Infineon: Acquisition Of Cypress Establishes The World's Top Automotive Chipmaker

Summary

• Infineon Technologies, one of Europe’s largest semiconductor companies, is in the final stage in acquisition of Cypress Semiconductor for €9 billion.
• The acquisition strategically expands Infineon’s portfolios and leadership in key market segments including automotive, power & discrete modules, and security integrated circuits.
• Most notably, the acquisition allows Infineon to leapfrog NXP Semiconductors into become the world’s largest automotive chip supplier with 13% market share.

Source: Infineon

Infineon Technologies (OTCQX:IFNNF), a semiconductor powerhouse in its own right, has long been a presiding player in the key markets it operates in. The company holds the number 1 market share position in power & discrete modules and security integrated circuits. Its major competitor NXP Semiconductors (NXPI), has always narrowly edged out Infineon in automotive electronics, until now. Not only does the Cypress acquisition give them the leading position in this segment, the combined revenue of Infineon (€7.6 bln) and Cypress ($2.2 bln), will now also spearhead them in front of NXP (€9.4 bln). This is a huge win for Infineon as the automotive segment is its largest revenue driver representing 44% of total revenue.

Infineon's other key business segments are Industrial Power Control, Power Management & Multimarket, and Digital Security Solutions, as seen below.

Source: Infineon

• Automotive: Chips used in powertrains (engine, transmission), comfort electronics (steering, absorbers, air conditioning) and safety systems (ABS, airbags). 2019 segment revenue of €3.533 mln, a 7.6% increase from the previous year.
• Industrial Power Control ('IPC'): Power semiconductors and modules used for generation, transmission and consumption of electrical energy for industrial applications and household appliances, energy production, conversion and transmission. Segment achieved sales of €1,445 mln in fiscal year 2019, a 9.2% Y/Y increase.
• Power Management & Multimarket ('PMM'): Semiconductor components for efficient power management used in LED lighting, servers, PCs, notebooks and consumer electronics. In 2019, PMM increased 3.9% Y/Y to €2,409 mln.
• Digital Security Solutions ('DSS'): Provides microcontrollers for mobile phone SIM cards, payment cards, security chips for passports, identity cards and other official documents. DSS achieved €642 mln in fiscal year 2019, and was the only segment to drop in revenue.

Cypress Acquisition

When we spoke to Infineon Investor Relations last week, it was confirmed the acquisition is

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

No information in this publication is intended as investment, tax, accounting, or legal advice, or as an offer/solicitation to sell or buy. Material provided in this publication is for educational purposes only, and was prepared from sources and data believed to be reliable, but we do not guarantee its accuracy or completeness.