INTERVIEW: Infineon CFO: Chip Demand Up; To Meet 4Q Views

The semiconductor sector has passed the worst of the slump, demand is growing and there is better visibility, but it will take years to return to pre-financial crisis sales levels, according to German chip maker Infineon Technologies AG's (IFX.XE) Chief Financial Officer Marco Schroeter.

"In the last four to six weeks the situation has changed," Schroeter, who is also a member of Infineon's management board, said in a recent interview with Dow Jones Newswires, echoing more positive recent comments from firms across the sector.

Earlier this month Dutch semiconductor equipment maker ASML Holding NV (ASML.AE) raised its sales expectations for the September and December quarters, as did industry heavyweight Texas Instruments Inc. (TXN) for its September quarter.

Demand, especially from industrial and automotive customers, has increased, Schroeter said. Moreover, "we now have visibility into the next two quarters and it looks better than six weeks ago," he said. "However, quarterly growth rates could flatten in the second quarter," but won't see such a sharp declineas in the first fiscal quarter of 2009, which ends Dec. 31, he added.

Infineon supplies logic chips used in the communications, automotive and industrial sectors. Its products are also used for passports and chips used on cell-phone SIM cards and credit cards.

Still, it could take three years until Infineon reaches the sales level prior the crisis, Schroeter said, but the signs are encouraging.

Infineon's book-to-bill ratio now stands at above 1 times, up from a floor of 0.6 times in the December quarter last year, Schroeter said.

As a result of the improved conditions, Infineon has now scrapped the shorter working hours previously brought in to mitigate the effects of the slump and factory utilization has recovered to almost full utilization from the levels of around 40%-60% seen in recent months, he said.

Referring to Infineon's fourth quarter results for the period ending Sept. 30, Schroeter said: "We won't disappoint market expectations," without elaborating.

According to a poll of Dow Jones Newswires of three analysts, fourth quarter operating profit of EUR28 million and sales of EUR832 million are expected. Estimates exclude Infineon's wireline operations.

Infineon said in July it will sell its wireline operations to U.S. private-equity firm Golden Gate Capital LLC for EUR250 million and the closing of the transaction is expected within the next few weeks.

After a recent capital increase in which Infineon raised EUR725 million the Neubiberg, near Munich-based company will be able to refinance its debt and has built up a solid cash position.

Schroeter said the company has no acquisition targets in mind right now, but might consider an acquisition after a minimum of two-to-three quarters of strong operating performance.

Meanwhile, Schroeter poured cold water on recent market speculation that Russian conglomerate AFK Sistema (AFKS.RS) might take a major stake in Infineon.

"We were in talks with Sistema earlier this year," Schroeter said, "but after the successful completion of our rights offering in August we are currently no longer in talks for an investment from an anchor shareholder into the company."

Company Web site: www.infineon.com

-By Archibald Preuschat, Dow Jones Newswires, [phone], [e-mail]