Infineon Technologies AG (IFX) Earnings Call Transcript & Summary

Good day, everyone. Welcome to Infineon's PSS Update Call. Today's call will be hosted by Holger Schmidt, Director of Investor Relations of Infineon Technologies. As a reminder, today's call is being recorded. This call may contain forward-looking statements based on current expectations or beliefs, as well as a number of assumptions about future events. We caution you that statements that are not historical facts are subject to factors and uncertainties. Many of which are outside of Infineon's control that could cause actual results to differ materially from those described or implied in such statements. Listeners are cautioned that Infineon's actual results could differ materially from the results anticipated or projected in any of these statements, and they should not put undue reliance on them. For a detailed discussion of important factors that could cause actual results to differ materially from the statements made on this conference call, please refer to our quarterly and annual reports available on our website. At this time, I'd like to turn the call over to Infineon. Please go ahead.

Yes. Hello, everybody, and welcome to our PSS business update call. Today's call will start with the presentation given by Andreas Urschitz, Division President, Power & Sensor Systems. A live slide show that is synchronized to telephone audio signal is available on our website at infineon.com/slides. After the presentation, we will be happy to take your questions, kindly asking you to restrict yourself to 1 question and 1 follow-up, please. A recording of this conference call, including the aforementioned slides, is available at infineon.com/investor. Andreas, over to you.

Yes. Hello to everybody. This is Andreas speaking from Infineon. I am delighted being your host today for performing the PSS presentation. In that case, digitally as the digital Mobile World Congress 2021. Holger, next page, please. I'm starting with, as usual, an overview of power and sensor systems at a glance, if you will. On the left-hand side, you can again see an updated development of PSS financials in terms of revenue growth and also segment result margin. As seen in the past 5 years, PSS has managed to grow its revenue 7 percentage points CAGR. Last year, ending up at around about EUR 2.7 billion of annual revenue. Profitability used to be at 24 percentage points. Looking into the first half of the current fiscal year 2021, we are at around about EUR 1.6 billion in revenue. Again, repeating 24 percentage points of segment result margin. If I move -- if I may ask you to move your eyes towards the right-hand side of the slide. So this is PSS' revenue split by major product segments, round about 40% of PSS revenue is done with MOSFETs, power MOSFETs, that includes also silicon carbide and gallium nitride. Around 25 percentage points are power ICs. Another 25-plus is frequency and sensors and the rest 10% including HiRel is what we would call the others category. Next page, please. Let's come to the market. This is the PSS business or let me say, the majority of PSS business along the major application segments where typically we are in. On the left-hand side, you can see the sections of computing, communication and so on and so forth, you can read on your own. Let me guide you through on how we do see the market on the short term and midterm segment by segment. So top left in the computing segment, which contains mostly applications around data center servers, but also PCs, computers and laptops, which account for 20% of PSS revenue. We see a strong market demand also in the second half of fiscal year and calendar year 2021. Mostly that is driven by the effects of digitalization and the demand for, so to say, more PC infrastructure, more Internet, more connectivity and so on and so forth. That is translated into computer equipment and server farms, data centers. We see continuity of demand also ongoing in calendar year 2022. So definitely, that market is, and we are supposed to see it to remain a boom phase. Communications segment, which pretty much has to do with chips that we sell into 4G, 5G infrastructure and also others adjacent kind of applications, 9% of PSS revenue. We see a sidewards trend at the moment in second half of calendar year '21. Mostly that goes back to the 5G supplier landscape resorting itself after all this cosmopolitical and global political tensions in between China and the U.S. So that market is a bit shaky, if you will, at the moment. 2022, we expect that to be much, much clearer with regards to the makers of 5G infrastructure to have found the new routes and paths to kind of take their shares in the global market and demand from 5G. So in a nutshell, we expect the market to boom. Smartphones, I keep it a bit shorter. Makes up around about 20% of PSS revenue. We see that strong in also second half of calendar year '21 and see it continue to boom in 2022. 5G definitely and a rising number of use cases that rely on 5G, which goes hand in hand with more and more 5G infrastructure to be deployed, are drivers for demand also for 5G-enabled mobile devices. Consumer section, another 20% of PSS revenue is in a boom phase. So everything which consumers, like you and me need at home, used to boom during COVID and continues at the moment to doing so. In 2022, we expect that market to kind of make a sidewards trend. So our expectation is that after people have equipped their home with new devices, new TVs, new whatsoever electronics that are surrounding us that this takes a little bit of a pause and consumer spending supposedly may go into the area of the more leisure time and outside oriented activities. So here we see sidewards trend. I want to enter the slides with the industrial and automotive segment, which is another 20% plus of PSS revenue. Automotive subsystems such as onboard chargers or then also electronic charging stations as well. And there's also electric tools like drillers. You can see here on this icon, have been booming in 2021, and we expect them to continue to boom also in 2022. So all in all, if you will, quite a positive outlook for calendar year '22 as far as the whole of PSS is concerned. So we see that to be a function of 2 factors, if you will. Factor number 1 is the cyclical demand drivers that you're all aware of, but factor number 2 is also structural demand that comes along with those applications that you see here, which are typically in themselves strong growth applications as a function of, on the one hand side, digitalization and acceleration of digitalization. And on the other hand side, and also CO2 at the green deal also that drives anything that goes in direction of energy savings and that blends into energy-efficient semiconductor as well as sensors, I come to a couple of examples then later, in order to reduce CO2 emission going forward. There's also kind of counter momentum and, if you will, so-called -- however, while the market continues to boom structural and cyclically, we also see a headwind in the context of COVID not yet being over. Another example is the recent lockdowns that used to happen in Southeast Asia. And as far as Infineon is concerned, we are also hit by countrywide lockdowns in Malaysia. So there was a new outbreak in certain regions. Infineon entertains manufacturing sites in Malaysia. Mostly our packaging sites in Malacca. We managed while there was shutdown ordered by the local government to get us on the list of system critical industries, if you will. At the moment, we are still sorting out on what the impact of, so to say, a certain amount of lockdown situation that still remains -- will impair or will bring us towards in the foregoing a couple of weeks and months. Next slide, please. At this moment, I want to dive a little bit deeper into a subsection of PSS business, namely in the radio frequency and sensor portion of PSS, [remember back] that makes us somewhat like 25 to 30 percentage points of PSS revenues. So let's go a little bit deeper on what PSS offerings are looking at the very moment and give you also a little bit of outlook with regards to road map information. On the chart, you see an overview of PSS' most important product families. We are offering underneath the portfolio of sensors, top left, the MEMS microphones. Where we're pretty much convinced a significant portion of the market to buy microphones and audio chips from PSS from Infineon, which brought us the #1 position in market share in 2020 already. Lowest power consumption and the best performance in Audi experience are definitely strong sales arguments where our customers like to work with Infineon and want to go with us. Radar sensors, which are pretty much used in presence detection and vital sensing functionalities. So here, we are proud of having the most accurate and best signal performing radar sensors in the market. They are used by many customers as a kind of 3D sensor sort of a replacement of what I would call the human eye, without creating a picture, but telling electronics, what happens in the surrounding such as using radar technology for vital sensing. We also have 3D time-of-flight image sensors, both create that point cloud, if you will, of the 3D surrounding of any electronics device. So here, we are offering a turnkey solution to our customers for mostly in the area of smartphones but also in applications such as payment terminals for face identification, automotive in-cabin sensing and other such related applications. People like to buy from Infineon because we offer a turnkey solution, which is the hardware, the 3D imager, including a turnkey ready-to-use software to operate the 3D camera. The software we do together with our partners and where we also hold kind of a minority stake, the name of this company is PMD Technologies, as you are well aware. Fourth category of Infineon's product portfolio on the sensor side, is our environmental sensors. So we have been introducing a very accurate and small form factor CO2 sensor to the market in 2020, which also found its way towards being used as a sort of an indicator for aerosol density in rooms and giving very early information with regards to heat, the COVID infection risk may be rising as a function of increasing CO2 in a certain room. So here, we see a lot of momentum and interest in the market to get that sensor being used in many of our applications that go far beyond also what is mentioned here, bottom right reduction of, so to say, virus risk and related things. Next page. That one is meant to give a bit of an idea of the offering of Infineon in the context of sensors. In principle, Infineon provides 3 different business models or offering packages to its customers. Offering number 1 is the single sensor chip, if you will, like a single radar chip, a single microphone, a single 3D camera, where a customer and most of these customers who use the plain chip built those chip in their software ecosystem and environment. These are typically large sized customers, mostly Internet and Internet hardware giants as you're well aware. That buy chip from us and do the work on the system integration of the chip and using their software in order to get maximum out of Infineon's high precision sensors in order to create new use experiences such as unique audio signals and voice detection in a smartphone, but then also presence detection in a certain room setting. However, when you talk about the wider field of market players and if you will, players that make themselves places in the area of IoT and related applications, you all of a sudden realize that the vast majority of customers are lacking experience in terms of software integration and algorithm capability in order to get the best out of the sensors. They buy from Infineon to make a certain system functionality like presence detection, fiber sensing, 3D imaging in the context of face recognition and other such use cases truly work. These are customers that typically ask for model #2 shown on this chart, where Infineon in the meantime, since the acquisition of Cypress is in a comfortable situation to offer full single sensor systems to its customers, which is, in this example, the combination of a sensor, which provides raw data like a radar sensor detects the 3D cloud of the environment to be interpreted by microcontroller, in that case, Infineon's legacy Cypress piece of family, coupled with some elements of software and even machine learning, which all of a sudden enable a customer to use kind of a ready-to-use hardware and software-based solution to deploy in their system. Systems such as smart speakers, our air conditioning systems and many others, we come to that then also in the later part of the presentation. Last not least, is the model #3, where we combine different sensors plus a microcontroller plus software elements and machine learning. Like in this example, a microphone plus a radar sensor and the compute power, including the software to interpret what the microphone is saying and what the radar chip is giving as an input signal. All of a sudden customers here with have the possibility to get access to multi-sensing functionality where a radar chip can help in a room situation to detect where people are talking and then rectifying the beams, the audio beams from microphone in that way that the audio reception through the microphone is getting much, much better. So the combination of sensors, some talk about this and also by saying and calling it the sensor fusion creates a lot of additional value to our customers. In a nutshell, customers can choose, 1 or 2 or 3 from Infineon. Next page. That kind of business also requires much more intensive collaboration and joint development with our customers because different scenery settings for instance, for presence detection while using a radar chip looks different in the smart speaker as compared to when you use a radar chip in whatever kind of a headset, for remote controlling the headset through gestures. So in a nutshell, what this picture shall say is that there's a lot of collaboration ongoing and joint development ongoing in particular in the software engineering side in between Infineon and those customers that are listed here. In order to make applications such as Sony's latest and greatest high-end over ear headset, which is using 9 microphones from Infineon. Work also with Xiaomi smart cleaner which is using a 3D camera from Infineon in order to kind of let the cleaner know the room circumstances in order to avoid too much kind of trash situation and the cleaners kind of then silently driving through the room and cleaning up the stuff. Next page. That one goes a bit deeper now in the section of silicon microphones. You know pretty well that Infineon has become the market leader in silicon microphones in terms of market share and units in 2020 last year already. And one of the most interesting growth markets that we do see and where we have gained strong momentum also Infineon as a core supplier is the application of true wireless stereo assets. And this is what is here and also shown on the top right part of the chart, it shows an estimation of growth of TWS headsets going forward. So the average growth rate by analysts is suggested to be around 42 percentage points. Infineon's microphones with their super good and world record signal-to-noise-ratio and a couple of other elements that we are providing is predestined in order to enable true wireless stereo headsets then going forward. So very interesting application for us, where we expect a lot of growth going forward after we have successfully entered all the major true wireless stereo headset makers already in 2020. Next page. And this one is an even deeper dive into what's the bigger business opportunity for Infineon as a, if you will, chipset and system solution supplier for TWS application. In a nutshell, you can say that Infineon within its portfolio has almost each and every active semiconductor that is needed in order to equip and build such TWS systems at, so to say, very high system requirements, providing the greatest user experience that you can imagine. So let me start to top in the middle. Infineon has a gesture sensor in the form of radar sensor, which can be used going forward in the, so to say, ear plug for remote control in the ear plug. That's something that's under development, if you will, by a couple of these TWS makers. Infineon is massively used already for active noise cancellation in ear as well as outer ear, microphones are being used for that one, sophisticated technology to provide, so to say, a meaningful real kind of room experience while using that ear plugs. It's very difficult to do, it requires high-end, so to say, microphones that help noise cancellation to be done in a way that when you use these ear plugs, the acoustic experience is as natural as possible. Other than that, Infineon provides connectivity devices, Bluetooth and WiFi that are being used in the ear plug as well as -- and also, so to say, in the basket underneath, so to say, the cage for the ear plugs. We are also providing the chips in order to power this kind of cover. Also USB chips are being provided in order to kind of make data transferring between the cover and wherever you then plug it into a USB cable. Infineon provides micro controllers in order to have a communication brain in between the ear plugs, the cover and then also the cover, so to say, the charging cable. And other than that one, we have 2 things under research, if you will, that's at the moment, the MEMS speaker. So here Infineon is not yet having a product, but we are working on this since the ear plug is using a rather small and low volume kind of a speaker in order to give you a sound and make you hear a meaningful sound experience. All of a sudden a silicon-based speaker becomes very interesting and it's something which Infineon is putting a lot of R&D into. And last but not least, we are also working on a voice processing unit which is kind of an accelerometer. It shall be used going forward in the ear plugs in order to ease up the detection for the ear plug when you kind of move your mouth while speaking, in order to make a meaningful noise cancellation and cancel out while you speak your own language from the speaker that might be transporting language into you with the help of the BPU, that can be excluded. Nice opportunity for Infineon going forward. And we're working on, so to say, further gaining momentum in revenue and profit in that section. Next page. I come to our offering in radar. I've been talking about that quite a lot during the last MWC, so to say, face-to-face presentation and discussion with many of you who participated that very day in Barcelona. Mostly radar in the meantime, found its active use in these 2 use cases that are mentioned above. One of which is presence detection. The radar can very accurately segment a room scenery, like you can see on the bottom right-hand side with regards to how many people are in the room, how far away are they from the electronic device. And are they moving in a room from A to B to C. Why is this so meaningful and useful for many kind of electronics? Think about your air conditioning system in a hopefully smart building, it makes a difference whether the air condition switch is on or off depending on the room occupancy and the number of people in the room. So I think that's pretty much a no-brainer in the context of then also energy savings. But the other topic is radar can be also used in order to kind of steer the stream of the air in the room. As a function of radar making the air conditioning system in a room understand where people sit and where they move. So the room feeling with the help of radar, while the climate or the air conditioning system is being switched on, all of a sudden gets much, much better, and the customer experience is heavily improved. That's just one example with regards to where presence detection makes a lot of sense. Energy savings and the customer experience in a heated or cooled room environment. Health monitoring is something very interesting. Also very meaningful, and so to say, innovation, pace making customers, in particular in the U.S. have started to use the radar chip being put into applications such as smart speakers or applications like the Google Nest remote controller somewhere in the sleeping room. In order to use the radar functionality to detect and surveil your sleep. So it's used for sleep monitoring. It's used for, so to say, surveillance of vital sensing. And the radar information giving them to Google Nest controller, if you will, helps people a lot in order to then over the time, kind of observe your own sleep rhythm, do things like apnea and then also snoring detection and by doing so giving you hints in order to sort of work on your own room settings to simply improve sleep and therefore, improve wellbeing. Lots of interest by many, many electronic device makers in that functionality as far as radar is concerned. Next page. Deep dive into time-of-flight. Time-of-flight has been discussed up and down and back and forth. With regards to 3D cameras being used for face detection on the, so to say, front side of the smartphone, but also improvement of photography and also augmented reality features on the world-facing side. One of the interesting things where Infineon has been working together with its partner company, PMD Technologies and the third party in China, a company called ArcSoft is a functionality that we are offering, which is under display, 3D camera allowing highest accuracy in face authentication and face recognition to switch them over. Why is that so interesting? Many smartphone makers go into the direction of making their screen bezel-less. So they want to remove holes and camera areas on the surface of the screen putting a camera underneath the screen is something which is requiring a lot of engineering art. Infineon together with PMD and ArcSoft with the help of AI found the solution for [underneath] display 3D imaging. That's going to be launched in the market very, very soon in the fourth quarter of fiscal '21. So that, if you will, an early information for you. We expect and already have a lot of interest from market players on that solution to come to the market soon. Next page. To keep it short, that gives an overview on the latest use cases that we are confronted with in the context of mostly smartphone makers or makers of smart glasses and then also sort of robotic equipment like this smart vacuum cleaner by having 3D cameras built in, so in essence, every electronic device that needs to be better aware about what happens in the surrounding and where 3D map of the surrounding makes a lot of sense is talking to Infineon in terms of how to use and how to then also apply 3D cameras in a smartphone, be it the front-facing or be it world-facing cameras in consumer robotics also augmented reality glasses and such related applications. So momentum that we will see in this market. Next page. And here, we come into the fourth sensing category. If you remember the picture I showed, I think it was Slide #5 or #6 at the beginning of the presentation. It is our latest and greatest gas sensor. So indeed, it is a CO2 sensor, which is the smallest and high precision and most high precision CO2 sensor [on the work] that you can get. It uses Infineon's competency in the area of MEMS technology, where we have, so to say, a lot of know-how, how to do super accurate micromechanics out of our experience in silicon microphones. And the fourth acoustic principle that to a certain degree is applied in our microphones is also used in order to detect the CO2 -- number of CO2 molecules that are in the room in a microelectronic based and chip-based, so to say, housing. The chip that we have been introducing to the market, you see on the bottom left-hand side, so its size is super small compared to anything comparable in the market. It's kind of 14-millimeter times 14 times 7.5 millimeters. It's much, much smaller and also much, much more, if you will, energy saving as compared to anything else that you can find in the marketplace. In what applications, do we see that sort of solution to proliferate? Mostly it is used, and we see market interest in the area of, so to say, air conditioning systems and room conditioning systems. So understanding the CO2 circumstances in certain rooms, be it office rooms or private rooms is very important, so to say, information for meaningful climate and air flow control in given room circumstances. The other topic is definitely the use of the CO2 sensor in the context and also of automobiles were then also CO2 values in cabin are of importance. Many other applications, we expect to come and use the sensor going forward. Because at the end, the making electronics [smell] and understand the CO2 scenario in the surroundings is of a meaningful use for many, many other applications. Next page. Such small and smart buildings as seen here, I try to sum it up. So Infineon's sensing solutions, including power semiconductors including connectivity, including microcontrollers and even security bring us in a pretty good position with regards to being a premier league supplier for a smart building management and smart buildings in the future. So where you can find the Infineon sensors, connectivity, power, security, but then also our control devices are typically in smart building. Downlight systems, so downlights, which are being shipped with power semiconductors from Infineon and also radar sensors in downlights to smartify buildings in terms of letting rooms understand how many people are in the room, to better control the air conditioning and save power, if you will. Presence detectors and CO2 sensors are being used in the air conditioning systems as such. So to say, to do CO2 monitoring and then also regulate the air condition in a meaningful manner. Infineon's power semiconductors are used in general in everything that requires power in a smart building, partially also in, so to say, then the smart building control systems, which are typically in, I would say, smaller kind of observed environment that you typically find in the cellar of such a building. So these are [full] with power semiconductors from Infineon. Last not least, access control. So Infineon's trusted platform modules. Infineon's smart cards are simply used in order to kind of access in a wireless and touchless manner, buildings, rooms and other such kinds of settings. Next page. That's the second last one. People are very often asking me, hey, in particular, when Infineon thinks about customers that are not that knowledgeable how to deal with sensors and sensor systems and who want to kind of perform 3D functionality, be it with radar, be it with time-of-flight, who want to perform CO2 sensing functionality, audio functionality, how do you enable these customers in order to get them quick started in their R&D surrounding? What you see here on the right-hand side, so bottom or top right of this on this chart is, so to say, a little bit of magic, no longer secret. So we have been providing the market in the meantime for a couple of months with a main board that kind of comprises a microcontroller, WiFi and Bluetooth functionality as a basis. For each and any developer of an IoT device in order to combine and connect to the Internet a wind board, which is a fully functional CO2 sensing system that the customer can simply kind of stack on the main board and kind of connect ready-to-use CO2 sensor towards the www. And the latest that we brought to the market is another wind board which is a radar sensor, which is kind of enabling to use and that have a -- developed at the customer site use one and the same main board. Get it connected to radar functionality and implement in a very fast and easy-to-use manner, presence detection or vital sensing functionality in any kind of sort of electronic system that the customers' developers are being working on. Next page. Market at a glance. So the microphone market is suggested to grow from EUR 1.2 billion in total available market from a semiconductor perspective to round about EUR 2 billion in 5 years from now. Major growth driver for sure are these TWS headsets. So interesting market for us and definitely growth engine. Time-of-flight images are suggested to grow from this around about EUR 200 million in the market in '21 to EUR 1.4 billion in 2025. So there is a broad proliferation expected, mostly, of course, driven by proliferation of 3D cameras and smartphones. Radar IT market is suggested to go from EUR 150 million to EUR 600 million, also here nice growth for 22, 24 and 60 gigahertz radar chips. And last not least, also very interesting market growth in the area of the CO2 sensors. So that goes from round about EUR 300 million to EUR 700 million in 5 years from now. So all in all, strong structural growth expected for our sensor business going forward.

Yes. Thank you very much, Andreas for all these interesting insights. Ladies and gentlemen, this concludes the presentation, and we would like to open up the call for your questions now.

[Operator Instructions] We'll go ahead and take our first question from Stephane Houri with ODDO.

Yes. Thank you for the presentation. Maybe a first quick question is to understand if you still see the same kind of growth going forward that you have witnessed in the past, i.e. around 7%? Or you see any reason for an acceleration in this growth? And second question is about capacity constraints. Do you see any capacity constraint at the moment? And can you, by the way, describe if you outsource, in-source or both the production of your products in this division?

Historically, we have performed a CAGR of 7 percentage points. In revenue going forward, we expect 9 percentage points or more through the cycle. I've explained a little bit on what are the background considerations. So mostly it is the structural growth of the key applications which PSS is in which will allow us and be the basis for growth that goes into the arena of 9 percentage points plus. Second, on the capacity side. So you always have -- on the capacity question, we have to distinguish, part of our manufacturing our, so to say placed and done in silicon foundries, and part of manufacturing is done in-house. As far as silicon foundry manufacturing is concerned, and we have [polyethylene] foundries. We have part of our power semiconductors [running] foundries as well as then also part of our sensor portfolio [done] in foundries. Everything that comes from foundries, we foresee that we will remain very, very tight and capacity limited until deeply 2022. As far as in-house manufacturing is concerned, so we expect the situation to ease up a little bit relative to what we oversee today. So second half of 2021 should already be, so to say, a little bit better with regards to our capability to ship according to the demand of the market. Nevertheless, I expect us to remain allocated well through 2021 also as far as the in-house capacity is concerned.

We can go ahead and take our next question from Andrew Gardiner with Barclays.

Andreas, I had a sort of similar question to Stephane's, but perhaps we could extend it out into next year. What is -- Infineon at a group level is clearly spending a lot on CapEx at the moment in order to provide for the structural growth as well as to alleviate some of the current capacity tightness. You mentioned you think things remain pretty tight through the second half of this year. What -- as a division manager, what are you expecting to see in terms of capacity coming online for you -- for your product lines in particular into 2022? What kind of growth can you see as a result of that?

Very generally speaking, we have a guidance out in the marketplace. So as far as -- so to say short term, '21, fiscal '21 growth is concerned, we pretty much foresee that we as a group and also PSS will remain in the guidance and will remain in the revenue corridor that has been communicated multiple times. To be a little bit more specific on PSS and the outlook of PSS. Kindly ask Holger to maybe flip back to the slide with the revenue. I think that was Slide #3 in the presentation. Give me a moment. It was Slide 2. Thank you very much, Holger. That slide already gives you a little bit of the answer so just by applying mathematics. So if you look into what PSS was capable of performing in the first half of 2021, EUR 1.6 billion in revenue. And if you consider that to be at least duplicated in the second half of the fiscal year, that gives a little bit of a feeling on where, so to say, give or take, at the end of the year, you may find PSS ending up with in terms of its revenue performance. And that's a significant growth in revenue relative to fiscal year '20. And that significant growth relative to fiscal '20 is a function of our CapEx strategy, which I also was kind of elaborating on all the times to talk to you. Being a competitive differentiator for not only PSS, but also Infineon as a whole going forward. Owning capacity and spending CapEx that we are doing it, is decisive with regards to us being able to offer to our customers best supply security, which makes the difference in terms of the customer and the particular large customers deciding for Infineon, where ever then supply security is of certain value. And please bear in mind that there's nothing new I tell you that while we speak, the importance of semiconductor availability and the value created through semiconductor availability and Infineon being able to ship ahead of the one or the other competitor, that value has never been larger before, and our customers are continuing to buy in that -- buy in to that rationale and want to partner with us also going forward. So in a nutshell, we will continue to deploy CapEx. We will grow. And as I said before, please just apply the mathematics. Significantly in fiscal '21, and there will be a further capacity extension in '22. I am not yet in a position to give an outlook where we will finally end up in terms of capacity in '22 because still we are sort of evaluating on how much we get from the foundries that is also of an importance to us and how much we get deployed in terms of additional equipment installation in 2022, which will then again make the difference in terms of revenue growth. So that's a long answer, but it gives a little bit of flavor where we stand.

We'll go ahead and take our next question from Jürgen Wagner with Stifel.

I have a question on your 3D time-of-flight turnkey solution that you mentioned. What ASP are you targeting? And who would be your display partner? And the second question on the supply chain issues. And you mentioned the recent lockdown in Malaysia with impacting your back-end price. How meaningful is the impact for you in terms of revenues this quarter -- of the last quarter?

Yes, pricing is always a difficult thing to comment, as you know pretty well. So typically, for such kinds of devices. Of course, as a function then also volume and as a function of is it a large pixel array or a smaller pixel array, which has a massive, massive, so to say, difference with regard to the camera performance and many, many others. So specifically, you're talking about price ranges, which are again volume-dependent and functionality dependent. You will find the marketplace something in between $2.5 up to even the double digits. So when you think about very complex 3D systems that are used, for instance, in robotic systems for warehouse management and stuff like this. So that shall give you some feeling.

Is that your ASP or the total ASP you share with PMD?

There is -- there is not a total ASP, if you will, with PMD. There is an Infineon ASP that includes, of course, the software spec, if you will. I think that gives you the answer. So hardware, software that's what we are talking about here. Yes, and the second part of the question, can you please repeat?

The display partner, I guess, you are testing it with a display provider?

We are not partnering with the display maker as such. So we are partnering with a company whose name is ArcSoft, who are specialists in if you will, video computing and vision software, mostly today in 2D cameras going forward in 3D cameras. And together with them, we are working, so to say, on making algorithms, make the 3D camera work under display so that the signal detection of, for instance, of measuring and detecting your face in the authentication use case is accurate enough and fits the very high standards that are meanwhile usual in the marketplace. So -- but the trick is not the display maker as such, the trick is, so to say, to find the artificial intelligence and the algorithms for under-display use.

Okay. Okay. And the second question was on the impact of Malaysia in the last quarter in terms of revenues?

The impact on? Yes.

Yes, how much sales you lost basically?

That -- I apologize, I cannot answer yet. That is under elaboration since that is happening while we speak. So the majority of manufacturing modules, we managed to still keep on working full steam. There was a bunch of manufacturing modules, which due to, so to say, people needing to stay at home, we couldn't operate. The entire impact towards Infineon supply and revenue is under elaboration. So we will communicate on that more tangible figures for you in the very near future. So please be patient.

We'll go ahead and take our next question from David O'Connor with Exane BNP Paribas.

Thanks, Andreas, for the presentation. Maybe a question on my side on the data center side of things. In data center, you talked about being positive on that business. Can you just give us a bit more color on the trend at data centers -- at hyperscalers by geography, the U.S., China and for 2022 as well, just to clarify, do you expect U.S. and China, both of them to remain strong? And just could you also just clarify if there -- within your data center business, if enterprise plays a role there? Or are you mainly just focused on the hyperscalers?

Yes. I tried to keep it crisp. So most data center demand and demand for power semiconductors to fuel the data centers with efficient electricity definitely comes from the U.S. as well as China. So vast majority of demand is driven out of these 2 regions. Demand drive in this context, for sure, is hyperscale data centers far ahead of what you would call enterprise data centers or enterprise servers. So the growth engine are hyperscalers class. That's something you did not mention, I think you're also having that in the back of the mind, machine learning data centers. So these 2 things used to be the growth engine. And will continue to be the growth engines going forward. With regards to data center capacity and installations. Unfortunately, there is no clear data available in the public space. So from what we can oversee, we estimate that the data center capacity or data center CapEx amongst major data center installers, such as Amazon, Microsoft, also Alibaba, some of them are kind of releasing the one or the other figure. We estimate that the CapEx capacity expenditure for, so to say, capacity expansion was in the range of -- in the 20 percentage points, give or take, during 2021. From what we can oversee, that appears to continue. So if you ask me, I see that trigger and that demand going on and also towards 2022. To what extent? The sum of all supply chain players really allows 20% CapEx is, to me, not yet completely clear while we speak. But demand-wise, definitely the demand for data center capacity is strong, remains strong, comes from hyperscalers and machine learning. And there's another thing I want to make you aware of. What is just about to start is this I would say, smaller size remote data centers in the context of 5G telecommunication. Typically, these are kind of FOC compute centers. People call them that name that are placed pretty nearby or next to 5G stations in order to do some preprocessing or whatever data that is being pushed through 5G networks before it's uploaded in full-fledged data centers in order to do some compute demand -- compute power, which in the data center, of course, is always costly and coming at the price -- certain price point for the operator. So having said that, FOC computers is something that we see arising and that also drives demand for data centers in a wider sense.

We'll go ahead and take our next question from Sébastien Sztabowicz with Kepler Cheuvreux.

One question on your computing business and notably for 2022 because it seems that the PC market could potentially peak in the back half of this year. And maybe decline in 2022 in terms of shipment after 2 years of exceptional growth. I would like to know how do you see the demand for PC or laptop related products moving into 2022? And what is the size of this specific business within your computing activity? And another short follow-up would be on the time-of-flight sensors. Do you have any specific design wins in hand with your new under-display 3D sensor solution? And when do you expect the first volumes to come with this specific solution?

Okay. Let me answer first question first. The second, you need to repeat because acoustically, I did not understand everything, but let me start with answering the first question. So the vast majority of PSS revenue in this computing section comes from data center. So answering your question regarding what's the importance of notebooks and desktop PCs. It is in the 20 percentage points of minor importance, if you will. I'm asking -- or going back to the question on, so to say, how do I see PCs trending. PCs, I see trending sidewards while we speak with regards to number of desktop PCs. And most of them, we see to happen in the area of gaming use cases. So that's quite interesting that is not new. But interesting that, that's shown a strong growth momentum, namely gamers using the latest and greatest PC equipment in order to have better use experience, if you will. However, also the gaming sectors and the sectors for desktop PCs for high-end oriented gamers, also under certain limitations due to shortages on the, so to say, graphic card ICs, as you know pretty well. All in all, it sums up that market goes sidewards. Last statement, the market for laptops, which also falls under this computing segment here on this chart. We see that trending upwards. However, we see, so to say, an inherent, so to say, a shift of product mix. The number of laptops being produced, which are kind of same client-based systems, which means that they do most of their compute activity in the cloud. That is something which is heavily accelerating. And we think that has a lot to do with schooling from home, and so to say, pupils using that [same client] lower-price laptops, which have the backbone in the cloud for, so to say, digital schooling purposes. So if you will, laptops in terms of number of units are growing in that scenario.

Okay. The question on under display 3D sensing solutions was whether you have already some designs win in hand? And when do you expect the first revenue potentially to come in?

They are what has been -- what has been made public and what I'm in a position to sort of then also share with you is Infineon's position with its 3D time-of-flight imager in smartphones that are being done by Google, for instance, smartphones being done by Huawei, smartphones being done by Honor, which is this Huawei spin-off. Smartphones being done by companies such as Sharp and also LG. So these are things that have been publicly announced. Beyond that one, I kindly ask you for understanding, I cannot share information on the design wins due to secrecy policy, if you will, or confidentially policy of the big smartphone players going forward.

We'll go ahead and take our next question from Jerome Ramel with Exane BNP Paribas.

Quick question, Andreas. On the chart you showed about the sense of market for the MEMS microphone market, the 3D time-of-flight, the radar, and so on. Could you maybe just share with us what kind of market share you are targeting for this market? And the follow-up question is concerning the 3D time-of-flight. Could you share with us the road map you have in terms of pixel size?

With regards to market share target, let me say, I can give you ranges for selected areas. So definitely, we intend to grow our market share further in the area of microphones. So what you have seen before, the MEMS microphones. So while we speak, we are, give or take, in the range of 40 percentage points, plus/minus, depending when you look at it, and what source you are using. So definitely, target is going north of this round about 40s. And so to say, design in and wind funnel also blends in the direction that we can execute on this plan. So the other topic which goes then into CO2 sensing, radar sensing and time-of-flight sensing. Let me put it like this, time-of-flight, we have not set a concrete share target in this context. Time-of-flight, also in the PSS business planning when we're talking about greater than 9% revenue CAGR for PSS division through the cycle, time-of-flight is not included. So that's a wild card for us. Also in our business planning, we -- we believe in this market, we invest in this market, and we have success in this market. And going forward, not a target set yet in the context of market share and also not significant revenues planned into the business case. As far as radar is concerned and then also CO2 sensors are concerned. So also here, it's a bit tricky to talk about the market shares because the subsegmentation or something like radar or then also CO2 sensors, on the other hand side, it's not that easy since you have automotive applications, you have industrial HVAC applications end on end. Not easy to derive a market share target. Of course, we have the revenue plan, if you will. And we could do certain mathematics in this context. But allow me to, at this very moment, not take a specific position on that one. For sure, in principle, I can tell you our #1 position is what we target in radar and also #1, we target them also in the CO2 sensor. If you ask me where are we today? CO2, we are a starter. So not yet a meaningful market share. And radar, we are pretty sure that in 60 gigahertz and 24 gigahertz, we are already market leader. I hope that helps a little bit. Second question was on the imager, sorry. So as far as imaging is concerned, look, I personally, and Infineon does not believe in the same logic that typically applies in the 2D camera segment. But to be, so to say, transported as a logic with regards to number of pixels in 3D. So in 2D, It's always a race for more and more and more pixels on a given size of a camera chip. That's not the case in 3D because the functionality of a 3D imager is -- sorry, the system functionality of the 3D imager is very much, so to say, depending on what the 3D typically is used for. And when you have a look at this slide that is now shown in the webcast, stuff such as then, for instance, a far field looking with a 3D camera in a world facing camera scenario where a 3D camera is being used in order to sort of then also make the distance measurement of a group of people where you take a photo. That in essence and do that very accurately, does not require a large pixel field in order to generate the required, so to say, sensing and dots projected towards a group of people that you're needing to interpret and to calculate what's the distance of the people whom we want to photograph and then do auto zoom and then make a very meaningful and then also energy saving kind of picture shooting or video recording. So what I'm trying to say is Infineon's intention going forward is definitely to grow from 300K pixels, which is today's standard we are offering, getting it closer to the 1 mega if you will, in this context, but not beyond on the road map while we speak. Size of the pixels is number of pixels is by no means the same logic as compared to the 2D camera systems..

I was just going to take 1 more question, if that's all right?

Yes.

We'll go ahead and take our next question from Amit Harchandani with Citi.

Amit Harchandani from Citi, and thank you, Andreas, for an informative presentation. I just have one question from my side, and I wanted to get your thoughts on how we should think about the impact of inflation for your business? For example, in terms of the cost of inputs, in terms of cost of freight, to what extent can you pass this on to your customers, multiyear contracts? Any details that you can give us to help better understand and articulate the impact of inflation for your business this year as well as going out into further years?

As I was mentioning before, the value created by Infineon and by semiconductors from Infineon in the larger industry or even in the economy, never has been at that high grade as today and the trends of our importance to fuel the economy, if you will, with semiconductors is still increasing while we are speaking. So having said that, there are 2 things I want to mention. Point number one, demand and the stronger demand momentum and demand increase, I personally believe has come to stay for a longer period of time than at the moment, all of us can imagine. As a function of that, partnerships with customers and us engaging with customers also has reached new dimensions in terms of strategic nature of partnerships that allow us to engage in long-term contracts, if we will, on the one hand side. So we're engaged with a substantial amount of large sized customers already in longer-term buy and purchase agreements. On the other hand side, these circumstances and the importance of semiconductors and the value of semiconductors and their availability for sure, have brought us in the position where customers even wouldn't say invite us, but -- it goes without saying, all of a sudden in many negotiation situations that Infineon does and also can in a meaningful manner, pass over cost increases that we do see from our supplier base towards our customers. So that has been something that has been changing in the last couple of, I would say, quarters pretty significantly compared to how I got used to like 10 years ago, 5 years ago or so. So in a nutshell, yes. We are managing to pass through cost increases that we do see to our customer base for the benefit of both of us because they are with -- Infineon ensures supply security. We do everything to secure supply to the best of our ability. And that also goes hand in hand with us accepting also higher prices from our suppliers, where our customers are willing to shake hands and say yes, overall, it makes sense and we accept what you are asking, Infineon.

So thank you very much for all your questions. We now -- with that, we now conclude our PSS business update call. Thank you very much for your participation and goodbye.

Thank you. Bye-bye.

That concludes today's conference call. Thank you, everyone, for joining us. You may now disconnect.