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iPhone’s Component Ecosystem: Infineon

Posted on Monday, Jul 30th 2007

This post on Infineon will be the last in the series of posts analyzing the major players in the iPhone’s component ecosystem. In the iPhone, Infineon provides the digital baseband through a PMB8876 S-Gold 2 multimedia engine with EDGE functionality, a radio-frequency transceiver and power-management devices. As per iSuppli, these parts account for $15.25 or a big fat 6.1% of the iPhone’s 8 Gb model’s cost.

Infineon Technologies (NYSE: IFX) is a leading German semiconductor company with revenue of €7.93 billion (including Qimonda sales of €3.8 billion) and 41,600 employees in 2006. Its business is organized in two main segments: 1) Automotive, Industrial & Multimarket, which provides automotive, industrial, and security applications and 2) Communication Solutions, which provides wireline and wireless communication applications. It used to have a Memory Products unit that spun off as a stand-alone subsidiary, Qimonda in May, 2006 and in August it went public on NYSE.

The Communications Solutions segment experienced a decline in net sales in 2006 due to decline in demand for baseband products as well as pricing pressures. The decline in sales was also due to the insolvency of its major customer, Ben-Q. To counter these losses, Infineon reduced fixed costs by reducing its workforce. It also actively scouted business from other mobile companies to fill the gap left by Ben-Q and won major design wins from LG, Samsung, and Apple.

In the third quarter of fiscal 2007, Infineon reported revenues of €1.01 billion (excluding Qimonda). This is a sequential increase of 3%. In the Communication Solutions segment, revenues in Q3 2007 increased sequentially by 9% to €259 million due to an increase in mobile phone platform shipments. Another significant venture in this segment was the acquisition of DSL Customer Premises Equipment business of its rival, Texas Instruments. Though the EBITDA for the segment were a negative €34 million, it was an improvement from negative €53 million in the previous quarter. In Q4 2007, the company expects the segment to break even.

Following the teardown reports of the iPhone, the stock of Infineon rose 3% to $17.03 on July 2nd. It is currently trading at $16.41.

Even though the financial gains expected from iPhone might not be as good as predicted earlier (with reports of fewer iPhone sales than expected), Infineon seems to have hedged its bets well with spreading its business over other mobile vendors, and certainly weathered its BenQ catastrophy.

Infineon Technologies AG (IFX)

This segment is a part in the series : iPhone’s Component Ecosystem

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