Good morning. Welcome to the publication of the figures for the first quarter of Infineon AG. I'm Moritz, I'm your operator today. We'd like to point out that all participants are going to be in listener status during the presentation. After the presentation, you will be afforded the opportunity to ask questions by pressing star one on your keypad. Should you need the assistance of the operator, please press star zero on your keypad. T he conference may not be recorded for any purposes.
Good day, ladies and gentlemen. I would like to welcome you to the conference call on the results of the first quarter of fiscal 2024. Representing Infineon and attending are Jochen Hanebeck, CEO, and Dr. Sven Schneider, CFO. My dear listeners, as usual, Mr. Hanebeck will start by giving you an overview on the business performance of Infineon AG, after which Mr. Hanebeck and Mr. Schneider will be available to answer any questions you may have. Mr. Hanebeck, the floor is now yours.
[Foreign language]
Thank you, Mr. Tauber. Good morning, listeners. Infineon is facing headwinds at the beginning of 2024. Geopolitical and macroeconomic factors and the cyclical market development are causing us problems. Due to the weak economic environment and the high inventories, the demand situation remains mixed for our application fields. On the one hand, the demand in major sectors of our automotive business is holding up. On the other hand, in consumer communication, computing and IT applications, but also in the industrial environment, we have got high inventories, which have to be digested first. This situation, together with a weaker U.S. dollar, is causing us to correct our expectations for the current fiscal year, and I'll turn to that in the outlook later on.
Because of the need to digest inventories over the entire supply chain, we expect a slow recovery in the final end markets I've mentioned. At the same time, it shows the resilience of the Infineon business that we are able to manage these times so successfully. In the first quarter, Infineon achieved revenue of EUR 3.702 billion. The decline compared to the previous quarter is 11%, which is somewhat more than expected, above all, because of the negative development of the exchange rate of the U.S. dollar to the euro. Our forecast had assumed that, exchange rate of the U.S. dollar to the euro of 1.05, but the actual exchange rate in the first quarter was 1.08. The segment result was EUR 831 million, which reflected the decline in our revenue situation.
The segment result margin was 22.4%, falling 25.2% in the previous quarter. Profitability developed differently in the different sectors, which is due to the different dynamism in these fields. Inventories consisting of confirmed and unconfirmed confirmed orders have become more normal. At the end of December, it was EUR 24 billion. Three months earlier, it had been EUR 29 billion. In view of the generally available supply, large inventories in a number of markets, and shorter lead times, many of our customers are adjusting their orders. This behavior can be seen in particular towards the end of a calendar year. The free cash flow in the first quarter declined considerably, as was expected. It came to -EUR 1,597 million, following +EUR 640 million in the previous quarter.
Various special effects had a negative influence. First of all, the payment of the purchase price for the acquisition of GaN Systems, amounting to EUR 800 million. Secondly, the annual bonuses, which we normally pay out at the end of December, this time for a record fiscal year 2023. And thirdly, the substantial reduction in our liabilities, which is due to the different payment patterns between the different quarters. Our inventories have increased. They now reach 185 days. Some of the stocks are being built up for strategic reasons, for example, on behalf of our customers in turn for payment, or in order to have supply certainty in view of geopolitical risks, and to balance out some of the changeovers in manufacturing. The strategic stocks will have a volume of mid-EUR 500 million range.
Now, the figures for the first quarter. The Automotive segment achieved revenue of EUR 2,085 million. The decline was 4% compared to the record previous year's quarter. It's a result of the correction inventories among customers, which was to be expected. The second result was EUR 564 million, and second result margin was thus 27.1%, following 28.5% in the previous quarter. Currently, many investors are looking in particular at the short-term cyclical prospects for automotive semiconductors. For our Automotive business, we can reaffirm what we said in November. The growing value of semiconductors per vehicle driven by electromobility, driver assistance systems, innovative electric electronic vehicle architectures is making it possible for Infineon to continue growing.
This is still valid in the market environment, where the number of cars produced in 2024 is expected to be on the same level or slightly below the previous year's level of 90 million units, when the replenishment of inventories will have largely been completed. The way to growth leads through a leading and broad product portfolio and trusting customer relationships. So this current market phase is, this is the most important pillar of our success. Of course, Infineon isn't immune to general market trends, for example, with inventory adaptations and standard applications, but there are also some factors that work in our favor. First of all, we have solutions with all leading car brands, brands where we represent all the major markets of the world. The mood in Western countries remains weak, but the biggest market for electric vehicles, China, remains in the lead.
In December quarter, production reached a record number, 2.3 million units, which is 22% more than in the previous year's quarter. This development is good news for global climate protection. The conversion of the traffic sector in the bellwether market of China is advancing. Globally, electric vehicles are growing, but there are still obstacles. First of all, European interim targets for the carbon dioxide fleet limits in 2025 is approaching. Secondly, Japan, there's a new 10-year state subsidy program in planning. Thirdly, the prices for some battery raw materials is declining. And fourthly, and this is an important factor, new, cheaper vehicles are coming in the markets. A broader offer in all vehicle classes gives people more incentive to change to electro mobility. Then the value of semiconductors and cars for advanced driver assistance systems is growing.
It is enabling our customers to have cars which are more autonomous, digital, and more connected. Here, the steady development of microcontrollers for the automotive sector is striking, which I mentioned in our annual press conference in November. In the production of our microcontrollers, we work closely together with our subcontract manufacturers. In order to increase our supply certainty, we signed a multi-year supply agreement with GlobalFoundries. The agreement secures the growth of AURIX microcontrollers until 2030. In addition, we've got a statement of intent with Honda, which we announced a few days ago, to set up a strategic cooperation. Honda selected Infineon to provide the future product and technology roadmaps for power semiconductors, driver systems, and electronic architectures.
A few weeks ago, BYD awarded us the Outstanding Partner Award for 2023, which is a reward for our operative excellence and reliability, and it's also a confirmation of system competence, which has led to intensive and innovative cooperation with BYD, which will support our growth with that customer. Now, green industrial power. The sector achieved revenue of EUR 497 million, which is a decline of 16% compared to the previous quarter. The demand is becoming weaker in all fields of application. High inventories and customers are aggravating typical seasonal weakness. Despite the considerable decline in revenue, the profitability remained high. The segment result was under EUR 30 million, and segment result margin was 26.7%, following 28.5% in the previous quarter. Our industrial business addresses a large number of end markets with different demand drivers.
Core industrial applications, such as factory automation, is closely linked to the general economic situation and normally reacts late in the cycle. We therefore assume that the demand for industrial app drives will continue to decline. The market for domestic appliances and large heating and air conditioning systems, and the high interest rates will slow the consumption the demand among consumers. The demand for applications in the field of decarbonization, energy storage systems, grid and charging infrastructures, and transport sector is growing on the other hand. The increased demand for photovoltaic inverters will be slowed down, even though the number of installations is growing. Our broad business with silicon carbide is making good progress, both in automotive and also industrial applications.
We confirm our goal that in the level of EUR 500 million revenue with silicon carbide, which we announced achieved in 2030, will be increased by about 50% in the current fiscal year. We are glad to have a diverse of our network of the substrate suppliers and with a multi-sourcing strategy. We've also signed a long-term delivery agreement with SK Siltron in Korea. This means that SK will supply Infineon with competitive, high-quality 150 mm silicon carbide wafers, and in the later phase, SK Siltron will play a major role in helping Infineon to transfer to 20 mm wafers. In addition, we have the agreement with the U.S. American company, Wolfspeed, which will ensure that we gain access to silicon carbide basic material across various regions. Our long-term partnership with Wolfspeed is strengthening Infineon's supply chain for the coming years.
At this point, I would also point out that the building work on the first phase of expanding our front-end location in Kulim is running according to schedule. We still expect that in the second half of this calendar year, we shall reach the ready for production milestone. Let's come to the segment of Power and Sensor Systems. This division is affected by the lasting weakness in consumer communications and computing applications. Revenue in the first quarter declined by 16% by the previous quarter to EUR 765 million. Whereas demand for components for smartphones recovered slightly, the demand in all the other consumer markets, such as PCs, notebooks, and battery-driven devices, continued to decline. The level of the slowdown in PCs business can be seen if you look at the comparison with the previous quarter. That was 27%. This decline was also noted in profitability.
The segment result was EUR 99 million, and the segment result margin was 12.9%, following 18.9% in the previous quarter. Apart from the lasting macroeconomic environment, the long phase of inventory digestion is having a negative effect. The inventories in the supply chain are still on a high level, and there are no signs of a recovery in demand at present. Therefore, it's not surprising that there's certain pressure on prices. In other words, in the short term, we expect negative consequences for our sales and margins. At the same time, we expect a recovery in demand in the second half of 2024 as a possibility. If the inventories are depleted, then there, there'll be a steep recovery.
In the medium term, there are structural trends such as artificial intelligence, the increased use of gallium nitride-based solutions in mobile chargers, data centers, and onboard chargers for electric vehicles are being supported here. In the integration of GaN Systems into our company, we're making good progress. In view of the spread of artificial intelligence, we are confident that our leading AI power management solutions will be accepted by the customers. Now, the segment Connected Secure Systems. This division in the past quarter suffered the steepest decline in revenue of all 4 segments. Revenue dropped compared to the previous quarter by 26% and reached EUR 364 million. The weakness in demand affect all fields of application of product groups and was aggravated by the lasting correction of inventories. Thus, the segment results also declined accordingly. It was EUR 37 million.
The segment result margin was thus 10.2%, following 18.4% in the previous quarter. High inventories and the necessary depletion phase will continue to affect the markets for consumer communication, including IoT and secure applications in future. Apart from the cyclical programs I've explained, we also see attractive structural growth opportunities in the Internet of Things. Artificial intelligence, in addition to the cloud, will be used increasingly directly in end devices. This brings advantage in latency, power consumption, and data protection, and opens up many new opportunities of Infineon, both in consumer and also in industrial applications. In order to shape this trend, we have added a new PSoC Edge product family to our microcontroller portfolio, which is a high-performance, energy-efficient means of supporting machine learning in end devices.
The company, Imagimob, which took over last year, has brought a number of ready models to the market, and they these offer complete solutions for machine learning edge devices and be used in a short time and on existing microcontroller hardware. For customers with developments, no additional costs or time and knowledge are needed. Listeners, I come now to our outlook. As already stated, Infineon is working in a difficult market environment. There are various geopolitical, macroeconomic, and cyclical uncertainties which are influencing us, and in this environment, the end markets are developing differently. Broadly speaking, there are three categories of applications. Those with a strong demand, which is continuing at healthy inventories. There's those where we have high inventories and which are concealing otherwise intact end customer demand, and those where the demand among end customers is actually lacking.
In the field of automotive, structural growth is continuing with electric vehicles, albeit at a slower pace in China, or outside China, rather. With our microcontrollers, we are benefiting from the spread of driver assistance systems and development of new electric electronic architectures. In more mature automotive applications, we're expecting normalization of demand and some adjustments of inventories. But all in all, we expect there to be a stable development because the manufacturers know the strategic value of an adequate supply of semiconductors. All in all, our forecast for the fiscal year confirm the development of automotive business from November. Adjusted for currency changes, we expect a low double-digit % rate in revenue growth and a strong segment result margin between 25% and 20%. Demand in non-automotive applications remain generally weak, even though this is for different reasons.
In the consumer fields of application, demand is subdued. Customers and distributors, first of all, have to digest high inventories. This applies to core applications and industrial sector as well. For the application field of renewable energies, payment, transactions, government documents, there is demand, but the inventories have not yet been digested fully. In principle, delivery times are becoming shorter, which is leading to a shorter-term order behavior. Then this means that there's not many opportunities for a cyclical recovery at present. Nevertheless, the digestion of inventories means that the possibility exists that an increase in demand should become steeper than usual. This could happen in the course of fiscal 2024. Now, forecast. Taking into account the development of the exchange rate since mid-November last year, the U.S. dollar has weakened.
The exchange rate we assumed was $1.05 to the euro; now we expect $1.10. Applying the rule of thumb, where each cent change in the exchange rate has an effect of EUR 24 million on the quarterly revenue. Taking into account the first quarter, our forecast for the dollar means that the consequences will amount to almost EUR 500 million. First of all, we see a continuing digestion of inventories and the slower recovery in consumer applications. We're correcting our guidance for fiscal 2024 to about EUR 16 billion ± EUR 500 million. Before, we'd expected a revenue range of around EUR 17 billion. We expect that this development of business will differ considerably between different segments. Revenue in Automotive, currency adjusted, will be in the low double-digit % range.
In contrast, revenue in the Green, Industrial, and Power division should be in the medium- to high-single-digit % rates. For power sensor systems and connected systems, we expect declines in revenue in the mid- to high-teens range. One note on pricing, we expect the price in auto sector will only decline in a low-single-digit range, whereas the weaker demand and the high inventories in other sectors means that there will be a pressure on prices there. We expect revenue of about EUR 16 billion and a segment result margin in the low- to medium-20s. This is in line with what we expect over the cycle. The mixed market picture will be reflected in the development margins. Automotive will reflect the segment result margin between 25%-28%.
Profitability of GIP will be somewhat lower, but it should hold up quite well, whereas the margins of PSS and CSS will become significantly weaker compared to the previous year. We've adjusted our investments downwards and now expect a level of about EUR 2.9 billion. Forecast November had assumed EUR 3.3 billion. The focus investment will be the third manufacturing module in Kulim. A large part of the means will flow into the building of the new factory in Dresden. In addition, considerable funds will invest in development of products based on silicon carbide and gallium nitride. You'll see that we are sticking to our strategic projects and future investments. Regarding free cash flow, the investment in front-end business and the purchase of GaN Systems can be taken into account.
Adjusted for that, the free cash flow can be expected to be about EUR 1.8 billion, which corresponds to about 11% of the forecast annual revenue. The reported free cash flow should be about EUR 200 million. For the second quarter of our fiscal year, we expect, assuming an exchange rate of $ 1.10, mixed revenue of about EUR 3.6 billion. With the forecast group growth, we expect a segment result margin to be about 18%. Before coming to your questions, I should like to look at our non-financial targets. Decarbonization is the key to a future worth living in, and we are also implementing consistently in our company. Our route to make Infineon CO₂ neutral by 2030 is progressing well. This includes the purchase of electricity and heat. These are the Scope 1 and Scope 2 emissions.
Since we've reduced this by 57% compared to the base year of 2019, we are now tackling even more ambitious goals in the context of our climate strategy. In December, we announced that we would have a science-based climate target in line with the latest climate science findings and the Paris Convention, and we expect that we can include our suppliers in our efforts at climate protection. So we're expanding our strategy to Scope 3 now, and this is a logical, important step. Listeners, that brings me to the end of my remarks, and together with Sven Schneider, I'll now be happy to take any questions you might have.
We'd now like to start with the Q&A session. If you'd like to ask a question, please press star one on your keypad. You'll then hear a tone, and that will confirm that you've been added to the queue. If you'd like to withdraw a question, please press star two. Participants are requested to kindly use their handsets when asking a question. Please limit yourself to two questions for each turn. If you have a question now, please press star one on your keypad. We're waiting and standing by for the first question now. There don't appear to be any questions at present. Therefore, I'd like to hand the floor back to Andre Tauber. I think we'll wait another minute, perhaps. Just a kind reminder, if you have a question, please press star one on your keypad. We've just received a question from Marcus Theurer from FAZ. Please go ahead.
Hello, Mr. Hanebeck. Hello, Mr. Schneider. I hope you can hear me. You said that 2024 is a transition year. Perhaps we, as shareholders, must brace ourselves for a smaller dividend. How certain are you about the reduced forecast? Do you really believe that you'll achieve your goals or, or are there still some uncertainties?
Sven Schneider here. Hello, everybody. Let me start by answering the second part of your question. The forecast that we issued contains two essential assumptions. The first one is that the automotive business will develop as we anticipated, which means that in this year, a low double-digit growth rate and a margin range of 25%-28%. The second assumption is that, contrary to the November guidance, we expect the recovery of the three Cs, consumer, communication, and IoT markets have been postponed.
If these assumptions materialize, we will reach the guidance that we have announced. In the analyst call, we were asked what the indicators were. We, of course, have a number of different KPIs we look at: order intake, for instance. We talk to customers, and in the PSS business, we see, by the way, this is one of the businesses which was the hardest hit, so far by the weakness, that in parts of the business, such as smartphones and also in AI, the initial improvements in order intake have been registered. These are factors that have caused us to adjust the order backlog, that is the sum total of orders on our books, leading to the assumption that the prognosis will, be upheld as given. The second thing you asked was about the dividend.
We already have a dividend of EUR 0. 35 , which has been announced for the past fiscal year. The dividends are always paid in a current fiscal year for the preceding fiscal year, and of course, this is subject to approval by our annual general meeting, which will soon take place.
The next question is from Hakan Ersen from Thomson Reuters. Please go ahead, sir.
Hello, Mr. Hanebeck. You said that you anticipated a recovery in the second half of the year, especially in PSS, and you said that this recovery may indeed be steep. Could you perhaps quantify this a little bit? What do you mean when you say steep?
Well, indeed, it is difficult to put a number on this. This is a more qualitative statement than anything else. What we're observing is that due to the high interest rates, value chain partners tend not to keep big backlogs at this point in the cycle, as opposed to past cycles when interest rates were very low. If you have such buffer elements in supply chains, and these buffer elements are reduced, then you may well imagine that any increase is instantaneously steeper because these buffer elements are just smaller than they normally are. As a matter of principle, of course, we have a much higher revenue target in the second half of the year, EUR 8.7 billion, and plus EUR 7.3 billion, if you do the math from the first two quarters. But there are a number of different reasons for this.
The price reductions take place in January, for example, and from our perspective, the biggest part of adjustment in automotive takes place in the first half of the year. All of this combined, together with PSS recovery, of course, this is not going to relate to all of the end markets, but at least one of the PSS end markets, which has caused us to issue the current forecast.
Ladies and gentlemen, a friendly reminder: if you'd like to ask a question, please press star one on your keypad. There don't appear to be any further questions at present, so I'd now like to hand the floor back to Andre Tauber.
Thank you. There are no further questions. This brings us to the end of the Q&A session. Mr. Hanebeck, please go ahead with your concluding remarks.
Thank you, Mr. Tauber. Yes, listeners, finally, I'd sum up. At the beginning of fiscal 2024, in view of the difficult overall situation, Infineon is robust. Geopolitical and macroeconomic factors are causing a difficult market environment, especially with consumer communication and computing business, but also in IoT and industrial applications. The depletion of inventories is taking its time, and in view of the available often shorter lead times, we're getting very short-term order patterns. The automotive business is surviving well. In microcontrollers, we're gaining market share, and in new electric vehicle models, we are well represented, and so we can balance out for the lack of dynamism in the classic automotive semiconductors.
In view of the broad level of our business, Infineon, of course, are not immune to market fluctuations, and we need to take this into account when it comes to weaker dollar, which affects our forecasts, and we're adjusting expectations for fiscal 2024. As we expect demand to begin recovering in consumer applications towards the end of the second half of the calendar year, now, there's a quarter later than so far assumed. The bottom line is that it's a transition year for Infineon, and this shows it's the litmus test for our target business model. At the same time, we're making good progress with decarbonization digitalization. Structural growth drivers in the core applications, electric mobility, automated driving, renewable e-energies, data centers, including Artificial Intelligence and the Internet of Things, remain intact. Therefore, we maintain our investments in the future in order to create medium and long-term value.
Thank you for your interest, and goodbye.
Ladies and gentlemen, the conference call has just ended. Thank you for participating. See you next time.