Infineon Technologies AG (IFX) Earnings Call Transcript & Summary

Hello and welcome to the Infineon Automotive Conference Call. My name is Rosy, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to Janardan Menon to begin today's conference. Thank you.

Good morning, and good afternoon, everyone. This is Janardan, technology analyst at Liberum. Thank you very much for joining this Automotive division conference call by Infineon. We are very happy to have with us on the call today Peter Schiefer, President of Infineon's Automotive division; as well as Joachim Binder, Senior Manager, Investor Relations at Infineon Technologies. The format for the call will be that Peter would first run through the presentation slides themselves. These are already available on Infineon's website. At the end of that formal part of the presentation, we would open up for Q&A, as per the method told to you by Rosy already. And we expect the call to be about 60 minutes in duration. And with that, I shall hand over to Peter to go ahead with the presentation.

Yes. Thank you very much, Janardan. Ladies and gentlemen, good morning and good afternoon. Welcome to the call on the Automotive division of Infineon Technologies. I'm Peter Schiefer, running the Automotive business for Infineon. And I want to start by giving you an overview of the Infineon market position as well as the short-term and midterm outlook considering the macroeconomic aspects. So on Slide 3, you basically see that over the past 20 years, Infineon was really nicely growing around about 10% on an average of the result of being really active in the key growth drivers of the automotive market. And mainly through the organic growth, we gained market share year-over-year. And now with the acquisition of Cypress Semiconductor, we are in the #1 position of the automotive semiconductor market. And so you really can say that the digitalization, the electrification and also the automation of cars are and will take place with Infineon in a strong leading position there. So we are in the forefront of the market. And you will see in the next part of the presentation that we are also well positioned to benefit from this structural growth drivers when it comes to Automotive segment, semiconductors. On Slide 4, you'll see that our #1 position is really broad-based. So on the one hand side, we are a strong #1 in the power semiconductors so that cars are becoming smarter, that cars are becoming more and more electric, will for sure be actively supported by the power semiconductor solutions, which we offer to the market. Then also through the Cypress acquisition, we are the leader in the automotive NOR flash memory market. The automotive sensor is pretty much important to us. We are a close #2, and we lead in the overall radar sensor market once you consider radar sensors. The Microcontroller, here also, we are in a #3 position. We are winning major designs with our second-generation of AURIX microcontroller in many of the exciting applications. And so you can see that our strong position has many legs, and we are really building further on these areas. In Page 5, and going more towards the market development, here you can see that in the coming quarter as well as in the next year, we are all aware of the uncertainties, which we will see surrounded by this pandemic situation. And I think that we will have high volatility is well known. On the car production, for the light vehicle market, we expect that the recovery which we have seen in the calendar 3, to continue in the next quarter. Also here, China is leading the recovery from speed of recovering. Europe and U.S. are recovering at a little bit slower rate compared to China, and we also expect that to continue in the quarter 4. For the coming calendar year, the recovery still will be a good one. We expect year-over-year recovery rate in the mid-teens, which is, for sure, not enough to compensate for the year-over-year decline this year. And then on top of that, we should also keep in mind that currently, we see kind of a second wave of COVID-19 pandemic. We still have uncertainties in front of us due to the effect of U.S./China trade conflicts as well as there is the Brexit in front of us. So for sure, 2021 on the one hand side should see a recovery. On the other hand side, we should be aware of potential uncertainties and volatility in that market. When it comes to xEVs, the electrification part of the market, we have seen a very strong momentum in Europe, while the large Chinese market and U.S. market is a little bit lagging behind. We also see that continuing to grow in the next quarter. And for the next year, there are several governmental stimuli packages, which will continue. Also OEMs, case-by-case, do have their own incentive schemes for xEVs, and this combined with the investments done in the charging infrastructure, should really lead to a solid '21 growth year for xEVs, and once again, depending a bit on the volatility COVID-19 will bring to us in the next months and quarters. In the advanced driver assistant function side, we have actually not seen and also do not expect major changes in the plans of the OEMs in terms of introducing ADAS functionality into their car. So therefore, the growth of the so-called Level 1 and Level 2 should continue in the calendar quarter 4 and also in '21. And we also would see some first, what we call, Level 2+. So an increased functionality set of Level 2 -- Level 2+ shipments later this year and in the calendar year '21. And -- however, these volumes are relatively smaller compared to the Level 2+ volumes, but it will contribute also a little bit to the growth. Having said that, there is also some news about Level 4, Level 5 projects, which were delayed at certain OEMs due to the effect of R&D budget constraints. So those levels are anyhow not seen in near term, so no real impact for 2021. But we may expect that for a very long range perspective from the time Level 4, Level 5 projects may be pushed out to the right. On Slide 6, you see basically now the split in all the regions. All regions are going to come back to growth after they had a hard 2020 due to the COVID-19. And this data here shown in this slide is basically data which was reported by IHS, which we would take also as a base. We have our own model, but pretty much, we are currently in sync with the analyst expectation there. So 2020 will likely end up anywhere between minus 19% to minus 20% percent, round about 71 million to 72 million car units sold. So quite a steep drop in 2020. China, which is the biggest market for LV volumes is hurt the least. So here, it was the impact not so high, and also recovery was actually quite fast. Then in 2021, IHS is expecting an increase of little bit more than 13%, going up to 81 million cars, still not meeting the number which we had, for example, back in 2019. Slide #7. So now I want to dig a little bit deeper now in the 2 structural growth drivers. So I start with the electromobility first, and we switch to 8 -- Slide #8. And I think we are well aware that over the last year and over the years, there have been changes in the CO2 regulations in the key markets, which actually then is playing a key role in modulating the growth of the electromobility. You may be aware that the EU has clear targets in terms of adhering to very strict and stringent emission standards. So I think you know the 95 gram per kilometer consumption by '21, which is a key milestone for the OEMs to meet in the euro market. But they are even facing a more challenging limit until 2030 when the CO2 limits have to drop by almost 38% compared to today. So there is very strict targets in front of us. China approved slightly relaxed targets until '24. Also U.S. updated their emission targets based on their, what they call, safe plan. And very new information, about 10 days ago, the governor of California signed an executive order, mandating that all the new cars to be sold in California by '20 -- by '35, so long time out, but it's a clear sign, must be zero-emission vehicles. So basically, they are banning gasoline and diesel-powered vehicles at all. And California is the largest U.S. vehicle market. They have round about 11% of all the U.S. registrations. And there is 13 other states, which may follow California. And if you put these 13 together with California, they all together would account for round about 1/3 of all the U.S. light vehicle registration. So when this new executive order would be copied, I think this also gives a clear trend towards further push to electromobility. Then on the right-hand side, you see basically our estimates on CO2 for an average combustion engine as well as the contributors by electrification type. And basically, OEMs will only be able to achieve the overall CO2-free targets when they manage to push more cars with electrified power retained to the market. 48-volt mild hybrids and the full hybrid trend has also set last year, will grow significantly in the next 5 years, but they will not be sufficient as they will not meet the '25 targets alone. That's why OEMs will have to push for plug-in hybrids and battery electric cars to meet the target. So these long-term trends coming from the regulation and from the target is still intact and we didn't see change due to the COVID-19 effect out of that one. In Slide 9, you see then the result in growth of the electrification of cars, and it's very impressive what you see there. So the graph shows, in the colored bars, the electric cars. So the mild hybrids which are 48-volt are in this lighter color, and the darker one is the combination of the full hybrid, plug-in hybrid as well as the battery electric vehicles. And what you see is that more than 1/4 of all the cars produced would be electric already by 2023, and this number will exceed 50% level by 2027. So a very strong population of cars in the next 5 years and also in the next 10 years from now, still it will not significantly flatten out. On Page #10, it shows then the semiconductor opportunity coming from that electrification of the cars. And as you well know, the main semiconductor beneficiary is the power semiconductors. More than 1/2 of the bill of material upside in a 48-volt mild hybrid are from power semis. And in a full hybrid or plug-in hybrid or a full electric car, the power semi part represents already 3/4, so 75% of the BoM upside comes from power semiconductors. And in the next slide to come, I will tell you why we, at Infineon, are really nicely positioned there in place when it comes to how can we further electrify cars to this extent shown in the market update. So Page 11 gives you a little bit better understanding about Infineon portfolio. And you see that we have a portfolio that is very extensive when it considers the entire control loop of an electric car. So if you think in this paradigm of sense, compute and act, so this is what we typically divide our controller, you can see that we have different ethics which we do bring into that area. So for example, the sensor part, we have different sensors for rotor positioning of the motor, current sensing. The compute functionality, here we have a really strong foot in the microcontroller area with AURIX, which is a benchmark in the automotive industry. Then we offer the driver needed in order to run the power devices with the 48-volt or high-voltage electric need so-called drivers in the 48-volt area, so this is the mild hybrids we have, the so-called MOSFET, and we offer them from single chips to discretes as well as special packaging technology, like chip embedding. For the high-voltage portion, we have a very scalable platform. So this is based on both IGBT and silicon carbide technology, which I will elaborate a little bit later also with the aspect of scalability. And here, we also -- as shown in this chart, we offer the customer really what they need, whether it is the single chips, discrete components, modules. So whatever the direction and development strategy of an OEM is or tier 1 is, they really get what they need and they do not simply need to take what we have. So we complement all that with the needed power supply of the system, the communication circuitries of the system. And I think one of the key advantages to have that stake in these different parts of the control loop in the car is really the advantage of the system-level competence and system understanding because having all assets in all aspects of this system in our mind, we can really optimize our products on the system and on the future system evolution. This makes us a very strong partner to our customers and also helps us to understand what are the future needs. So when we talk about next generation, instead we can develop the next-generation in a way that really fit to the requirements of our customers. Next, page #12, then also shows that in addition to the product portfolio and all the innovations which we have there, we also continue to innovate on the packaging technology. And especially in power, packaging is very much important to get the maximum out of the chip. So on the left side, as an example, you see packaging innovation where so-called topside cooling significantly improves the thermal management. So you can do the cooling, instead of the bottom side, on the top side. And this was innovation with the top side cooling, which also did win us a key design at a large European tier 1 customer. And actually, this is the largest automotive MOSFET design win we ever made. And considering all customers, we expect a triple-digit revenue with automotive MOSFETs for these 48-volt systems by '25. And that's why for me, despite the fact that most of the people talk about this high-voltage electrified cars, this 48-volt area is pretty much important for part of the structural growth drivers for our business. Then on the right-hand side, you have the so-called chip embedding technology. This is a technology which we developed jointly with Schweizer Electronic, and this is also an innovation which is really driving up the performance. So 60% performance improvement compared to traditional design systems, and [indiscernible] technologies is the first customer who has chosen this technology to optimize the system to make them smaller and to innovate in their electrification in this mild hybrid applications. So then if I refer back to this slide, I had said by 2027, more than 50% of all cars sold will have fully or partially electrified drivetrain, that means that it's a big market. And then we talk a lot about inverters. We also in the past talked about onboard charging. And besides the main inverter and the onboard charger, the battery management is a good example for Infineon system solution competence. So battery management, which is now an application which is starting in volumes in electrified cars, is actually a quite complex system. You have, for example, the task to monitor the battery to balance the different battery cells. Here you need high-precision measurement of voltage, high-precision measurement of temperature and the current, but you also have things like pressure sensors, you have gas sensors inside the battery packs, it's basically to detect overloaded cells. If a cell is overloaded, it emits CO2, and then with the gas sensor you can detect it. But there are things like solid-state protection, which can react very, very fast, like less than a millisecond to switch on and off. You need an AURIX microcontroller with security features and many more. And I think this chart very nicely shows that in all this complexity of the system, Infineon has actually -- or is working on all components needing to come up with an overall system solution. And actually, lot of products are products which you can use in other applications, like the microcontrollers, but there is also dedicated solutions, like the balancing ICs, which we offer and/or in the future maybe even wireless communications, such as bluetooth needed to replace wired communications. So one more example out of the overall scheme of electromobility which will create additional growth to our top line. So Page 14. Now moving a little bit into the power semiconductor space. IGBT, as you know, is the current major technology while silicon carbide is the fast-growing one. And before we talk about our position in silicon carbide, let's discuss a bit on what drives an OEM to go for either IGBT or silicon carbide. And the choice of the main inverter technology depends pretty much on the choice of the OEM in terms of either range versus cost, or also in size and cost of the battery. So range, cost and size of the battery are the, I would say, 3 key criteria. And let me explain these choices an OEM has a little bit with more detailed examples. And here, the first example on the top side is basically an all-wheel drive battery electric vehicle where in the first axle, in particular if the OEM is focusing on range, silicon carbide is the best choice for the all known reasons. And if the OEM is focusing on cost, the choice becomes a matter of the size of the battery. So for a large battery, silicon carbide is the right choice. However, if the OEM is going more for small batteries, not so much range, then it's more convenient to continue to stay with IGBT because it's the more cost-efficient technology and much cheaper by a multiple versus the silicon carbide solution. So this was the first axle, but then we have a second axle because it's a 4-wheel drive. The second axle has a much lower usage profile, and thus, the efficiency is of lesser benefit. And that's why OEMs typically prioritize on cost on the second axle where then IGBT is their technology of choice. So you see that you have a mixture of both technologies in one car platform then. If we take another example, which is the one below, the example of an axle split plug-in hybrid. So one axle here, of course, is the classic combustion engine, and the other axle is typically then, for cost-effective reasons, a solution based on IGBT. And I think this is then giving you also a little bit of flavor how an OEM would approach depending on the platform strategy and depending on the positioning in the market, when is the right convenient time to use silicon carbide or to stay with IGBT. So now regarding the silicon carbon design wins. Here, I think it's fair to say that higher-volume platforms are going to be launched in and around '24, '25. And these kind of platforms are being awarded over the next quarters, and we are well placed here with our, one the hand side, very excellent IGBT portfolio, but also with, meanwhile, the broadest silicon carbide product portfolio. And that's why we are confident that we will win designs here. And as mentioned, key drivers are, as already discussed, the aspect of the range as well as the different criterias in terms of range versus size versus cost effectiveness where OEMs will then put the respective development strategy into their platforms. So Page 15. Another aspect then in terms of why we feel we are very well positioned for the design wins in front of us, and this is due to the key reason in terms of large customer base. So as you're well aware, we have a very large IGBT customer base. And now, as mentioned in the earlier slide, many of our customers are considering silicon carbide for future platforms, or a combination, IGBT and silicon carbide in their platforms. And due to the fact that Infineon offers this, I would say, a seamless path from IGBT to even higher-power IGBT and then eventually even to silicon carbide, there is this aspect of scalability advantage. So there's these 2 examples on the module side, you see that they are the same modules for IGBT and for silicon carbide. So this is what we call our HybridPACK drive package, and this has the same form factor. So the same form factor with the module allows the customer, on the one hand side, cost-effective ways with IGBT, but also to switch from one platform to the next one. So it's a scalable approach, and it's creating flexibility. The second example is the driver ICs. So our ICE driver family supports all power ranges, so you can use that for the IGBT as well as for the silicon carbide. And by that, it's a kind of a seamless scaling of the platform of an OEM. And I really believe that this scalability is a key advantage of Infineon because it's a -- on the one hand side, it's the product portfolio, the package innovation, but then offering silicon carbide and/or IGBT in a similar form factor is giving the most of the R&D and design freedom to our customers and giving them also a great level of flexibility. So on Page 16, to summarize the electromobility part. So our silicon carbide portfolio is really optimized for xEV. We have been working closely with our customers. And also based on our technology and system understanding, we created, meanwhile, the broadest silicon covered portfolio in Automotive. We have currently the next 2 generations of silicon carbide technology in the development. To meet the growing customer demand, we just decided, and this is despite the difficulties in the COVID-19 pandemic, to establish one new additional development site for our high-voltage products. This is established now and based in Germany. We had to do that because we had so many engagements for design wins with customers that we had to expand here. We have a large IGBT customer portfolio. When these IGBT customers go for silicon carbide, we can leverage on the advantage of our scalable packaging platforms. About our system offerings, with the driver ICs, really, with that we can make -- that the transition for our customers is very cost-effective, fast and also seamless. So if an OEM decides to go for silicon carbide, we are really placed in an excellent position there to win their platforms, which are lying in front of us. Now let's move to the other mega trend in the automotive market. So Page 18. So here, you have the car production forecast by the level of automation. Currently, about 1/2 of the cars produced are either Level 1 or Level 2. In the coming 4 to 5 years, the Level 2+, which is included in the Level 2 figures, will also grow. By the mid of this decade, round about 3 out of every 4 new cars will come with either Level 1, Level 2 or Level 2+ autonomy. The level 3 figures, due to the complexity in the regulation, are forecasted to stay actually on very small single-digit numbers till end of the decade. By then, we also should see some Level 4 cars coming in. And if you then put this car production figure into the context of the semiconductor content, you can see that 1, 2 and 2+ in terms of the level will really constitute the major portion of the ADAS bill of materials in the next years. And only in the very later years, Level 2, Level 5 contribution will be in a sizable manner. So Page 19 now. As it comes for the semiconductor content, this is mapping out the picture here on the BoM figure, which, for sure, goes with the number of cars becoming more autonomous. So today, you can say that an ADAS-related BoM is round about USD 160, USD 180 content whereas 50% to 60% of the BoM is in the radar or sensor fusion modules. The rest is mostly camera. And as you level up then to Level 2+ in 2025, we estimate the BoM to be more in the USD 280 to USD 350 range. But the split amongst the components is quite similar, so same percentage split. However, the value of the components in absolute goes up due to the higher level of autonomy. Then if we take a Level 4 or maybe even a Level 5 car that comes to the end of the decade, we would command about a factor of 6 to 7x higher BoM by 2030 compared to Level 2 in 2020. And here, the sensor fusion, the radar portion, the lidar portion will have the major share of that USD 1,200 BoM. And as you know, we are -- have been playing actively in many of the application product segments for the ADAS and AD. And in the next slide, I will cover one particular aspect, which is the radar. So this is Page 20. And in radar, you may remember that we have basically started with silicon germanium as a base technology for the sensors. And here, we have been pretty successful in the market. According to the market researcher, Yole, in 2019, Infineon had more than 50% of the market share in total automotive radar sensor IC market. So this is combining the 77- as well as the 24-gigahertz sensors. So this is the sensor elements market. In this radar, we call it RF mimics or sensor elements. We have a very strong customer base that also will continue to rely on Infineon in next years. So for example, we are at 5 out of 6 leading rated tier 1s. And we're also addressing the market segments from the low-end applications, such as a blind spot detection up to the very high-resolution radar solutions. And the -- so this was basically the wave of success, which we started. And building on this success on the radar sensor element, we focused then consequently for our AURIX second generation where we had dedicated AURIX microcontroller derivates with integrated signal processing, especially developed for radar solutions. And then adding the controller to the sensor element is roughly doubling the Infineon semiconductor content in a radar system. And with that, we -- AURIX -- and with the success of the AURIX in the radar platforms, we have literally one option across all the board of the engagements which we have. So this is the second wave now hitting the microcontroller to the sensor element and then going forward, we are making one step more, what we call, system-level offering. Here, we are basically combining the radar sensor elements, the microcontroller, but also the power supply. So both the sensor element and the microcontroller are quite complex. And the powering up these 2 products is quite a challenging task, so having a dedicated PMIC for that task is key because there's a lot of benefits or advantages for the customers. One is the interoperability. So if the customer takes the chipset, he knows that the 3 components work with each other. But it's also a reduction of the development time, and for that, it's a faster time to market for our customers. Then one aspect on the technology. I think here also, we have made the right choice for the guys who are a bit more deeper into these technology areas. You may recall that our 77-gigahertz radar sensor elements are based on a bipolar -- BiCMOS technology. And with that, we have proven that this is really the better option as most of the tier 1s selected for that opposed to any kind of 40-nanometer CMOS technology. And this also explains why we have won even recent sign wins with that silicon germanium-based technology. We do see increasing volumes for the current generations up to 2027. So as next-generation of radar modules will ramp up anywhere around 2024, still the old generation will see significant growth until then before new generations kicks in. Then when it comes to this next platform, we strongly believe that -- when we talk about CMOS, that the 28-nanometer node is the right inflection point to switch from silicon germanium to CMOS because in 28 nanometer, really, you have a lot of advantages in cost, in power consumption, in the RF performance. And here, it makes, from our perspective, most sense. And as said that the next radar platforms are ramping round about '24. After us having started the CMOS development already back in 2015, we work now closely with our tier 1s to ramp our first 28-nanometer solution exactly for that period. And one topic I also want to mention because this was now all very much hardware related, I strongly believe also that the involvement on software becomes more and more critical as the evolution of the algorithms for the radar systems are pretty important, and they will also have an effect on the hardware. So this balance between what do you solve in hardware, what do you solve in software is requiring an overall integrated consideration, especially when you go to this very high-performance radars, like 3D imaging radars here, a big portion of the task will actually be done over -- by software. That's why we are also teaming up and partnering with companies which can contribute through the hardware solutions, also the needed software and algorithm part. So 21 -- Page 21. So if we now switch from radar more to the, again, concept of autonomous driving and ADAS function, here, I think in order to be successful, we really need to have -- to look at this topic from a very much holistic perspective. In addition to the technology that go into this assisted and autonomous system, we need to ensure that the user, so the car drivers, you and I, when we drive the car, really can have trust in our cars that they are driving with all these autonomous technology. And if we translate trust into what in our semiconductor world would fit, I would say, such a system or a solution needs to be dependable. So we need to have dependable systems. And let me elaborate a little bit on this from the levels of autonomy. As you can see on this upper part of the slide, the level of autonomy spans from 0 to 5 where basically 0 is that you have no assistance system and you are fully responsible for the task of driving the car. But then going forward, you can take off your feet of the cars or break in Level 1, you can take the hands off in Level 2. If you move further along to the different levels, up to Level 5, where there's even no driver and the driver becomes a passenger in the car system and the car system then is being in full control. And so along these levels -- on the lower levels, at least, you need to have a fail-safe system. That means a system in case of a failure should enter into a very safe mode. But then moving further up in the levels, the system needs to ensure even greater availability. So by continuing safe critical operations and make sure that you have the minimum of functional driving capability even if the system is breaking down, and such functionality is called fail operational. And why is this all important? Because you and I, as drivers, would never rely on our car if the system is not fully reliable and if not operating reasonably even in a failure. And by that basically, all the systems within a car must be able to really position the car in a situation that you have a high-quality availability of the product. So it means anything which is part of the system -- let's say the sensors, the microcontroller, the connectivity, the power distribution, all the products must achieve this dependability, must achieve that you are very safe when you drive in this autonomous conditions. And why I do tell that? Because over the last year, it became so evident that this is a very complex task to fulfill. And this scheme about dependability and what all is needed to do so, there are not many semiconductor companies who can really provide such components or such solutions for a dependable system, and that's why this is a very nice growth area for us because actually we have all these dependable semiconductor solutions for the individual steps, whether it's the sensors, the controllers, the power and so on. And this is all based on the one hand side, the well-known Infineon automotive quality aspect. So this makes us robust and reliable. It's along the safety competence, which we build up in our development centers. So this is adding the safety and availability. And then with the cybersecurity aspect also the protection against cyber security issues. So growth driver pretty much important for us. And on the next page, I give you examples what that would bring in. So there is benefit for us as a semiconductor company from this dependability situation. First example is the power distribution, so our power distribution architecture. So basically when the cars become more automated or more autonomous, the system really need to make sure that the power distribution, so how the battery power is distributed to the each individual systems, or is supporting the needs of this dependability without having too much hurdle on their -- or burden on their wiring harness because the car should also be -- not become so heavy with all these wires. And by that, so-called intelligent power distribution is needed. That's why we have so-called intelligent power switches, and this is a product category where we are actively designing solutions for our customers. So we call it PROFET or PROFET wire guard, PROFET local. So these brand names which we have they are -- this all is offering integrated protection and diagnostic features, which is typically not available in classical relays and fuses. And as you can see on this page, if you take, as a reference, a Level 2 car, which has round about 35 to 40 of such switches, the number is doubling in a Level 3 and more than tripling in a Level 4 and 5. And it's an area which not many people think about, but it shows or it illustrates that it's a very nice growth opportunity when it comes to autonomous cars. Another example on Page 23 is for the trend of -- towards dependability or functional safety is the security aspect, safety and security in the memories. And this is actually the business which is now in Infineon through the Cypress acquisition. And if you take, for example, the need of software-over-the-air updates in the microcontroller systems or the increasing use of GPUs or MPUs in the car, all this is driving demand for safe and secure external flash. And we here do have a unique offering as we are combining the competence of microcontroller and memory in one product. And with that, we could have been able to offer this Semper Secure NOR Flash, which is the first memory solution on the market combining both the security and the functional safety aspect in one single device, and that's why the most advanced systems will take advantage of that one. So a second example where this story about dependability is creating revenue growth potential. 24 is the third example, which I wanted to mention as a growth driver out of this dependability story, the microcontrollers. So you see that the overall market of the microcontroller, which was more in the EUR 1.6 billion back in 2010, is now increasing to EUR 4.8 billion by '25. And consequently, our MCU revenue also will grow strongly. And the major area of revenue is exactly in this dependable ADAS part. This is the square which is marked in this berry or purple color on this slide. And you see from the size of this square how fast this is growing. It was more relatively still small in '20, but there's a significant growth in the next years. And this is the -- due to the excellent design win momentum, which we have in our second generation of AURIX, we will see a strong growth in our microcontroller business in the next years due to this effect, due to the success which we had in this fail operational secure and safe microcontrollers. So on the Page 25, this actually gives you or illustrates 2 examples, these 2 OEM platforms, a higher platform and the medium-range platform. And one is ramping this year, the next one in the next quarter. And you see the strong take rate, so how many AURIX microcontrollers meanwhile are selected by our OEMs in their applications. This is reaching out from ADAS functions, like in the radar, camera, sensor fusion, but then also the classical powertrain, the safety cluster, the engine control, airbags, so many, many applications. You also see that, meanwhile, we can also show the parts where Cypress from the acquisition plays in, and this is the controller part, but for sure also the connectivity part and the part on the memory. So coming to the end. All in all, I think Automotive division is really well placed for growth. In the xEV, we are in an excellent position within upcoming silicon carbide platforms because we can here nicely leverage in the advantages we have in the technology but also in the packaging, in the scalability and, of course, using our large customer base, which we've developed already in the IGBTs. In the ADAS, this scheme about dependability is a must meanwhile, and it's really a driver for further semiconductor content in many different areas in our portfolio in this dependable systems from the sensor, microcontroller, the memories, the power, the quality of our products, the functional safety competence, the security aspect. These are all key elements, which is simply unparalleled. We bring so much into this requirements of our customers that we are really seen as a key partner to them. And you also have seen that how the AURIX microcontroller, meanwhile, has become the first choice microcontroller for these high-growth applications. And overall, you see that all these ingredients will help us to grow first on the top line. We are ready to serve that growth. Thank you for your time. And I think now it's time for Q&A.

Thank you very much, Peter. That was great. Before we go to the line on Q&A, maybe I'll just ask a couple of questions from my side, and then we can go to the line. On Slide 6, you had said that based on market research companies, like IHS, you are expecting around a 13-plus percent growth for automotive production next year. One, are you comfortable with that growth? And what do you think will be your content growth next year? Or what are the kind of content growth trends that you're seeing right now, which -- how much can Infineon grow on top of that, say, 13% based on content growth trends?

Yes. Thanks for the question. I think, first of all, on the car growth, I think we need to consider that there is still potential effects on the COVID-19 second wave, U.S.-China trade war, Brexit, and also let's see how the growth rating on the car will be on the semiconductor content. I'm planning as a normal model like we always communicated, so growth coming a little bit from the classic application, 1% to 2%, 3% to 4% from the structural growth drivers. So I would say no change compared to what we reported so far. Let's see what the number of cars bring, but on the semiconductor content, assume normal growth rates on the BoM on top of the car production.

Thanks. And then on the battery management systems on Slide 13, this is the first time that we've heard you talk about BMS so much. Previously, companies, some of your competitors, like TI and XP, have talked about it for some time now. So I'm just wondering what -- since you're coming into it a little bit late, can you get a good position here, like you have in some of the other sort of power areas? Have you already seen some design wins here, which gives you confidence that you can be a significant competitor here?

Yes. I think, first of all, it's important to note that this is an application which is still in its infancy and very much uncertain about how the different technology trends we develop, for example, build a train core more for single-cell balancing, multi-cell balancing, whether it remains a wired communication or we move to Bluetooth Low Energy. But it's an application which is also developing in volume. And for us, the application is interesting because it's -- the system is very complex, and we actually have all the building blocks and ingredients even with Cypress now, the Bluetooth Low Energy. And it also helps that we have design wins as your question was related to design wins in the various products, like microcontrollers, the sensors, but also meanwhile, we have first design wins which include the more specific products, like the cell balancing ICs. Sure our share still is in the single digits, but we are here to grow.

Understood. Thank you very much. Rosy, could we take questions from the line, please?

[Operator Instructions] And our first question comes from line of Sandeep Deshpande from JPMorgan.

I have two quick questions, if I may. Firstly regarding what Infineon sees at the moment in terms of the electrification market, clearly that is happening as we speak. And how do you see Infineon's market share? I mean, you've talked about these dollar amounts that you will have in these different stages of electrification, whether it is 48-volt, half -- mild hybrid, full hybrid, et cetera. So where -- what is Infineon's share as you see today in terms of the design wins which have occurred across the ecosystem and where Infineon had in terms of those wins? And then my second shorter question is you've talked about the price range for 48-volt hybrid. I mean, that seems to be like it's going to be a big overall volume. But are you really going to see the high end of that estimate? Or is it going to really be a $30 addition from 48-volt?

Yes. Sandeep, thanks for your question. So first of all, the different shares in the electrified cars is -- the market is so diverse, modules versus bare dies, direct OEMs versus tier 1s, it's always a bit difficult to comment on the real market share because it's in these different areas. You know me, typically, I use the answer then, how many cars are using our system? And here the good news is if I take 2019, this was again a year were round about 15 out of the 20 most selling plug-in hybrids and fully electric cars did use our product. I think more importantly is also now, as you also mentioned, different technologies. One is the perspective into silicon carbide. And here, I would say that the majority of the high-volume platforms are still in front of us in terms of design win, but I at least want not to miss to mention that actually last week we got a new design win with silicon carbide based on a non-European electric OEM. And this actually is a mid-triple-digit million design win, but it's from -- we did win it because of this situation of the scalability because this platform is partly IGBT, partly silicon carbide. And this is one good evidence that we can win business in silicon carbide, but also we can win business because of our strong foothold in the customer base. So this was a good success there. And concerning 48-volt, yes, I'm confident from the power perspective on this range simply due to the effect that you need a minimum power of the electromotor to drive for the start and stop function of the car. And I see that the trend towards using that BoM really -- and for that, you need the power portion of that one in order to get the kilowatts needed for driving the acceleration in the 48-volt systems, as well as then if you think about 48-volt systems, one is the main inverter, but then typically, these premium cars have a 48-volt board net. They start to add additional applications which need power, for example, dampers, avoidance -- anti-avoidance -- anti-collision avoidance aspect where you have -- where you lift up the car by 8 centimeters to protect the driver. So there's a lot of more secondary power semiconductors used for that application once they have established 48-volt as a system.

The next question comes from the line of Adithya Metuku from Bank of America.

I have two. Firstly, just on the silicon carbide backlog. It feels a bit like all of your competitors are putting out press releases. We've seen [indiscernible]. We've seen some rumors around SAIC looking for partners on silicon carbide. I know you talked a bit about how platform wins are ahead of you, but I just wondered if you could give us some color on how the backlog is trending. I know you just talked about this triple-digit win, which presumably wasn't in that EUR 1.8 billion backlog number you've given to us. Any update on that would be very helpful. And secondly, just on Cypress. As you consolidate Cypress, can you talk a bit about what are the things you're finding? Cypress used to talk about the addressable market for their automotive business doubling over 5 years, i.e., almost 20% growth for that business. Can you talk a bit about why you're not raising your guidance around this given -- as you consolidate Cypress? Any color you can give around that would be very helpful.

To your first question, so this design win, which I just mentioned, was not inside this EUR 1.8 billion, this is new last week. This is on top of that. And I think also important to know is that there's a lot of announcement out, but I think it's very important to see when are OEMs really awarding platforms. And actually, there was only so far 2 high-volume platforms awarded by OEMs. One is the one you know from last year with Hyundai. The other one is not with us, but this is Tesla, as you know. So their '24, '25 SUP, their high-volume platforms will be hitting the road, are going to be awarded in the next quarter. So that's why I'm very confident that we are well positioned because the design win from last week shows that we are well positioned to capture a good share out of that one. So then your second question was Cypress growth perspective. Okay. So the growth of microcontroller, which we do show on 24 -- Page 24 is the legacy Infineon AURIX, so this is not including Cypress.

Understood. But maybe if you could give us some color around what you're seeing as you consolidate Cypress, the pros and cons that you're seeing would be very helpful?

Yes. The pro definitely is that with the memory solution which we have, we have a high-growth opportunity with good profitability and is adding needed components for the future advanced systems in the Automotive. When it comes to microcontrollers, as you know, with the AURIX, we are more in the powertrain safety-related, ADAS-related function. Here, Cypress was strong in the cluster infotainment and built up sizable design win funnel in the body electronics. So here, it's very complementary and we can do a lot of cross-selling, so using our strong customer base to sell the Cypress products into the application. And this is also valid for the other products which are not in my division but in my colleagues' divisions, such as WiFi, USB charging, Bluetooth. So there's additional opportunity for cross-selling of those devices into the Automotive customer base.

The next question comes from the line of Aleksander Peterc from Societe Generale.

I just have a couple. First, on your view on the xEV market pre and post pandemic, would you say that the market is now higher as a result of all the green initiatives and stimulus packages and so on? Or is it lower because the overall car market is lower? Just kind of a general view of how your vision of xEV as a whole has changed for the midterm? Then the second question is pertaining to the slides 15, 16 when you talk about your scalable portfolio and you say that existing customers can go to higher performance with the same form factor of module in silicon carbide. Now it was my understanding that SiC devices have a lighter module because there's a lot less heat dissipation, and so the main advantage of SiC was that you could have a smaller, lighter module. So if you could just explain to me why it will make sense to keep the same module form factor when you go to silicon carbide? And the just last final point on Siltectra, if you could update on the progress there?

Yes. I think -- so first of all, I think you're right. There's both assumption, on the one hand side is additional stimulus packages and subsidies are actually boosting the demand, and you see that in particular, for example, in Germany where we have this specific tax situation, but Europe in general, I think July, Europe was even now higher than China in the electromobility. On the other hand side, if you talk about 95 gram per km, then for sure, if the average -- if the total number of cars go down, you need lesser xEVs to blend in. Or to put it in other words, if you still blend in more, then it's much more easier to achieve the target. So at the end of the day, especially when we talk about Europe, it will remain the OEM's choice on how they will position in terms of penalty versus meeting their CO2 targets. But I see no deceleration. Actually, what I saw from all OEMs and tier 1s I was talking to is at least that they are on plan or even accelerating their plans for the electrified cars. Then on the module, very good question. And actually, both is true. On the one hand side, if you take a HybridPACK drive from the form factor, then you can fill a lot of more silicon carbide. By this, you can improve the power and boost performance. So that means for those customers who like this platform concept with the form factor, it's not a real penalty, it's an opportunity for them because they can reuse their system. And they plug-in the silicon carbide HybridPACK drive even though it's maybe bigger than needed, but then they have the opportunity of the scalability, ease of use, fast time to market. But you're also right, if you then would optimize the system in terms of size, for example, if you want to integrate it very tight into an axle, then you would come up with -- we have also the HybridPACK DSC kind of modules, which are much smaller in form factor and where you optimize on miniaturization. It depends a bit on the strategy of the customers, but we as Infineon have -- are very flexible. We sell chips; we sell discretes; we sell HybridPACK DSC, double-sided smaller modules; but also then the HybridPACK drive.

And on Siltectra?

Siltectra, sorry, I missed out that one. We are -- development is according to plan. So we had the plan to come up with the wafer split by '22 and the pool split by '23. And the current progress in the development activities is very promising. We are on track with our development targets.

The next question comes from the line of David Mulholland from UBS.

Just two questions, if I may. Firstly, in terms of how you see the market evolving, between bare die, discrete components and modules. Obviously, you haven't changed much in terms of what you see the power opportunity within EV, but I guess some of the discussions I've had through the supply chain suggest it's trending more towards modules, which I would suspect is more positive in terms of the content opportunity for you. So I'd love to get your thoughts on that. And then just secondly, on the silicon carbide design win from last week, can you just give us some color on whether that was someone you were already supplying into with IGBT and that led to it? Or kind of what led to or helped you get embedded with your new silicon carbide products?

Yes. Thanks, David. So first of all, in terms of the design win you just mentioned, so it's actually a customer which we did not supply IGBT yet. Here the success factor was more on the scalability and flexibility because this customer wants to have IGBT-based and silicon carbide-based options in the platform. And by that, he really was -- this offering -- or the scalability of our offering was appealing event and also the performance which we could demonstrate with our silicon carbide, state of the art technology as well as in the IGBT. So performance and scalability. Then your question about trend, bare dies and modules, I would say not a real change in the trend. I think it's still valid that depending on the philosophy and the R&D target the OEM and the Tier 1 has, it's one or the other. If you go for full optimization, if you feel that you have the own packaging assembly technologies, then you would rather tend to bare dies. If time to market, scalability and also missing competence on this sophisticated chip packaging technology, this topic, then it's more the modules. But I would not say it's a change of trend compared to what I saw in last year.

Is it fair to say though that the bias is a bit more towards modules? Because I guess some of the big volume ramps that are coming in the next year, particularly the likes of the ID.3 and ID.4 are using a standard module rather than getting more involved in the design. Is it fair to say, it makes your content looks slightly more conservative?

That's fair to say. If we take that -- if you take now the cars on the street, then definitely, we will see a stronger focus now simply due to the fact of the MEB. That's fair.

I'm afraid due to lack of time, we'll have to take only one more question. So Rosy, could we take the last question, please? Thank you.

So our final question comes from the line of Achal Sultania from Crédit Suisse.

Just a couple of questions. One on the silicon carbide platform. Can you just help us understand, I guess, you've been trying to do this Trench technology, if I remember correctly, as opposed to a planner. So can you just help us understand like which generation we are in today? And what are the next steps of trying to get that ramp up towards Trench technology? And can we expect to see an inverter module based on silicon carbide, like a proper car model launch next year? Is that on track? Any time lines around that? First half? Second half? Any clarity?

Yes. Thanks for the question. So we are currently ramping first-generation Trench technology, and the answer is yes. Hyundai will start being on the street in '21. And this is -- first-generation technology is in the ramp up. The second-generation and the third-generation silicon carbide Trench technology are in the development. For the second generation, we are currently in designing activities, and third generation will also then follow soon. So that means first generation ramping; second generation in the coating process; third generation in the development.

And any color on the performance improvement from first gen to second gen?

Out of my head, I think it was a 20% cost performance improvement from that perspective. And then it depends on whether you optimize on size or on costs. There's then different flavors product by product.

We have come to the end of Q&A now, so I will hand back to Janardan for any concluding remarks.

Thank you, Rosy. Thank you very much, everyone, for joining this call. And thank you very much, Peter and Joachim, for taking the time to go through it. Unfortunately, we don't have time for any more of the questions. Thank you very much. Bye-bye.

Thank you all for taking the time. Bye-bye.

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