Thank you operator. Good morning, everyone. Welcome to this short notice conference call, where we have exciting news to share on this early Monday morning. Infineon has just signed a definitive agreement to acquire Cypress Semiconductor Corp. We want to provide you the key parameters of the transaction and talk about its strategic and financial rationale. Here, together with me in Munich, is the entire Infineon management board, our CEO, Reinhard Ploss, as well as Sven Schneider, CFO, Jochen Hanebeck, COO, and Helmut Gassel, CMO. Reinhard and Sven will start with introductory remarks. We will open the call to your questions. In addition, we have posted a slide deck about the deal on our investor relations webpage. Reinhard, please go ahead.
Thank you, Alexander. In our announcement shortly ago, we called the acquisition of Cypress a landmark step in Infineon's strategic development. Indeed, it will be a transformative deal, accelerating and strengthening our path of profitable growth laid out previously. Let me begin with the transaction highlights. We have signed an agreement to purchase all outstanding shares of Cypress at $23.85 per share in cash. Taken together with the company's net debt, this corresponds to a fully diluted enterprise value of EUR 9 billion. The executive board of Cypress fully supports the transaction and will recommend its approval to its shareholders. The acquisition is subject to antitrust and regulatory approvals. We expect closing to occur towards the end of this or early next calendar year. The essence of this deal is about strengthening the link between the real and the digital world. Infineon and Cypress have highly complementary strengths.
Upon bringing them together, the combined entity will have a complete and highly competitive product portfolio to address high-growth markets in automotive, industrial, and IoT application. Infineon has embarked years ago on a journey to become a provider of system solution. We call this initiative P2S or product to system. At our capital markets day in London last year, we elaborated further on our strategy. Well-positioned in markets with structural drivers, we leverage our strong core by expanding into adjacent and new technologies, applications, and markets, and deliver sustainable, profitable growth. Cypress is ideally suited to enhance and accelerate this strategy. With its leading suite of microcontrollers and connectivity components, as well as its software development ecosystem, it will broaden our scope significantly. Combined with our world-class power components, sensors, RF, and security know-how, we will be able to offer highly differentiated system solutions.
As you know, Infineon follows a highly disciplined approach to mergers and acquisitions and always looks at transactions from three angles: strategic fit, financial fit, and cultural fit. Acquiring Cypress perfectly fits the bill on all three criteria. The deal rationale is very compelling. Generally speaking, there is a massive shift in way devices are being turned into useful application, be it in industrial, be it in consumer markets. The real and the digital worlds are getting steadily more integrated and connected. So far, we are seeing predominantly standalone, unconnected devices, which are optimized to fulfill their specific purpose. Functionality is limited, power is coming mainly from the power line and connectivity, if exists, is mostly wired. Examples are production machinery in factory, household appliances or power tools. This is now changing at rapid speed. In numerous application fields, devices are becoming smart and connected, enabling new and improved functionalities.
System thinking comes to the foreground. Linking together devices by means of secure connectivity, both wireless as well wired. At the same time, more and more of such devices are battery-powered, and energy efficiency becomes crucial. In this world, smart and connected devices will number tens of billions. It is this future world that the combined portfolio of Infineon and Cypress will address. Taking on Cypress leading microcontrollers, software ecosystem, and connectivity solutions, we will be in an ideal position to enable a much higher number of applications in a much more complete way. With this, we will benefit even more than today from structural drivers in a wide range of high-growth markets, while at the same time making our business model more resilient. Let me illustrate this point by an example.
Inverterizing large home appliances such as air cons is making them more energy efficient, Infineon is already capturing a good part of the additional semiconductor content with its power components and also sensors. Adding microcontrollers like from Cypress PSoC family will supplement this core andTogether with connectivity components for Wi-Fi or Bluetooth enable further functionality such as remote control, more intuitive user interfaces, and linking the device to a smart home. All told, we are foreseeing a 50% bill of material increase in a market that is growing at a level of 19% over the next couple of years. Further examples for similar structural growth are motor controls for server drives or battery power tools. In our automotive stronghold, we as Infineon are already harvesting the benefits of system expertise and of the ability to address an entire sense control actuate loop.
Cypress will add to this strength and fortify our core even further, rounding out our portfolio of automotive microcontrollers. This is another example of the high complementary of both companies. Whereas the AURIX from Infineon is geared towards key car domains like powertrain, chassis, and ADAS with high demands and complexity and compute power, the TRAVEO from Cypress is built around body and convenience functions as well as the instrument cluster and infotainment. Taken together, we achieve full coverage of all application field and can address the new electronic architecture of vehicles. It doesn't stop there, as Cypress will bring two more new strengths to us, expanding our offering. With components for in-car Wi-Fi and a leading USB-C franchise, we will be able to offer solutions for the connected car of tomorrow. Furthermore, Cypress has a strong offering of specialized high-density NOR flash for automotive application.
These parts are used as instant-on program flash for processors in the field of infotainment and automated driving, two key areas driving increasing semiconductor content per car. Besides ADAS, the electrification of the drivetrain, the other secular growth driver in automotive, here Infineon already today is a market leader. The combination with Cypress will create the new overall number one automotive semiconductor supplier with a 2018 pro forma global market share of 13%. We are very keen to shape the future of mobility from the pole position. Let me briefly comment on memory products. After contributing its NAND business as a minority partner into a joint venture with SK hynix at the beginning of April, Cypress is now offering a highly differentiated portfolio. Besides the mentioned NOR flash components, it contains nonvolatile FRAM and specialty SRAM chips.
These offer high margins and generate stable cash flows based on the leading position Cypress has in its addressed market segments. With the acquisition, the new enlarged portfolio of Infineon will also become more balanced. The share of sales from embedded control and connectivity will increase by almost 10 percentage points to constitute a bit over a quarter of the combined revenue base. More complete semiconductor solutions and ICs will be a higher part of the mix having a positive impact on average margins. Complementary geographic footprint and sales channels are additional aspects of the perfect strategic fit of the two companies. With Cypress, Infineon increases its exposure to important regions, in particular gaining presence as well as market share in the strategically important Japanese market. Furthermore, we will reinforce the distribution business, which will become equal in size to the business with direct customers.
This, plus Cypress advanced digital marketing capabilities, will enable to reach far more customers in a cost-effective manner. By gaining scope and broadening the product range are the driving forces motivating the transition. We also gaining considerable scale and are building a much stronger company. Based on a pro forma combined revenues of EUR 10 billion in our fiscal year 2018, Infineon will become the number 8 chip manufacturer in the world. In addition to our leading position in power semiconductors and security controllers and the new number 1 spot in automotive semi already referred to, we will become the number 4 supplier of 32-bit microcontrollers. Both breadth as well as size matter to offer more comprehensive system solution and thus create superior value for our customer and shareholder.
While Sven will walk you through the different levels for strengthening the financial base of the new Infineon, let me explain what the sources of our higher revenue dynamic will be. Already in the near term, the combined company will benefit from improved access to a larger customer base. Combining our strengths will offer highly attractive cross-selling opportunities. We will be able to increase our bill of material share in core application and to achieve more design wins by adding power, sensor, and security components to microcontroller and connectivity sockets and vice versa. Many of today's and tomorrow's smart low-power connected devices are designed and built around control and connectivity functions. This is where we will now get stronger. In the long term, by joining forces, we will be able to enhance our system offering and bring new, more complex solution to the market faster.
Here, Cypress software competence will bring crucial advantages, improving the interoperability of products and yielding ready-to-use reference designs. We are therefore very confident about our ability to outgrow our target markets. Apart from the strong strategic rationale, this acquisition is built on a very high cultural fit. This is a key prerequisite for fast and smooth integration, and therefore reaping the benefits of the combination. Actually, our companies are already in close cooperation since the beginning of 2018 in the area of brushless DC motor control, where Infineon integrates Cypress wireless combo chipset and an Infineon iMOTION controller on the reference board. Together, we will continue to share commitment to innovation and focused R&D to accelerate technology advancements. Cypress Silicon Valley spirit will complement Infineon's strong engineering and manufacturing culture. This bodes well for a swift and successful combination.
With this, I would like to hand over to Sven, who will elaborate more on the financial aspects of the proposed deal.
Thank you, Reinhard, and good morning to everyone from my side as well. I certainly can't say that my first few weeks at Infineon were boring. At the same time, I'm very excited to take part in such a unique value creation opportunity. As such opportunities are scarce, Cypress comes at a price, no doubt. In addition to the excellent strategic and cultural fit highlighted by Reinhard, the acquisition is highly attractive also from a financial perspective. With its strong margin profile and efficient capital deployment, Cypress will bolster our financial strength and improve our profitability. We have done a due diligence exercise and validated our assumptions around cost and revenue synergies. Combining the two companies will bring economies of scale, allowing us to reap efficiency gains.
We see savings potentials in the joint procurement of materials and manufacturing services, in avoiding overlaps in R&D roadmaps, in covering customer accounts more efficiently, and in streamlining corporate functions. These measures will add up to annual cost savings of around EUR 180 million, or around 9% of the current revenue base of Cypress by the end of our fiscal year 2022. We will focus on gaining these benefits in a fast and decisive manner following the tried and tested integration procedures applied after the acquisition of International Rectifier. Cost synergies will constitute immediate and tangible benefits. However, financial value creation will by far not be limited to them. Given the many aspects of complementarity in terms of product portfolio, footprint, and competencies, the transaction will yield very meaningful revenue synergies in the mid and long term. Reinhard already elaborated on their sources.
We estimate the additional revenue potential to be almost EUR 1 billion by 2025 and to exceed EUR 1.5 billion per annum towards the end of the 2020s, making Infineon an even more dynamic grower than today. Cypress will be immediately accretive to our gross margin and allow us to significantly grow our absolute segment result already pre-synergies. With synergies ramping up quickly and growth accelerating, we will monetize benefits for our shareholders rapidly. We expect the transaction to have a positive impact on adjusted EPS already in the first full year after closing, allowing for the equity portion of the intended refinancing. Apart from improved profitability, the new company will also have a lower capital intensity, given that Cypress product portfolio permits a manufacturing setup with a substantially higher outsourcing share.
Mixing this with Infineon's large-scale power semiconductor fab footprint brings the invest-to-sales ratio down by a couple of percentage points and results in a higher free cash flow, which on a pro forma combined basis was around 10% of sales for 2018. Accelerated revenue growth, improved margins, and lower capital intensity will come together to deliver returns which by far exceed our estimated cost of capital. Let me now comment on how we will finance and refinance the acquisition. The funding for the entire transaction is fully underwritten by banks who are providing committed financing. This will be followed by a general syndication towards a broader banking group shortly. With regards to the final financing structure, the key objective for us is to remain an investment-grade company in order to continue to have access to a broad range of financial markets.
Since we are committed to this, about 30% of the refinancing will come from equity sources, the remainder from new debt and available cash. We, by the way, expect Standard & Poor's to publish their assessment of the transaction and its financing concept later this morning. Due to the transformative nature of the transaction, we will temporarily deviate from our previously communicated leverage target of no more than two EBITDA turns of gross debt. However, the improved cash generation capability of the combined entity will allow us to deliver quickly, and we expect to be back within our debt boundary towards the end of 2022. Our second capital structure target, which calls for gross liquidity to be at a level of at least EUR 1 billion and 10% of sales will remain unchanged. The same applies to our dividend policy.
As you can see, acquiring Cypress will bring numerous benefits to Infineon's financial profile. Reinhard will now pick up on this.
Thank you, Sven. The intended acquisition firmly delivers on Infineon's strategic direction. We pursue very clear targets with it. The addition of Cypress will fortify our competitive position, strengthen our focus on structural growth drivers, and accelerate our path of profitable growth. Broader scope and increased scale will result in a more ambitious target operating model. Upon successful integration, our through-cycle financial objectives will be revenue growth of 9% plus, with a segment result margin level of 19% and an investment-to-sales ratio of 13%. Let me summarize. Acquiring Cypress offers a unique opportunity to grasp a world leadership position in automotive, industrial, and IoT semiconductor system solutions. Various application in these fields are at the tipping point to becoming smarter and more connected. We will be able to address these structurally growth markets with the most complete portfolio, bringing together power, sensor, microcontrollers, software, connectivity, and security.
As a result, the new Infineon will have an even more attractive and robust business and financial model. Let me open the call for your questions.
Thank you. Our question and answer session will be conducted electronically. If you would like to ask a question, simply press the star key followed by the number 1 on your telephone. If you are joining us today using a speakerphone, please ensure that your mute function is turned off to allow your signal to reach our equipment. Once again, to signal for a question, please press star 1. We will take our first question from David Mulholland from UBS. Please go ahead.
Hi. Thanks, guys. Just a few questions. Firstly, on the overlap, can you possibly let us know, it's clear there's quite a lot of end market overlap, and it doesn't look like there's too much actual direct product overlap. In areas where there is maybe direct competition between yourselves and Cypress, can you possibly quantify how much that might be for revenues? Obviously, you're talking a lot about revenue synergies, but just like to understand what the synergy risk there might be for revenues. Secondly, just on the revenue synergy targets, you said you've done good due diligence around that, but can you just help us to understand what gives you the real confidence that the size is that big?
You've explained quite well where you see it coming from, just exactly what things you've done to be able to really put a number on that, just so we can try and give us a bit more confidence in that.
David, thank you for your question. First of all, the overlap. I would say the overlap is definitely minimal. We have ourselves basically no microcontrollers in the area of industry. We have only a very low performance set, and there, I think we do not have real relevant overlap. Automotive, we have not focused on the portfolios which Cypress is having connectivity, we don't have in that area. Basically, it is a low or even a very low single-digit % where we have a certain overlap. The revenue synergies here, it is very clear we did not thought about Cypress overnight. We have for a very long term thought about how we develop our strategy further. Thinking back to our Capital Markets Day, we already addressed that we want to complement ourselves in the areas of focus applications by product portfolio which complements sensors and powers.
This has been an active search, and we checked various opportunities where we could add these elements. The base for judging on the synergies comes from a detailed analysis of the applications where we are active in for quite some time and we can from this very clearly address the long-term revenue synergy. The short-term revenue synergies which comes from the joint customer access, I think here we have a very good insight on the applications which we are addressing and where we could gain cross-selling opportunities back and forth. Here we believe that our revenue synergies are on a very substantiated base.
Just one quick follow-up on that, because obviously you said you didn't think about this overnight. Can you maybe talk a little bit about the process that you've gone through? Obviously, as far as we were concerned, there was obviously discussions going on last week. Can you talk about whether this was something you initiated in terms of the process, whether it was something Cypress had initiated, how competitive it was? Just some color in the process would be really helpful.
Here, I hand over to Helmut Gassel, who is project leader for the acquisition. Definitely this is a longer term activity we have taken on.
As already mentioned by Reinhard's introductory comments, we have engaged with Cypress in cooperation discussions for quite some time already. We have already looked at Cypress as a company and have learned about their capabilities for a longer time. The actual process has been triggered by another party, we were invited about five weeks ago to join this process.
Okay. That's great. One final one from me. In terms of what regulatory processes you're going to have to go through to get approval, do you see any risks around that? Obviously, you've been blocked in the U.S. before on an acquisition, and obviously both of you have recent business in China. Just any thoughts on what steps you're going to need to go through to get the regulatory clearance?
Well, yeah, of course.
Any concerns around that?
We have looked into this very deeply. We feel reasonably comfortable as far you can. In this process, we have to go to the well-known regulatory approvals like U.S., the CFIUS in China. Some in Europe and other countries, which we do not see as very critical. Here from the portfolio and the assessment which we did with the support of external advice, we feel reasonably comfortable.
That's great. Thanks, guys.
Thank you, ladies and gentlemen. We'd like to kindly ask you to limit your questions to one in order to give a chance to everybody to ask a question. We'll take our next person from the queue, who is Sandeep Deshpande from J.P. Morgan. Please go ahead.
Yeah. Hi. Thanks for letting me on. Two quick questions, if I may. Firstly, regarding your revenue as cost synergies, you're talking about EUR 180 million of cost synergies. From what you're explaining, there isn't much product overlap here. Where are these cost synergies going to come from? Are you going to be shutting down any manufacturing capacity that they have, or there are some other drivers of these cost synergies? Secondly, we can see from Cypress's presentation that they have approximately one-third exposure in the memory market, in the NOR flash market. Is this all NOR flash that Cypress is exposed to mainly in the automotive market, or is it also exposed outside? Is there a risk that in this process, you get a lot more exposure to the consumer NOR flash market?
Thank you. The answers will come from Sven and from Jochen.
Yeah. Hi, Sandeep. To your question with regard to the cost synergies, you are absolutely right. As we have said, there is limited overlap. It's a very complementary transaction. Therefore, the sheer size of the cost synergies must correspond to that statement. It's roughly 9% of the revenue of the target, as we have said. If you now ask us about where should these cost synergies are coming from, just to recap, EUR 180 million end of 2022. We have basically four buckets. The first one is COGS. This is basically procurement savings from materials and manufacturing services. On the R&D side, it's bringing together the roadmaps and reducing overhead. Sales and marketing is as mentioned already in our statement, it's the efficiency gains and account coverage for customers. For G&A, it's optimizing corporate services and reducing overhead.
If you look at the buckets, there is a chart which you may have a chance to look at later in our equity presentation, the two biggest parts are COGS and G&A. Jochen, would you be so kind to take the manufacturing question, please?
Yeah. Hi, Sandeep. This is Jochen. On manufacturing, all we learned, we learned a lot in due diligence, is that the fabs are competitive. We may have to tailor a little bit the portfolio in production, but we believe the sites in Austin, Philippines and Thailand are competitive. In terms of NOR flash, today already 50% of the NOR flash business at Cypress is related to automotive. We assume that the share of NOR flash going into infrastructure will increase. Also, there's opportunities with ADAS and automated
Driving levels to sell more into automotive, whereas the already low consumer share will decline over time. We consider this NOR flash as an attractive business.
Thank you.
Thank you. Now we'll take our next question from Matthew Ramsay from Cowen. Please go ahead. Your line is now open.
Thank you very much. Good morning, gentlemen. I guess just a couple of from me. The first one, obviously, there's going to be a good bit of debt brought on here by doing the acquisition. I just want to think most of your shareholder base is quite interested in your investments for the long term electric vehicle market and the capacity thereof to do the manufacturing for your power semis. Maybe you could talk a little bit about if any of the financing here to do the acquisition or any of the planned synergies affect your capital investments for the long term in the EV space. Then secondly, for the Cypress portfolio, could you talk about any of the synergies specific to your automotive portfolio? Thank you.
Matt, if we got the question right, of course, we will not change our investment to harvest from the opportunity we have in the EV market. We see the acquisition in general as complementing and driving and supporting our structural growth drivers. Therefore, the basic strategy has not changed. The improvements of the investment to sales ratio comes from the fact that Cypress has a very high level of outsourcing share and does not need to invest a lot in manufacturing. The revenue synergies from automotive in general, we see as low because here we see the microcontroller portfolio more as an add-on, while it is for IPC and PMM and DSS is a systemic complement which drives the revenue synergies.
Got it. Thank you very much.
Thank you. Now we'll take our next person from the queue, who is Amit Harchandani from Citi. Please go ahead. Your line is now open.
Good morning, all. Amit Harchandani from Citi, thanks for letting me on. I'll stick to one question. I look at your approach towards looking at the market. You've decided to make longer term investments in Dresden. You've decided to make one in Villach, now you've done an M&A deal where potentially, again, you're talking about really longer term revenue synergy. On the back of this, of course, your balance sheet also gets leveraged for some time and of course de-leveraged later. The question is, do you believe you're placing too much emphasis on longer term growth, longer term orientation at the risk of potentially losing some of the short term flexibility which might be needed potentially given some of the uncertainty out there in the market and some of the geopolitical risks?
I guess strategically, how do you reconcile taking so many longer-term bets in these uncertain markets? Thank you.
Amit, thank you for your question. I think here with the financing strategy, which Sven will explain in a little bit more detail, we are very well balanced on the risk side. Regarding the long-term investment, here I want to remind that the investment in Villach, for instance, is the cleanroom investment, and we only will incrementally add the capacity as the market grows. We don't expect a significant overcapacity or let's say as we managed in the last years, we were able to follow the demand of the market with adding capacity. Regarding the Cypress deal, we see this definitely more as a strengthening and complement to the portfolio, and the growth opportunities do not require significant changes in the overall market conditions. This is nothing which we have figured in in the synergies. Yep.
Yeah, maybe just to add two things. On the profitability side, and to your question, Amit, on short-term benefits, there is an immediate profitability increase, and there is a lower capital intensity coupled with higher cash flows. Therefore, we see that as a further enhancement of our business model, also giving us the opportunity to leverage short-term opportunities. Secondly, without going into all the details of the refinancing again, I think we are contemplating a financing plus refinancing structure in volatile markets, as we all know, which give us also some headroom for all these things you were talking about. We think it's the sweet spot, and therefore, we are well-placed to do long-term growth plus benefit from short-term opportunities.
Thank you, gentlemen.
With your next question from Jonathan from Deutsche Bank. Please go ahead. Your line is now open.
Hi. Good morning. Thanks for taking the question. I was just wondering a little bit on the short-term revenue synergy. You've given us a number of EUR 1 billion by 2025, if you look at the short-term cross-selling opportunities, how fast do you think by, say, 2020, if this transaction completes by the end of this year, will you be able to get some of that in 2020, 2021? If so, can you give us an idea of what kind of quantum you're talking about? Would that be a couple of hundred million EUR, which could be on a short-term, low-hanging fruit basis that could come through? The second question is also on, you've had a successful integration with International Rectifier, which presumably has given you some confidence on the integration ability.
Having said that had a huge amount of similarity with Infineon, being a power semiconductor company, and where you could see more scope for synergies and as well as potentially cross-selling. This being quite separate sort of a company altogether, do you think you will be able to achieve as smooth an integration as you had with International Rectifier, where actually you exceeded some of your targets during that period of time?
Thank you, Jonathan, for this question. Let's start with the last one. We have been working with Cypress already for some time on various applications. As the market is moving from pure product thinking to this system solution thinking, we believe that there we will have a similar smooth transition by supporting these key applications which we are addressing, which will also are the base for the synergies. Therefore, we are pretty sure that the cooperation, which will be different than the one in IR, will be helping us in the integration. Of course, the way we will integrate it may be a little bit more different than before due to the nature of the various businesses, we are very confident that we are able to do it in a similar way, we have very good examples. I think we mentioned it several times.
Today, we already cooperate with Cypress in the drives market. Therefore, we have a good feeling, and as this is the application orientation, we assume it will work quite well. With the revenue synergies, maybe Helmut can answer the question.
Yes. When we are planning for a closing at the end of 2019, maybe the beginning of 2020, the revenue impact in 2020 will be very limited, simply because the design in cycles for the business we are addressing are usually about a year or more. We expect the revenue synergies in 2023, about half of what we have communicated for 2025. There will be a substantial pickup in the years following 2021, 2022 to reach that number.
Got it. Just one small follow-up. The 19% margin we can expect for 2020 itself, if the transaction completes by the end of this year?
Jonathan, the year was lost in some beeps. Can you rephrase the year that you are focusing on?
The 19% margin, if the transaction completes at the end of this year, would you be able to achieve that in your FY 2020? The segment margin that you've given.
Sven will answer.
Yes. As we said, this is through the cycle TOM model. We expect the 19% to fully come through after the integration or at the end of the integration, so end of 2022.
Understood. Thank you.
We will take our next question from Johannes Schaller from Deutsche Bank. Please go ahead. Your line is now open.
Yes, good morning. Just on the memory division, Reinhard, you talked a little bit about the different product groups here, also what is outside of the NOR flash business. Could you just generally maybe give us a bit of an overview on the strategy for the various product groups, and also in particular, if you feel like there is anything you may want to exit still on the memory side, or if you're generally quite happy with that business? Then just as an add-on, is there maybe a little bit of detail you can give us also on the debt in terms of what you're paying in terms of interest, for example, et cetera? Thank you.
Mr. Schaller, thank you for the questions. Jochen has digged into the memory more deeply and will explain on that side.
Yeah. Good morning, Mr. Schaller, also from my side. Again, the biggest part in this memory business after exiting the NAND, which was very important also for us because that's indeed volatile, but they exited it by contributing it into a joint venture with SK hynix. What remains is about 2/3 is already today towards NOR. Again, NOR automotive, attractive to us, growing with the automated driving, also growing in terms of infrastructure. The remaining 1/3 is about SRAM, asynchronous and synchronous SRAM, which is, let's say, in a very established market. Cypress has a very high market share, so we consider this as a very attractive business in terms of cash generation. Besides this, they have some activities or already revenue with F-RAM, which is an attractive new technology for very high-speed data logging.
We consider overall, after the NAND joint venture step as an attractive portfolio in terms of a little bit of growth going forward, but first of all, cash generation.
On the SRAM and the FRAM side, you basically definitely want to continue to invest in these businesses, and you see also complementary applications.
Yeah. The SRAM is basically an existing market, which does not require really a lot of new R&D. It's products that will run for a long time. The investment cases are the FRAM, a little bit around the NOR adding some functionality. NOR is not to be shrink any further. Small R&D, a lot of cash, and complementary to our target applications.
To add on before Sven answers the interest thing. It was asked how long we are looking at this target. Last year, the set up with the memories, what was for us still very, I would say, let's say, difficult to think about that this would be attractive, and this has improved in between significantly. I want to confirm that the memory is something which we will continue to maintain, and we really like the strong cash flow coming there, so we will do what is necessary. If there is potential from ADAS in the future, we will grab it, but this is, I would say, lower investment part. Sven, now for you.
Yeah. Johannes, your question with regard to the debt interest payments. It is very early in the process, you will understand that I cannot share all the details, but I can give you some background information how we plan to do it conceptually. There is a plan, of course, as you can imagine, as we are intending to acquire a U.S. entity to refinance partly in U.S. dollars, partly in EUR. There will be a mix, and this mix, as you know from the interest rate differential, determines very much the actual interest payments. It is very important for us, as we have said, that we remain investment grade to have attractive refinancing opportunities, and we want to really have everything on hand, the EUR market, the Schuldschein market, the USPP market, and so on. Please bear with us.
We will fine-tune that in the next months, but we have all options on hand.
Understood. Thank you very much.
Thank you. Now we take our last question from Adithya Metuku from Bank of America. Please go ahead. Your line is now open.
Good morning, guys. Two questions. Firstly, I just wondered if you could give us a bit more color around the PSoC products, what their advantages are, how do they compare versus competition, where exactly these are used. Secondly, I wanted to get some color on what proportion of Cypress's business is exposed to consumer, and what does it mean for Infineon once Cypress is consolidated in terms of what does it do to your consumer exposure? Where will it end up? Thank you.
Thank you, Adi, for this question. I think the answer on PSoC might take a little bit longer. It is a very competitive overall architecture using ARM microcontroller cores. Here this is a very intelligent set up how the development is done in order to create families of products being able to address various application needs by combining the ARM and different peripherals in a very fast turnaround time. By this addressing very clearly the markets around industrial and IoT as well as the automotive market. Many of the basic architectures are similar. Then there is a portfolio which is a little bit more seasoned, which comes from the Spansion acquisition, which we also will roll over based with these products. Cypress is not only bringing competitiveness by the product, it is also significantly by the overall software support architecture and software capability.
Summarizing very simply, very good set of peripherals, standard ARM cores, easy to put together and complementing this application software. Consumer exposure is not what we are seeing as a major growth area. Very clearly it is more the industrial range and in the IoT range, of course, a pick where we are already today active.
Thank you. Just a quick clarification on the consumer exposure. What is the exposure that Cypress has today to this market?
Yeah. Helmut, can you answer this, please?
Yeah. I think a basic question to you is, what will Infineon end up with? On a pro forma statement, consumer exposure will be in the higher single digits.
Okay. Understood. Thank you.
All right. Thank you everyone for your questions. We hope we were able to provide some additional clarity around the announced acquisition. We would like to conclude the conference call at this point. For further questions, please feel free to contact us in the IR team in Munich. Thank you very much at this point, and have a good day and week ahead. Bye-bye