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STM and NXPI Fall on Infineon’s Reduced Fiscal 2019 Guidance

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Infineon lowers fiscal 2019 outlook 

The semiconductor industry is set to report its worst quarterly results in a long time in the second quarter. In the run-up to the coming earnings season, some companies are revising their earnings guidance. On March 27, German chip maker Infineon Technologies again lowered its annual revenue growth guidance for fiscal 2019[1.ending September 2019] to 5.3% after lowering it to 9% in February from 11% in January.

These two downward revisions in two months raised concerns among chip companies and dragged down Infineon and peer stocks. On March 27, Infineon fell 7%, while rivals STMicroelectronics (STM) and NXP Semiconductors (NXPI) fell 7% and 2%, respectively.

About Infineon

Infineon Technologies supplies power semiconductors, microcontrollers, security controllers, RF (radio frequency) devices, and sensors for the automotive, industrial, communications, consumer, and security electronics sectors. Infineon is the second-largest automotive chip supplier in the world after NXP and earns more than 40% of its revenue from automotive. Infineon competes with STMicroelectronics in the automotive, power, and security markets, and with NXP in the automotive and security markets.

Infineon’s growth deterrents

In a press release, Infineon stated that it expects its fiscal 2019 revenue to grow 5.3% to $9 billion. Sequentially, it expects flat growth in fiscal 2019’s second quarter, and low-single-digit percentage growth in the third and fourth quarters. It lowered its revenue guidance because of declining vehicle sales in China (FXI) boosting inventory and slowing sales. It is also seeing weak demand in smartphones and tablets.

This year, analysts expect STMicroelectronics’ revenue to be unchanged, and NXP Semiconductors’ to fall 5% year-over-year. This demand weakness could hit Micron Technology (MU) the hardest, as it leads the automotive memory market. Infineon’s reduced guidance sent Micron stock down 2.7%.

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