How Infineon is Adapting to the Inflation Reduction Act
Infineon, the world’s largest supplier of silicon chips to the automotive industry, is considering moving more production to the United States to comply with the Inflation Reduction Act. This legislation seeks to revive the US semiconductor industry, which has been struggling with a shortage of chips due to the pandemic and a reliance on imports from Taiwan.
Peter Wawer, the head of Infineon’s green technology division, stated that the company is currently reviewing the requirements of the Inflation Reduction act to ensure that they are not locked out of business due to a certain share of value not being present in the United States. Infineon is satisfied with its current presence in the United States and has seven manufacturing plants in the country and one in Mexico. However, it may be necessary to move some product or additional production to the United States in the future to comply with the new legislation.
Infineon’s Expansion into the United States
Infineon has expanded its presence in the United States over the past decade through acquisitions such as the $3 billion purchase of International Rectifier in 2015 and the $9 billion acquisition of Cypress Semiconductor in 2019. The Munich-based company has seven manufacturing plants in the United States and one in Mexico. The company last month opened a plant in the eastern German city of Dresden for the construction of which it received 1 billion euros in subsidies, about a fifth of the cost. Infineon is betting on the shift to electric vehicles, which require more chips than those powered by combustion engines, as a way to avoid slowing auto sales.
The Rise of the Green Technology Division
Infineon’s green technology division is becoming increasingly important as the world transitions to renewable energy. This division accounts for just 13% of Infineon’s €14.2 billion in revenue from last year, but the growth potential is enormous. Green energy infrastructure such as wind turbines, solar panels, electric car chargers, and transmission lines needed to connect everything to the grid are expected to drive demand for Infineon’s chips. The division expects annual revenue growth of more than 10% “for years to come.”
Amit Harchandani, the head of European technology research at Citi, believes that Infineon’s energy-efficient chips will make it a major beneficiary of the shift to renewable energy. “I expect any company exposed to the energy transition in particular to evaluate the Inflation Reduction Act incentives,” he said.
The Impact of President Biden’s $369 Billion Package
President Biden’s $369 billion package has fueled concern among European policymakers as high-tech industries needed for the green transition look to opportunities across the Atlantic. Germany has also dedicated billions of euros in subsidies to encourage domestic manufacturing after the coronavirus pandemic-induced shortage of chips hit its auto industry hard and highlighted how essential the sector is.
The Future of the Semiconductors Industry
The semiconductor industry is undergoing significant changes as new challenges and opportunities arise. Infineon believes that the future will be centered around the green technology division and the shift to electric vehicles. However, there are also growing geopolitical concerns as more countries seek to become self-sufficient in the manufacturing of chips. The pandemic has highlighted the importance of semiconductors in many industries, raising concerns about the industry’s reliance on imports from Taiwan. This has prompted discussions about possible supply chain diversification to mitigate risks.
Summary
Infineon, the world’s largest supplier of silicon chips to the automotive industry, is considering moving more production across the Atlantic to comply with the recently approved Inflation Reduction Act. This legislation seeks to revive the US semiconductor industry, which has been struggling with a shortage of chips due to the pandemic and a reliance on imports from Taiwan. Infineon’s green technology division is becoming increasingly important as the world transitions to renewable energy, with the division expecting annual revenue growth of more than 10%. President Biden’s $369 billion package, aimed at supporting the industry, has raised concerns among European policymakers as high-tech industries needed for the green transition look towards opportunities across the Atlantic. The semiconductor industry is undergoing significant changes as new challenges and opportunities arise, and supply chain diversification remains a critical issue.
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Infineon, the world’s largest supplier of silicon chips to the automotive industry, said it was considering moving more production across the Atlantic to comply with recently approved legislation that seeks to revive the US semiconductor industry.
Peter Wawer, head of Infineon’s green technology division, said the German chip maker was reviewing the Inflation Reduction Act requirements relating to the value of goods manufactured in the United States.
“Obviously we have to be careful that we abide by these rules,” Wawer said, and “not be locked out of business because of a certain share of value we don’t have in the United States.”
Wawer said the company is currently satisfied with its presence in the United States, but added that in the future “it may be necessary to move some product, or some additional production, to the United States.”
The Munich-based company has seven manufacturing plants in the United States and one in Mexico, thanks in large part to acquisitions over the past decade, such as the $3 billion paid for International Rectifier in 2015 and the $9 billion acquisition dollars from rival Cypress Semiconductor in 2019.
President Biden’s $369 Billion Package subsidies and tax incentives have sparked concern among European policymakers as high-tech industries needed for the green transition look to opportunities across the Atlantic.
Germany has it too dedicated billions euros in subsidies to encourage domestic manufacturing after the coronavirus pandemic-induced shortage of chips hit its auto industry hard and highlighted how essential the sector is.
Infineon benefited from demand that coincided with a pandemic-induced bottleneck in semiconductor manufacturing. The company last month opened a plant in the eastern German city of Dresden, for the construction of which it received 1 billion euros in subsidies, about a fifth of the cost.
Wawer said the pandemic has revealed how many industries have relied on semiconductors, which mostly come from Taiwan. “Now everyone starts thinking: ‘oops, what if something happens between China and Taiwan’. This of course speeds up the whole discussion.
Infineon specializes in less advanced chips that, rather than being used in computationally powerful devices, are made for industries such as the automotive sector, which accounts for 45% of the company’s sales.
Even if auto sales are slowing, Infineon is betting it will benefit from the shift to electric vehicles, which require more chips than those powered by combustion engines.
Amit Harchandani, head of European technology research at Citi, said Infineon’s energy-efficient chips have made it a “major beneficiary of the shift to renewable energy.”
“I expect any company exposed to the energy transition in particular to evaluate the Inflation Reduction Act incentives,” he said.
Last year, Wawer’s green industrial energy division accounted for just 13% of Infineon’s €14.2 billion in revenue. But Wawer said the rise of green energy infrastructure like wind turbines, solar panels, electric car chargers and transmission lines needed to connect everything to the grid meant that demand for the chips had “just exploded.”
The division expects annual revenue growth of more than 10% “for years to come,” Wawer said.
Infineon last year achieved 11% of revenues in the United States, compared to 29% from mainland China.
Additional reporting by Tim Bradshaw
https://www.ft.com/content/4c8da4e2-76f6-44b8-ab5e-4a78d60cf4d7
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