Infineon Technologies AG (IFX) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to today's press conference of Infineon on the occasion of the publication of the figures for the quarter. Please note that there is a time delay of approximately 30 seconds in transmission. This is why we recommend that you listen in via your phone. I would now like to hand the floor to Mr. Bernd Hops. Please go ahead, sir.

Thank you, Mrs. Safatal. Welcome all participants. I'd like to welcome you to our conference call on the results of the third quarter of fiscal 2021. All of the members of the Board of Management of Infineon are participating at this conference, Mr. Ploss, the CEO; Mr. Helmut Gassel, Chief Marketing Officer; Jochen Hanebeck, Chief Operations Officer; Constanze Hufenbecher, Chief Digital Transformation Officer; and Dr. Sven Schneider, Chief Financial Officer. My dear participants, as usual, Mr. Ploss will give you an overview of the business performance of the company, after which all 5 members of the Board of Management will be willing to field any questions you may have. So I'll hand to Mr. Ploss for his statement.

Thank you, Mr. Hops. Good morning. Welcome, ladies and gentlemen. There's a great need for semiconductors and demand is unbroken. It's not been so clear as today how important valuable our products are. Semiconductors are the key to the energy turnaround and digitalization. The recovery of the economy in various countries, supported by huge public economic programs is providing a further tailwind. The general market situation and the businesses of Infineon are still very good. Demand remains extremely high and exceeds the supply considerably. In the meantime, semiconductor stocks have reached historic lows. And most of the final markets and applications are affected by delivery bottlenecks. In this situation, it's difficult for many customers. We at Infineon are doing everything possible on the value-added chain, everything in our power. We are supplying as much as flexibly and as quickly as possible for our customers. With contract manufacturers, we're fighting for every additional wafer we can get. Our chips leave their manufacturing sites directly to the customers and the final applications. Our employees throughout the world are giving their all. Limitations in manufacturing because of force majeure are particularly important in the current situation. As you know in February, there was an unexpected winter storm, which hit our front-end manufacturing sites in Austin, Texas. In the meantime, we have returned to the original production levels. Most recently, however, our back-end site in Malaysia was affected by disruptions because of the pandemic. Since in the federal city, Melaka, there were high infection rates repeatedly, the government authorities there, first of all, at the beginning of June and again at the end of June, at very short notice, ordered that certain sectors of production facility should be closed down. Since the beginning of the pandemic, Infineon has adopted comprehensive safety and hygiene measures for the workforce. In the last few weeks, at Melaka, we have conducted a major vaccination campaign. In the meantime, manufacturing is fully operational again. But the standstills and subsequent preparations for ramping up operations have led to reduced amounts produced. It will take until the end of the month until we're back to 100% of our manufacturing capacity. The event has had a very negative effect on our group revenue and the earnings in the third quarter of this fiscal year and the current fourth quarter, the effect will also be visible on the same sort of scale in our figures. Of course, we're trying our best to limit the consequence for our customers, such as by using inventories. But in times of a shortage of chips, that is only possible to a very limited extent. Let's have a closer look at the development business in the third quarter. There, Infineon achieved revenue of EUR 2.722 billion, which is about 1% up. The shortage because of the full capacity utilization of our contract manufacturers and the limitations on our own production facilities to have growth. The loss of revenue because of the incident in Austin at the third quarter were in a mid-double-digit million range. This effect has been taken into account in our forecast. The limitation in Melaka caused an additional burden in the third quarter with a high double-digit million euro figure. The segment result in the third quarter was EUR 496 million, which corresponds to a segment result margin of 18.2% after 17.4% in the previous quarter. As with revenue, earnings would have been better if that mitigates the effects of the disruptions in production. Demand for our products and solutions developing dynamically, which is shown by our book-to-bill ratio, the ratio of confirmed incoming orders and revenue, that has continued to increase from 2.1 at the end of the second quarter to 2.4 at the end of the third quarter. Incoming orders remains very strong. Temporarily, we have switched over to manual confirmation of short-term customer orders. In this way, we're able to match the dynamic demand better to the limited manufacturing capacities. Since this would distort our book-to-bill ratio shown, we've adapted it so that we can have the same confirmation ratio for newly incoming orders in previous quarter. That's the base of our assumptions. The very strong dynamics of demand can be seen from our order books. By -- in the previous quarter, they have risen by about 1/3 which corresponds to revenue of almost 2 fiscal years. Our company's free cash flow improved by the previous quarter from EUR 407 million to EUR 477 million. Now the results for the individual divisions. The Automotive segment achieved revenue of EUR 1.205 billion, which is a slight decline by 1% compared to the previous quarter. Despite strong demand in all product sectors, the bottlenecks in deliveries, especially because of the restrictions of manufacturing in Austin and Melaka that I've referred to, limited the sales and led to the slight decline. At the same time, Automotive has maintained its profitability level. The segment result was EUR 199 million, and the segment result margin was 16.5%, which was the same sort of level as in the second quarter. At the time, it was 16.2%. The recovery of the global automotive markets is still being dragged down by acute supply bottlenecks in the entire value added chain. It will take some time before we get to a balance between supply and demand. We estimated that it will be no earlier than well into 2022. In an automotive market that has been held back, the development of electric vehicles is developing well. Sales of battery-driven cars and plug-in hybrid vehicles increased in June and reached its highest level in the quarter. Regulation is providing support for electric mobility. Just take Europe as an example, the European Commission is proposing a further tightening of the carbon dioxide emission regulations so that by 2035, all new cars in the EU are supposed to be emission-free. Manufacturers have already undertaken publicly to achieve this goal even earlier. With scalable solutions based on silicon and silicon carbide, Infineon will enable its accelerated transfer to electromobility. At the same time, we are helping to make cars smarter. The success story with our automotive microcontrollers has been continued in the third quarter. We achieved a big design win at a leading European Tier 1 supplier, which will use AURIX and TRAVEO microcontrollers in its vehicle platform. The revenue over the life cycle will be in the 3-digit million euro range. Ladies and gentlemen, car manufacturers are constantly increasing the software, and they need the suitable hardware platforms. With our microcontrollers, we are providing manufacturers reliable, high-performance solutions for a large number of applications. With the acquisition of Cypress, we have expanded our microcontroller portfolio, and that is paying dividends. And for Infineon, we see a great potential for increasing revenue. Now to Industrial Power Control. The division recorded an excellent third quarter. Revenue was EUR 412 million, which was an all-time high. Compared to previous quarter, it's significantly up by 10%. All the target applications contributed to this. There was particularly strong demand in industrial drives and renewable energies. In both sectors, IPC set new revenue records. The segment result improved considerably to EUR 82 million, and the segment result margin rose to 19.9% after 16.3% in the previous quarter. The reasons were the strong growth in revenue and a positive inventory valuation effect. Macroeconomic and application-specific indicators indicate there will be a lasting dynamic growth. Industrial drives, the recovery is continuing with good robust prospects. Expansion of renewable energies needs to be advanced more in order to achieve the emission goals. For the energy turnaround, we need energy storage systems, charging resources for electromobility and power-saving domestic appliances. All that means strong and lasting drivers for IPC's business. Let's turn to the Power & Sensor Systems segment. Revenue in this division in the -- compared to the very strong previous quarter declined by 4%, and in the third quarter, it was EUR 757 million. Two factors were decisive for this decline. First of all, the temporary decline in demand for high frequency and sensor components for smartphones; and secondly, delivery bottlenecks because of the interruptions in manufacturing in Austin and Melaka that I referred to and at our contract manufacturers. In the meantime, demand for the entire range of our power semiconductor products is very strong. In the field of data centers, revenue rose slightly and also the business of battery-driven applications continue to grow. The segment result of PSS dropped to EUR 167 million, and that means that the segment result margin also dropped to 22.1%, which was less than in the previous quarter. Then, it was 23.4%. More than half of the products from the division are in allocation at present. As with the other segments, the inventories of PSS are on a low level. That limits our possibilities for serving income and customer orders. At present, everything that is manufactured is supplied immediately and sold to the end customers. In view of the current quarter, we see an improvement in the supply situation, and we also expect to revive in the field of mobile terminals. Our business with MEMS microphones will benefit from this. Another exciting sector is the data centers, in particular, for cloud computing, because the demand for low energy solutions with high efficiency and power density offers considerable opportunities for growth for our company. A very promising field of application is training systems for artificial intelligence. At present, we're in discussions -- good discussions with leading manufacturers of high-performance computers. And these value our ability to provide complete solutions for DC supplies for high-end server systems for machine learning. Our most important sales arguments are: firstly, the efficiency and interaction of our components with an unsurpassed power density; secondly, super slim form factor by innovative package technologies; and third, and this is particularly important, a profound understanding of our customers' needs on a system level. We expect that the demand for efficient power supplies for high-performance computers will continue to grow. And with our leading portfolio of power management components, we will benefit from this considerably. Now to the Connected Secure Systems segment. The division recorded revenue of EUR 346 million, which is a growth by 5% compared to the previous quarter. The increase in revenue is due mainly to 2 factors: Firstly, a slight improvement in external supplies. We were able to secure additional wafers from our contract manufacturers and process them; and secondly, there was a strong demand for project-related business in the field of identity solutions, which we are able to exploit. Because of increased revenue, the segment result margin increased to EUR 47 million, which is a segment result margin of 13.6% following 9.1% in the second quarter of this fiscal year. The margin of the previous quarter was affected by negative factors, which must be borne in mind, these are the costs connected with the weather event in Austin. In general, in the target markets for CSS, we see a limited supply, and this is more than matched by a strong demand for industrial microcontrollers, Wi-Fi and Bluetooth components and security solutions. Our connectivity chipsets in the past quarter was selected by major car manufacturers for new infotainment platforms, similarly, by manufacturer of the smart home devices and smart watches of next generation. In microcontrollers, we achieved an important design win from a leading manufacturer of electric tools. In the field of Security Solutions, we're working together with a Norwegian company, IDEX Biometrics, a leading supply of solutions for fingerprint identification authentication. Together, we have presented a reference design for the next generation of biometric smart card architectures that will make it possible to have fingerprints authenticated with low latency, high accuracy and power efficiency. The integration of the fingerprint sensor, the security element, the power management and communication reduces complexity in manufacturing the cards, which shortens the time to market and reduce the costs for our customers. Ladies and gentlemen, I now come to the outlook. At the beginning, I spoke about the strong demand, which was caused by cyclical and structural factors. This will continue to be the case for a long time ahead. In most of our final markets, we see that demand is not declining in view of the current shortage of capacities, but it's only being delayed. Inventories are still very low, restocking to a level which would be higher than before the pandemic has not yet even begun. At the same time, delivery limitations are present everywhere in view of the limited capacities of contract manufacturers and the structure sizes that were so important to us. In the case of products, which we produce a lot at Infineon, particularly power semiconductors and sensors, things are a bit better. But in view of the strong growth possibilities, we expect that the demand will continue to exceed supply for a long time to come. In view of this, we expect that in the current fourth quarter of the fiscal year, assuming the exchange of the dollar to euro of 1.2 -- or 1.20, we expect revenue of about EUR 11 billion. And this figure will second account the loss of revenue because of the pandemic interruptions in Melaka, which will lead to a drop of about EUR 100 million. The segment result margin on the level of this revenue will be about 19% we expect. For the entire fiscal year 2021, this leads to an expected revenue of about EUR 11 billion. And here, the segment result margin will probably be more than 18%. The strong operational performance will be reflected by further increase in free cash flow, where we now expect a figure of about EUR 1.5 billion. For fiscal 2021, we are still planning investments in tangible and intangible assets, including capitalized development costs of about EUR 1.6 billion. Finally, another very good piece of news. Our new 300-millimeter fab for power semiconductors at the Villach site is ready to go as of today. So our colleagues on the spot have achieved the next great milestone. They're now beginning to bring in the first wafers and in a few weeks on the 17th of September, we shall have the official opening ceremony for the factory. And then the first wafers will have gone through completely. And after that, they can be processed at further sites. The time couldn't have been better. Infineon now has Villach and Dresden with two 300-millimeter sites for ramping up additional capacities. That is a decisive advantage of many competitors in view of the current market situation. In the past weeks, we've done a great deal as well in order to secure Infineon's long-term suppliers by cooperating with contract manufacturers. In our negotiations, we have achieved a great deal. For example, with some of our manufacturing parts in the front end or back end sector, we've managed to agree on substantial additional capacities for the years ahead. We think ahead, and we take the necessary major steps to satisfy the growing demand for Infineon with foresight to create the basis for additional growth. Ladies and gentlemen, that brings me to the end of my remarks. Together with Helmut Gassel, Jochen Hanebeck, Constanze Hufenbecher, Sven Schneider, I'm now happy to take your questions.

[Operator Instructions] The first question comes from [indiscernible].

I have not just one question, but several questions, Mr. Ploss. Could you perhaps tell us in more detail to what extent manufacturing volume was reduced at Melaka so that we can gain an impression maybe in percentage or unit figures. So what was the shortfall there? If I understood you correctly at the beginning of June and at the end of July, you had 2 interruptions of about 2 weeks. Is that correct? How long was manufacturing interrupted? And perhaps you can also tell us in what areas? So if we could have some more detailed information on that, that would be great. And if I understood you correctly, the curtailments were to the tune of double-digit million euro amount. I didn't quite follow that. Another question is this. The orders on hand, are you close to your target or not? And then prices, you've improved your earnings substantially. Cost measures played a substantial role. But were you able also to enforce price increases at short notice?

Well, Mr. Kuhn, with respect to orders on hand, I can give you some information. Mr. Hanebeck will give you information on manufacturing and Mr. Gassel will tell you about prices. Now in absolute terms, well, in my career at the turn of the millennium, we had a high level, but we hardly ever have more than 2 years of orders on hand. That would be a very exceptional situation, if that happened. We expect that this figure will actually increase because everyone realizes that they need more. We're not confirming this at present because we have switched. Now Jochen, perhaps you can say something with respect to production.

Yes. Thank you. Mr. Kuhn, Mr. Hanebeck speaking. Indeed, Melaka, well, overall, our supply chain is rather unstable, not just Melaka, but also Austin. And the floods in Germany have hit us hard as well, but Melaka is definitely the hotspot, if I may say so. Overall, thus far, we have lost about 20 days of production and that has been accumulated over several waves. You may see that Malaysia continues to be hit by a very strong increase in COVID figures. The measures that we're taking to counteract this is to step up in Southeast Asia our efforts to -- of course, on a voluntary basis, vaccinate our employees. And in Southeast Asia and in the Philippines, we have reached a level of 80% for the first jab. The second round of vaccinations will take place in August, and we believe that this COVID issue, at least from September onwards should be manageable. With respect to the financial ramifications, I think that we've said that in the 2 quarters, we have suffered high double-digit curtailments with respect to revenue. But first and foremost, these are delayed revenues, in particular, in automotive, and we will catch up on that later on.

Sorry, I have a follow-on question. Mr. Hanebeck, I apologize. I asked you about volume so that we can gain an impression. You said that you had an outage of 20 days. How many units were you not able to manufacture in that time?

Well, this is Mr. Ploss. Would you like to have unit figures that we were not able to supply or what do you mean exactly?

Well, could you give us some information in percent? We just want to have some impression of the actual decline, were you able to -- well, did deliveries go down by 20%?

Well, we're talking about 20 days, so nearly 3 weeks distributed over about 5 weeks. I'd have to get you the unit figures. I can do that later on.

Mr. Ploss speaking. This is a little difficult, Mr. Kuhn, because in these times, we almost grind to a complete halt in manufacturing. After that, we can ramp up in some individual areas. Mr. Hanebeck will be able to give you some figures with respect to percentages over the entire quarter. Of course, this reduces. We have quite a good connection to the relevant areas in Malaysia. I don't think it's fair for us to be lumped up together with other manufacturers, that's inadequate, and I believe that you've understood that. In our manufacturing, in our back end, we have very good clean room qualities. We have a wonderful overall concept. And therefore, on a global scale, there is no difference with respect to how we treat our employees in the Infineon organization. We'll give you the figures later on.

Perhaps I can address the price increase issue. This is Helmut Gassel speaking, Mr. Kuhn. The highest average selling price in this quarter was achieved. There were a couple of factors, one being the product mix with an above-average share of high-priced products. And from product to system, we have been able to sell more complete solutions, and, of course, price increases have played a role. With respect to price increases, I need to add that as a matter of principle, we fulfill our contracts. And with many key accounts, especially in the automotive sector, we have entire supply arrangement. So price increase effects this year will come to bear less and will play out more next year.

Mr. Kuhn, perhaps just one clarification. The 20 days that I mentioned were the cumulative total outage. And this is spread over 5 weeks. But on a cumulative basis, it's 20 days over a quarter, which normally has 90 days, as you know. And the revenue would, therefore, be spread over the 2 quarters.

Our next question comes from Philipp Vetter from Die Welt.

I also have a couple of questions. I'd like to pick up on the price issue. You just said that the price increases will come to bear properly next year. Could you give us an order of magnitude with respect to the extent to which the prices can be raised, to what extent can the end consumers expect this to be passed through? If I buy a car next year, will it become much more expensive? Then following up on that, the lion's share of the chips that could not be produced in Malaysia, were they earmarked for the automotive sector? I believe they are. Could you tell us what products couldn't be delivered? What products suffered some delivery delays, and how that affects automotive construction? Now you also said that you switched to manual accounting with respect to order intake. How do you set your priorities? Which customers are preferred, automotive or other sectors, perhaps?

Mr. Ploss speaking. Well, Mr. Vetter, I will answer this together with my colleagues. I'll take the floor first. Well, our markets are not uniform. Mr. Gassel told you that we honor long-term contracts. But of course, there are also volumes and additional quantities where ad hoc we can set prices. And these have a price trajectory that is similar to that of commodities, and they can develop quite dynamically up and down, so I can't give you a sweeping answer across the board. Therefore, it's not all that easy to answer your question. The price increase effects will be felt on an ongoing basis in the near future, and we will report to you on that. Helmut, do you have anything to add?

Well, you were asking whether the prices will be passed through to customers and you address cars, well the value of semiconductors relative to the value of an entire car is quite low. We're talking about a total of EUR 400 or EUR 500 in terms of the semiconductors built into 1 car. So on the whole, this hardly has an effect on the price of an entire vehicle. But we must always keep in mind that we've increased prices on the basis of cost increases that we have incurred. This means that we have had to deal with substantial cost increases in raw materials, copper, et cetera, as have our suppliers in packaging and other areas. So we're just passing that cost increase on. So it's similar to the price increases. These will come to bear more in 2022 because that's when we will negotiate prices. That's what I had to say with respect to prices. Jochen, with respect to the products?

Well, Jochen speaking. Well, Melaka is a site that manufactures so great share for the automotive industry. These can be power semiconductors, simple MOSFETs and intelligent power -- intelligent semiconductors, ICEs, which are used in cars to control small ancillary motors, such as electric motors, of course, in the steering unit and in the braking unit. So it's spread across the entire car.

Mr. Ploss speaking now. In terms of electric mobility, in Melaka, we don't have any product that would go directly into the drivetrain that would reduce the production of EVs.

Our next question comes from [ Kristof Vilsmeier ] from DPA.

I also have a couple of questions. First of all, can you tell us roughly how much business you've lost because you weren't able to supply as much as you wanted or as much as your customers would have wanted? Second, when will this be felt in your figures? Now you said that with wafers, you -- it will take some time to catch up. Now with respect to the price increases, perhaps I can be more general. Do you expect that in 2022, once these price increases take effect or have an effect, your coffers will be filled up or will there not be that much of an impact?

This is Mr. Ploss speaking. Let us begin with the last point. And to what extent our coffers will be filled, Mr. Schneider, please go ahead.

Yes, Mr. Vilsmeier, this is Sven Schneider speaking. Mr. Gassel just said that we have 2 factors here: cost increases and price increase. At the same time, we expect now without giving you guidance for the next year that the market momentum will be maintained. And therefore, a substantial part of ad hoc profitability will be in the form of added revenue. Please give us some time until the Capital Market Day because in 2022, we'll be able to tell you much more. And then I think that you asked how much business we've lost. It's very difficult to answer that. First of all, there is revenue that can be made good on, which is basically just delayed, and there may also be some revenue that will never come up again. But if you're working in a market where the entire situation is tight, then the shortfall will be rather small. Speaking about 2021, I will mention a figure that I have mentioned before, that's EUR 2 million to EUR 3 million over the year. This would cover the production interruption in Melaka, in Austin and also, to a certain extent, the shortage from external contractors, but please don't hold me to these figures. These are estimates, but I think they're the right ballpark.

This is Ploss speaking now. Mr...

Sorry, I just want to ask something else. You were talking about EUR 200 million to EUR 300 million that may be postponed revenue. Is that correct?

Yes, that's correct.

Well, Mr. Ploss speaking. We have to differentiate between things, Mr. Vilsmeier. In our order books ad hoc, we could deliver much more. The commentary that we're giving you now is where a more balanced market situation could be. If we look at the order backlog and if we were able to process all of that, then we would have a completely different peak. So you have to treat these figures with great caution. Yes, I was also told that the date of the Capital Market Day has not been communicated to this circle of people yet. It's the 5th of October, but we don't know if it will be in person or virtual. So I just wanted to make sure that we added that piece of information. Now we are spending a lot of money in other countries, substantial amounts of money. And we're not talking about helping an industry that's in difficulty. Rather, we have a great imbalance which we're trying to correct. If we don't do that, Europe will fall way behind in digitization in the field of semiconductors. But the message is, Intel is definitely a very attractive company. The primary demand for it is in Europe, but we're not talking about everything that Intel manufacturers. Now with respect to production throughput, Jochen, please go ahead.

Well, we are trying to do everything that we can in order especially in those industries where we have great value added to alleviate the situation. This start with us ramping up inventories in terms of raw materials. In production, we are using more personnel than is nominally necessary in order to overcome the bottlenecks that have been caused by COVID and other factors. And I think we've also mentioned that here, especially in Southeast Asia, we are increasingly taking initiative to vaccinate our employees, and we have made good progress here in the last couple of weeks. Of course, it will take some time for the full vaccination effect to unfold. So as I said before, we are doing everything that we can with respect to Villach and Dresden, the 300-millimeter locations. Last year, we did not reduce our investment budget to a great extent last year, and we're benefiting from that now. And revenue potential for the next fiscal year will be improved substantially. And by the way, the factory in Villach despite all of the COVID problems has been commissioned early, and we are extremely proud that we succeeded in doing this despite the circumstances.

May I have a follow-up question. There have been speculations about TSMC together with you and plus 1 or 2 others as well. Let's say, chip fab that could be built in Germany. Can you say something about that? Are the discussions out to contacts?

TSMC is a very important and high-performance supplier for us with which we have developed many products jointly. And in the field of foundries, they are one of the biggest suppliers for us. We are convinced that the further cooperation will develop positively here. The specific investment projects of TSMC, I can't say too much about that. We don't want to comment on it. But it can, of course, be said quite clearly that the technologies as we mentioned just out that TSMC manufacturers are closer to the products and the systems that are manufactured in Europe. And from this point of view, it certainly would be an interesting idea to have TSMC in Germany.

We now come to a question from [ Koje Fuga ] from Nikkei.

I have a few questions about power semiconductors. First of all, could you elaborate on the current demand and supply situation for power semiconductors? And secondly, to what extent do you expect this business to grow in the medium or to long term? I mean, not only industrial, but also including automotive semiconductors. And lastly, your competitors are also expanding their capacity. So could you tell us how Infineon plans to maintain its competitiveness in power semiconductors. And please also elaborate how the 300-millimeter fab at Villach will contribute to your competitiveness and your sales? Hello, can you hear me?

We now have a question from [ Christian Heffner from Fortune ].

As I understand the crisis with semiconductors, I was thinking in terms of microcontrollers, we're talking about 40 to 90 nanometers. And Malaysia, at least as I understand it will -- they are upgraded by foundries in Taiwan. And you talk about power semiconductors, and that is a completely different product. So could you clarify my misunderstanding here please, and break down the question of controllers? I'm sorry, if I didn't hear. Could you tell me specifically about bottom worthy -- what the situation is there? We've heard that things went wrong in Austin in February, and that's back to 100%.

Thank you. I can answer the first part of that. In chip manufacturing, and the manufacturing of electronic components, the 2 major manufacturing sets can be distinguished. There's chip production and then a packaging of the chip, so that it can then be fitted into the devices to be used. That's assembly. Melaka produced power semiconductors and the foundries will get chips for microcontrollers. And unfortunately, these are 2 different elements which are -- which don't directly interact. It is the case that Melaka, the assembly of power semiconductors is done there. And the chipsets in the foundries have different consequences. Jochen, what about throughput times?

Well, to explain this again. The chips from Melaka come from the fabs in Dresden, Villach and Kulim. And the chips from the foundries typically go to the assembly step, as Mr. Ploss explained, to other contract manufacturers in Asia. And there the main bottleneck is on the chip level from the foundries. Then regarding your question concerning Austin, the factory is running fully now. But Austin manufactures more complex microcontrollers in geometries of 90 and 130 nanometers. And there, we do have throughput times of up to 3 months, which means that the effects of the winter storm in February affected our revenue in this quarter simply because of the throughput times. I hope that explain it better.

Good. And then a follow-up question. If the subject of foundries in Asia are different matters, I don't think it make any difference to the manufacturers. You can't build a car if you haven't got a chip. And therefore, it is attenuated somewhat by the fact that there are 2 different technologies where there are bottlenecks. So if the production line can't run because a microcontroller is missing, what the effect does it have if the power semiconductor is missing as well because they don't want to be built anyway?

Mr. Gassel will answer that.

That, of course, is completely right, of course. But the car manufacturers and the suppliers are working together very closely to optimizing to get as many vehicles as possible made from the available components. For example, in electro mobilization, we've seen a huge increase compared to 2020 in the first 6 months of 2021. And that is due to the fact that there was a clear priority placed on manufacturing those cars. So the complexity of managing the supply chain is a major challenge, but it is managed quite well by the overall supply chain. Unfortunately, it's not synchronized. Of course, it's not fully synchronized. So vehicles -- there are many vehicles that can't be completed. There are thousands of semiconductor parts in a vehicle, and then it does come together at some stage. And I have an answer Mr. Kuhn, by the way. You asked how many units it was that were lost after a 20-day break altogether in Melaka? And if you look at it, it's 450 million to 500 million units that we lost temporarily, but in the kind as you can expect that they can be caught up again as soon as the capacity is able to handle it. But if I understand correctly, the problem with power semiconductors comes into play just where it hurts the car manufacturers most namely in carbon dioxide compliance, because a few vehicles are built. No, not quite. The products for the drivetrain for electromobility are not manufactured in Melaka, but in Hungary and Germany, primarily by the -- for the packaging. It's equivalent to Melaka chip manufacturing, as Mr. Hanebeck said, comes either from Germany, Austria or Malaysia. So specifically regarding electromobility from the power side, not from the microcontroller side, it is impaired to a certain extent, but we have no information that, that is making its effect felt drastically.

We'd now like to try to take Mr. Fuga's question again.

Can I ask in English my questions?

Yes, you may.

Okay. So I have a few questions about power semiconductors. And first of all, could you elaborate on the current demand and supply situation for power chips, power semiconductors? And secondly, to what extent do you expect this business to grow in the medium to long term? And I mean not only industrial, but also encouraging automotive power semiconductors? And lastly, your competitors are also expanding their capacity in this field. Could you tell us how Infineon plans to maintain its competitiveness in power semiconductors? Please also elaborate how the 300-millimeter fab at Villach will contribute to your competitiveness and your sales?

Thank you. We shall divide up the answer to the question. So growth in power semiconductors is driven in cars very much by the subject of electromobility, but also other functions such as body electronics, the new modern headlamps with matrix light and many other functions in the car require more and more power semiconductors. Charging devices complement this, of course, as to the onboard chargers. We presume that there will be unbroken growth and that this will continue to accelerate because of the move towards electro mobility. But other areas are also growing strongly here. Power semiconductors are key products for renewable energy. For example, solar inverters, for wind power management, for battery storage management, just to mention a few. And in the same way, power semiconductors are central for the power suppliers for server farms for PCs, for charging devices, for tablets, notebooks and so on. All this is growing considerably present because of the working from home, home schooling and so on. The competitiveness in power semiconductors is secured, first of all, by the huge technological advances that we have made. By far, the biggest company in terms of revenue in the field of power semiconductors was -- have doubled the revenue of our closest competitor. So we -- you can see we're investing a great deal in research and development. And everywhere, we have products. We've given you the example. For example, power supplies for servers. Here, every percentage point after the decimal point is important for efficiency and so on. Of course, our production facilities come into it here. And Mr. Hanebeck will say something about that.

Good. Yes, this economy of scale that we've seen on the business side can, of course, also be mapped on the production side. We produce them in internal factories and particularly. You know that we are in the leading 300-millimeter technology. We have 2 factories, Villach and Dresden, and we link the 2 of them in 1 virtual fab set up, which gives high flexibility in capacity utilization. And in this way, we secure our competitive lead since there are other competitors who also manufacture 300 millimeters but with far lower economies of scale and revenue than us.

This brings me to a question from Kristof Vilsmeier from DPA.

I apologize if this question has already been answered. I had some technical problems just earlier on. With respect to Villach, when do you believe that the effect will be felt? When will the first wave of wafers basically land on the market? Could you give some more information on that?

Well, Mr. Vilsmeier, we will start in September to deliver the wafers. That means that right now, we are starting by accepting the starting materials, after which we will ramp up capacity. This normally takes a couple of weeks. That will be the assembly period and then in the fourth quarter, we should have an effect on revenue from Villach. And of course, we will also continue to ramp up Dresden.

The fourth quarter of the calendar year or the fourth quarter of the fiscal year?

No, I'm talking about the fourth quarter of the calendar year, says Mr. Ploss.

Now I'd like to hand the floor to Mr. Hops for a question from Mr. Ploss.

A question was received by us by e-mail because our colleague is online. It's from [ Mr. Glanchnik ] from ORF. Two questions. When can the new chip factory in Villach actually start production? And to what extent can it increase capacity? You already said something on this point, but perhaps you could give us a summary. And at the Villach location, this is the question -- second question now. An addition of 400 staff has been announced. To what extent has recruiting progressed? And are you still looking for employees?

Well, I suggest that my colleague, Mr. Hanebeck, take the floor on that.

Well, with respect to Villach, production will actually begin today, the wafers will then come out in September, October and then the factory will be ramped up more and more. It will be added to existing capacity in Villach and Dresden and in Kulim. So at the beginning, this effect will be incremental. And over time, Villach will be a significant growth driver. The 400 additional staff members that we have announced have largely been hired. But Mr. Ploss will give you some more detailed information on that.

Mr. Ploss speaking now. [ Mr. Glanchnik ], we will see high demand. As I said before, we are pushing innovation very strongly. And a huge number of vacancies in Infineon Austria exist. We are making good progress, but we see in Infineon Austria that is becoming increasingly challenging to fill these vacancies. But it's safe to say that we are pressing ahead and that we will soon come up against the limits of office space and other resources. And the issue of new work will probably make a major contribution to the extent to which we continue to grow at that site. With respect to the manufacturing location, we are starting in September. It's impressive to see how much equipment has already been built in. On a daily basis, additional equipment and machinery is being added, and we expect that in September, we will be able to have a very solid production volume from that hall.

Thank you, Mr. Ploss. I now close the Q&A session, and I would like to ask you to make your final remarks.

All right. Thank you, Mr. Hops. Ladies and gentlemen, despite the difficult supply situation and unexpected events in Austin and Melaka, Infineon has achieved a successful third quarter. We were able to increase revenue slightly. Earnings and free cash flow developed positively. And at the same time, we're expecting a strong fourth quarter. In view of the cyclical tailwind and the pronounced need for semiconductors, the demand will continue to exceed supply in the months ahead considerably. We are, therefore, particularly happy that we can see the start of our second 300-millimeter fab in Villach. The additional capacity will help us to serve our customers even better. We are setting the signals for additional growth, and Infineon is well prepared for this, so that the 2 major trends, electrification, digitalization can be advanced and we can benefit from that. In addition, design wins that we have achieved, the complementary products and the abilities of the former Cypress company are securing these medium-term dynamism of Infineon. Thank you for your interest. Goodbye, and see you next time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]