineon raises 2017 outlook on stronger automotive orders

Shareholders arrive for the annual meeting of German semiconductor manufacturer Infineon in Munich, southern Germany, February 16, 2017. REUTERS/Michaela Rehle

FRANKFURT (Reuters) - German chipmaker Infineon (IFXGn.DE) raised its outlook for the second quarter and for its 2017 financial year, citing better-than-expected orders for the chips it makes for cars.

Infineon said it expected 2017 revenue to rise by between 8 and 11 percent, with an operating margin of around 17 percent. Its chips manage functions such as enabling airbags and managing car power supplies.

It said in February it expected revenue to rise around 6 percent, with an operating margin of around 16 percent. Analysts said at the time the outlook was conservative, especially given its strong position in the automotive sector.

Chips made by Infineon are used by carmakers including Tesla (TSLA.O) and Hyundai (005380.KS) as well as auto parts suppliers Continental (CONG.DE) and Bosch [ROBG.UL] to enable cruise control and cut emissions.

Infineon is the world’s second largest semiconductor supplier to the car sector, with a market share of 10.4 percent according to Strategy Analytics, behind NXP (NXPI.O) with 14.2 percent.

The automotive unit accounts for more than 40 percent of revenues at Infineon.

“Due to the stronger than expected development of revenues and order entry, higher investments in property, plant and equipment will be required,” the company said in a statement on Friday.

Investments are expected to rise to 1.05 billion euros ($1.1 billion) in the fiscal 2017 year, up from a previously expected 950 million euros.

Like its peers NXP, STMicroelectronics (STM.PA), Renesas (6723.T) and Texas Instruments (TXN.O), Infineon is riding the automotive wave as carmakers rush to develop electric and self-driving cars, pushed by tougher anti-pollution rules and the emergence of new competitors from the technology sector such Alphabet’s (GOOGL.O) Google.

Infineon shares extended gains after the statement, hitting a 15-year high of 18.71 euros. They were up 8.5 percent by 1445 GMT (10:45 a.m. ET), at the top of the benchmark STOXX Europe 600 Technology .SX8P index, which was up 1.1 percent.

Last month the chipmaker had give up trying to buy Wolfspeed Power, a unit of U.S. LED lighting maker Cree (CREE.O), after the U.S. government voiced security concerns over the acquisition.

Reporting by Harro ten Wolde; editing by Susan Thomas/Ruth Pitchford

Our Standards:The Thomson Reuters Trust Principles.
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